If you’re struggling to raise a deposit, or cannot secure a high enough mortgage loan to buy your home outright, you could try considering shared ownership properties.
This guide will take you through the scheme, how it works and how it could help you get a home of your own (well, most of it anyway).
Shared ownership is when you buy a share in a property and pay rent for the remaining shares. You own the property on a part buy/part rent basis. These are sold through housing associations and they offer a minimum of 23% share, up to 75%, of a home’s total value. Properties sold through the scheme are always leasehold. There are six initiatives within the scheme;
If you would like to find out more about buying homes to rent, check out our Buy to Let Guide.
There are a number of extra costs in securing this mortgage so it is wise for those considering to save a little more onto their deposit total, in order to cover the legal fees. These costs could include;
The application process for shared ownership mortgages is slightly different to applying for an average mortgage. First, you must make your application to the authority selling the shared ownerships properties in your areas and make an appointment to see them. The company will be assessing your ability to pay and if this is a realistic option for you. They would also be sizing you up as a tenant and for that, you may need to provide references.
After that, you will need to apply for a mortgage as you would expect with any other type of property. Please note, not all lenders have shared ownership mortgage products, however, they are readily available and there is a great amount of choice on the market.
Take a look at these guides to making your first mortgage application for more details. You could also look at this handy guide to improving your credit rating to check if you have done everything to secure the best deal you can.
Once you have secured approval from the housing company and an offer for a mortgage, you can then proceed with buying your shared ownership property.
Find out more in this Guide to Buying and Selling your Home to find out more about the process of buying a house.
Yes, once you have lived there for a while, paying your mortgage and rent on time, you may get approval to buy more of a share in your home.
For example, you may have started off with 80% and after three years you may want 90% of the home. This process is called stair-casing shared ownership.
In order to do this, you must inform your mortgage lender and write to the housing association in order for them to assess your suitability to buy more shares. For this, they will need to send a valuator to check the current value of the property and you may be charged for this service. The company will then inform you of the price of a share. And you can make your decisions and advise solicitors from there.
Please note; Some lenders may restrict stair-casing ability, due to a scarcity of available housing. Some providers will also have an upper limit on the amount of shares you can buy, meaning you may not be able to stair-case up to 100% ownership. You may also be restricted in how soon you can stair-case, as well as the maximum number of times you will be permitted to it.
Conversely, you are not obligated to buy any more shares in your home, the choice is yours to increase or stick with the level of ownership you have.
Terry and Charlotte started a family and need somewhere to live in their local area. A new housing development has popped up and they have decided they would like a shared ownership home on this estate. They have a deposit of £7,000 and would like an 80% share of the home. Terry and Charlotte were able to secure a mortgage of £120,000, allowing them to get an 80% share of the house.
After three years, Terry and Charlotte wished to increase their share to 95%. They contacted their agent, who sent a valuator to assess their home’s value. Over the last three years, they have managed to increase the property’s value to £130,000. The housing association asked for £19,500 for the price of staircasing, plus the additional fees of;
You can sell your shared ownership property at any time. However, under some agreements, you may have to pay back some or all of the discount you received, if this is done within the first five or ten years.
If the housing association still have a stake in your home, you can sell these shares, along with yours, in a process called ‘back-to-back staircasing’. This may cost you extra to do but if it is possible with your agreement, you can complete the sale as if it were a freehold property.
At the start of the sales process, you must write and get permission to sell your home from the housing association. This is applicable even if you own the property outright from stair-casing, as it may be reserved key workers, the elderly or disabled people who need housing in your area. If this is the case, the new buyer will also need to pass the same eligibility checks to secure the property. This process could considerably increase the amount of time it takes to sell.
If you are a council tenant, you may be eligible for the government’s Right to Buy Scheme, where you can buy the council property at a discounted price, if you are a secured tenant.
Similarly, you may qualify under their Right to Acquire scheme if you are an assured tenant in a property and the house was built with public money after 1997.
It is a wise plan to speak to an independent mortgage advisor before making any mortgage applications, they will explain the process to you in detail and discuss your personal finances, helping you make the most informed decision. Get in touch for free now.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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