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What is a shared ownership mortgage?

What is a shared ownership mortgage?

An update from BB Mortgages

By James Carpenter

“I believe in excellent service and flexible appointment times.”

James Carpenter

What is a shared ownership mortgage?

If you’re a first-time buyer and you’re struggling to afford all of the costs associated with buying your first home, then a shared ownership mortgage could be the answer. In this post, we’ll explain exactly what a shared ownership mortgage is and give you all the advantages and disadvantages so you can decide if it’s the right option for you.

 

Shared ownership mortgages: The basics

 

So, what exactly is a shared ownership mortgage? Also known as Part buy/Part rent, this is a government run scheme which helps people to buy a share of a housing association or council owned property. They then own a percentage of the property and pay rent on the rest (usually at a reduced rate).

 

This can be a great way to cut the cost of buying your first home because you’ll need a smaller mortgage – and also of course, a smaller deposit.

 

Am I eligible for a shared ownership mortgage?

 

There are some specific requirements in order to qualify for this type of mortgage:

 

  • You must 18 years old or over.
  • Your annual income must be less than £80,000 (or £90,000 if you live in London).
  • You must be a first-time buyer OR in the process of selling your current property if you already own one.
  • You must be able to show that you can’t afford to buy a home that meets your needs on the open market.
  • You must be able to prove that you’re up to date with any existing mortgage or rent payments.
  • You’ll need to show that you can afford the regular costs of buying a home.

 

Is a shared ownership mortgage right for me?

 

To help you decide, here are a few of the pros and cons for you to consider:

 

Advantages

Disadvantages

Lower mortgage and rent costs make this a more affordable way to get on the property ladder, than buying a house outright.

Companies offer a smaller choice of shared ownership mortgages than more traditional types of mortgage.

You’ll be able to save for your deposit more easily as you won’t need to save as much.

Selling your home may take longer and be more complicated.

If you choose to, you can buy or sell additional shares of your property in the future – up to 100%.

You’ll need to get permission to make any structural changes to the property

You generally won’t pay stamp duty on the share of property that you buy.

If you increase the value of your property while living there, the cost of buying additional share will also increase.

Your rent costs will also usually be lower.

You’ll still pay ground rent and service charges on 100% of the property.

 

What are the alternatives to a shared ownership mortgage?

If you’re not sure if this is the right option for you then perhaps one of the government schemes below might be a better fit?

 

Help to buy

The government will provide an interest free loan of 20% (or 40% if you’re in London) of your property value and you can borrow the rest through a commercial lender.

 

Learn more about the Help to Buy scheme here

 

Right to buy

If you’re a tenant of a housing association or council owned property, then this scheme gives you the right to buy your home at a discounted price.

 

Learn more about the Right to Buy scheme here

 

Older people’s shared ownership

This scheme is similar to the shared ownership scheme but is aimed at people who are 55 or over. It allows you to buy a share of between 25-75% of your home.

 

Learn more about the Older people’s shared ownership scheme here

 

What do I need to know before I apply for a shared ownership mortgage?

 

If you think that a shared ownership mortgage might be right for you then there are a few things to consider before you take the plunge.

 

How much deposit should I save?

Most lenders will ask for 5-10% of the value of the share of property you’re buying. For example, if the value of your share is £100,000, you should aim to save around £10,000, which would be a 10% deposit.

 

Check your credit history

When you apply for a mortgage the lender will conduct a credit search so it’s a good idea to look at your credit report beforehand so you can check for any issues that might cause you problems during your application.

 

Speak to your housing association or council

It’s a good idea to get in touch to double check that the scheme is available in your area and whether your housing association or council have any other criteria that you need to meet in order to qualify.

 

Review your finances

Your mortgage isn’t the only cost associated with buying a home so it’s really helpful to properly review your financial situation so you have a good idea of exactly what you can afford. Take a look at all the guaranteed money coming into your household, such as any income or benefits. Then go through your bank statements and list out all of your monthly expenses, such as your gas and electric, groceries and hobbies.

 

This also gives you a good opportunity to see if there are any areas where you could save money by cancelling un-used subscriptions or switching to lower cost insurance or utility companies.

 

Speak to a mortgage broker

As with any type of mortgage, it can be tough to know which option is right for you. There may also be options that are only available via a broker so it’s a good idea to speak to an expert first.

 

Here at BB Mortgages, we offer free consultations where we’ll chat to you about your specific circumstances and help you to find the mortgage option that best suits your needs.

 

Here at BB Mortgages, we offer free consultations with our expert advisers, so don’t keep struggling alone and let us help!

James Carpenter,

Director,

BB Mortgages

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Ellen King

Absolutely delighted with the service we received from Dean. The advice we received was timely and thorough; the service provided went above and beyond our expectations compared to other mortgage advisors we have used in the past and the whole application process was made straightforward and stress free. Overall, an excellent value for money service that I would highly recommend.


Ellen King

BB Mortgages
2019-09-04T15:53:10+01:00

Ellen King

Absolutely delighted with the service we received from Dean. The advice we received was timely and thorough; the service provided went above and beyond our expectations compared to other mortgage advisors we have used in the past and the whole application process was made straightforward and stress free. Overall, an excellent value for money service that I would highly recommend.

Miss Knight

We would like to take this opportunity to thank you for your efforts in making it possible for us to purchase our first property.  You have been brilliant and your services have been friendly, helpful, swift and professional.  We cannot thank you enough and it has been an absolute pleasure working with you.  What is known to be a stressful time has been very smooth and I have yourselves to thank for this.


Miss Knight

BB Mortgages
2016-03-22T17:24:36+00:00

Miss Knight

We would like to take this opportunity to thank you for your efforts in making it possible for us to purchase our first property.  You have been brilliant and your services have been friendly, helpful, swift and professional.  We cannot thank you enough and it has been an absolute pleasure working with you.  What is known to be a stressful time has been very smooth and I have yourselves to thank for this.

Mr L

Mr L hadn’t sold his house but had found the house of his dreams, we arranged a mortgage that allowed him to buy his new house without selling and a mortgage that was flexible enough for him to pay a large amount off when he sells his house.

BB Mortgages
2016-09-13T12:38:09+01:00
Mr L hadn’t sold his house but had found the house of his dreams, we arranged a mortgage that allowed him to buy his new house without selling and a mortgage that was flexible enough for him to pay a large amount off when he sells his house.

Miss G

Miss G sold her house and had found a new house, it all looked straight forward but she had a historical bankruptcy which meant lots of lenders were declining her. We found her a mainstream high street lender that would offer a mortgage even with her previous bankruptcy.

BB Mortgages
2016-09-13T12:43:22+01:00
Miss G sold her house and had found a new house, it all looked straight forward but she had a historical bankruptcy which meant lots of lenders were declining her. We found her a mainstream high street lender that would offer a mortgage even with her previous bankruptcy.

Mr W

Mr W works abroad but wanted to buy a buy to let property, most lenders will require him to own and live in in a mortgaged property in the UK, however we found a lender that would lend at sensible interest rates for a new buy to let purchase.

BB Mortgages
2016-09-13T12:48:10+01:00
Mr W works abroad but wanted to buy a buy to let property, most lenders will require him to own and live in in a mortgaged property in the UK, however we found a lender that would lend at sensible interest rates for a new buy to let purchase.

Mr C

Mr C wanted to buy a student house in Lincoln via a limited company to take advantage of the income tax benefits of this. He spoke with other brokers and high street lenders all of which said it wasn’t possible. We found a building society who specialise in this with sensible fees and interest rates.

BB Mortgages
2016-09-13T12:49:06+01:00
Mr C wanted to buy a student house in Lincoln via a limited company to take advantage of the income tax benefits of this. He spoke with other brokers and high street lenders all of which said it wasn’t possible. We found a building society who specialise in this with sensible fees and interest rates.
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