Shared Ownership Mortgages Explained

As the name suggests, a shared ownership mortgage is the type of mortgage where you share the ownership of the property with another individual(Housing Association). In other words, you purchase only a portion of the property on the mortgage and pay rent for the other.

Also known as “part buy, part rent”, a shared ownership mortgage makes you an owner and a tenant of the same property. It allows you to own the property without making a heavy deposit as you need to pay deposit only for  the share purchased by you. This mortgage is often preferred by first-time buyers as they are new to the market and often struggle with gathering a big sum of money for deposit.

Housing associations allow you to purchase anywhere between 25% to 75% of a property and get a mortgage for the same. For the remaining 75% to 25% of the property, you will be required to pay rent to the housing association. In most cases, buyers are required to provide 5% of their share as a deposit.

Who is Eligible for a Shared Ownership Mortgage?

Apart from being a permanent resident of the UK, a shared ownership mortgage can be obtained by:

• First-time buyers
• People already living in a shared property.
• Previous owner of the concerned property who can no longer afford to buy it again.
• People willing to rent a housing association or a council property.
• Households with an income of less than £80,000 (or £90,000 if they live in London)

What is the Process of Getting a Shared Ownership Mortgage?

The process of getting a shared ownership mortgage is not too different from that of getting a conventional residential mortgage. The following stages are involved in buying shared ownership.

• Find the correct property in your desire location available on shared ownership.
• Get in touch with housing association to get income assessment done. Income assessment decides the percentage of shares you can buy.
• Find a mortgage broker to get best mortgage for you or you can go to your bank directly.
• You will need to have a solicitor to work on your case. Either your mortgage broker can recommend one or you can find someone.

To get the best deals and obtain expert assistance throughout the process, it is advisable to work with skilled and experienced mortgage brokers near you. For instance, if you are looking to buy a property on a shared basis, find the best mortgage broker has to offer and have them find you the best mortgage deals in the market.

Just like a normal mortgage, the amount you can borrow for a shared ownership mortgage would depend on the following key factors:

• Your income
• Your credit history
• Your savings
• The preferred location for the property
• Ground rent
• The cost of mortgage
• The value of the property

What is the Concept of Staircasing?

Once you have purchased a portion of your property under shared ownership, housing associations provide you with the option to buy a larger portion and increase your share in the property. This is known as staircasing.

According to the latest rules that came into effect in April 2022, you can buy an additional share in a property merely in instalments of 1% as opposed to the previous 10%. You can keep staircasing and increasing your share in a property until you own 100% of it. However, some housing associations set limits on the number of times you are allowed to staircase. Make sure are aware of such details before you go ahead with staircasing.

At any point in time, the cost of the share you choose to buy would depend on the market value of the property at that time. The panel of surveyors appointed by the concerned housing association would conduct a property valuation and you would be charged for the same.

What are the Benefits of Getting a Shared Ownership Mortgage?

Here are some of the significant benefits of getting a shared ownership mortgage:

• It allows you to become a shared owner of the property if you cant buy in open market.
• It allows you to secure full ownership of the property in the future by purchasing the remaining share.
• You can increase your share of ownership at any time.
• You are eligible to sell your share of ownership at any time despite not owning the whole property (however, the housing association may not give you complete freedom on who you can sell the share to)

These were some of the most important aspects you should consider before going ahead with getting a shared ownership mortgage. Taking the help of a mortgage broker would make your work easier and help you obtain the right advice throughout the process.