
10 ways to maximise your mortgage chances
Here are 10 top tips to help improve your likelihood of being accepted for a competitive mortgage deal
Shared ownership allows you to take out a mortgage on a share of a property and pay rent on the rest. Our guide explains how shared ownership works and how to apply...
Shared ownership, also known as ‘part buy part rent’, is a type of mortgage that gives first-time buyers the chance to buy a share in a new build property. You can take out a mortgage for the share you own (usually between 25% and 75%), while paying rent on the rest to a housing association. As you’ll only be paying a mortgage on the share you’re buying, the amount needed for a deposit is usually much less than if you were to buy a property outright.
Shared ownership gives lower income households the opportunity to get on the property ladder at a more affordable cost.
You’ll be eligible to buy a home through a shared ownership scheme if your household income is less than £80,000. You’ll also need to be either a first-time buyer or a previous homeowner who cannot afford to buy now. Alternatively, you will need to be renting from a council or housing association.
You will need to be able to prove you’re not in mortgage or rent arrears, that you have a good credit history and you can afford the costs of buying a shared ownership home.
Military personnel will be given priority over other groups through government-funded shared ownership schemes.
Shared ownership schemes, which are offered by housing associations, allow you to part-buy and part-rent your home.
If you have a long-term disability, you could also qualify for a shared ownership scheme under the government’s Home Ownership for People with Long-Term Disabilities (HOLD).
Our mortgage eligibility guide covers what mortgage lenders look for when deciding how much you can borrow.
As of April 2021, changes to shared ownership schemes were introduced under the government’s ‘Affordable Homes Programme’, including:
Shared ownership schemes can be seen as a middle ground between owning and renting, with the option to buy a bigger share of your home at a later date.
If you’re looking to take out a shared ownership mortgage, you’ll need to consider the following:
With shared ownership, you can choose to increase your share of the property overtime through a process known as ‘staircasing.’ This means that you can keep buying shares of the rented part of your home from the relevant housing association until you own all of it. Following changes to the scheme, you can now staircase in 1% increments. In most cases, you can ‘staircase’ all the way to owning 100% of the property so you’ll no longer need to pay any rent, just your mortgage payments.
How much you pay for additional shares will depend on the value of your home at the time (this will be determined by the housing association). For example, if your property is valued at £250,000 and you want to buy an additional 25% share, the cost of the extra share would be 25% of the valuation which would be £62,500.
Whether you can sell your shared ownership home will depend on how much ownership you have. If you end up with 100% ownership of your home, you can choose to sell your shared ownership property privately through an estate agent and may need to pay to have your property valued. But bear in mind that the housing association has the right to ‘first refusal’ for 21 years after you first bought your home.
If you don’t own 100% of the property, the buyer will have to buy it as part of a shared ownership scheme, by buying a share greater than or equal to what you currently own.
Shared ownership can come with advantages depending on your financial situation, including:
There are potential disadvantages that come with shared ownership including:
Shared ownership and shared equity are different types of schemes. Shared equity schemes offer a low-interest loan on part of the home you can’t afford to buy, instead of buying it and renting it back to you at a low-cost rent. Shared equity schemes are also offered under the government’s Help to Buy scheme.
The government offers a shared ownership scheme under its Help to Buy mortgage scheme, so if you’re looking to apply, a good place to start is your local Help to Buy agent. You can find your nearest agent on the Help to Buy website and they will be able to run through your options.
If you live in a council or housing association home, you can apply for Social HomeBuy. This is a scheme that helps you buy a share of the home you already live in and pay rent on the rest.
You’ll need to buy at least 25% of your home but you will get a discount of between £9,000 and £16,000 on the value of your property – depending on where you live and the size of the share you're buying. If you choose to increase your stake in your home later, again, you will get a discount. If you want to apply, ask your landlord for an application form.
If you buy a shared ownership property, you’ll need a shared ownership mortgage for the proportion of the property you buy and you’ll typically need a 5% deposit.
Not all lenders offer shared ownership mortgages, but many do, including Kent Reliance, Nationwide, Barclays, Leeds Building Society and Halifax. It’s a good idea to use a mortgage broker with experience of shared ownership mortgages as they will know the best lenders to approach.
Your mortgage is secured on your home, which you could lose if you do not keep up your repayments.
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