Shared Ownership Mortgages are not as complex as they may sound. Think of it as a cross between buying and renting; aimed largely at first-time buyers, as part of the help-to-buy government initiative. First-time buyers see a shared ownership mortgage as the perfect opportunity to get themselves onto the property ladder. If you cannot afford the mortgage on 100% of a home, it allows you to buy between 25%-75% of it. The idea being that you grow their share in the house over time until they eventually own it outright. Essentially, a shared ownership mortgage allows you to buy a share of the property to own and rent the part you don’t own at a reduced rate. Because of this, it’s probably the most affordable home ownership product there is.
In a nut-shell you would buy between 25% and 75% of a property, with the option to buy the rest at a later date. This is an ideal scheme for those who don’t earn enough to buy a home on a regular mortgage deal. Imagine the scenario… Buying a stake Firstly, you opt for buying a 50% stake of a property worth £100,000. In this case, you’d be buying a £50,0000 share and would need a deposit of £2,500 - £5,000 (5%-10%) to do so. But don’t forget that you’d be renting the remaining value of the property share at a subsidised rate. Securing the deal Secondly, you source a reputable mortgage broker and solicitor to iron out the rest of the deal. Buy a bigger share in the property Next, a few years later, once your first mortgage arrangement has just expired, you may wish to purchase a larger share of your home. If your property has dropped in value, you may be able to buy more shares without injecting as much cash, alternatively, if it has risen in value, you may have to pay more per-share than you originally did - a process known as ‘staircasing’. Exact rules vary between housing associations, on the buying and selling of shared ownership properties, check your lease to see if you have any restrictions. Also, don’t forget that you’ll have to stump up for a valuation report; these can cost anywhere from £75-£300. Rid the rent In some scenarios, dependent on your individual circumstances, once you own 75% of your home, you will no longer need to pay a subsidised rent. One idea would be to follow up the option to own 100% of your home outright, if you’re saving money here.
Eligibility differs from one country to the next. However, in England the criteria could look like this:
For any further details surrounding the criteria, visit Gov.uk.
Properties The majority of homes available for shared ownership mortgages are newly built. However, some properties are being re-sold by housing associations back into the market. Leasehold only Each country runs the Share Ownership mortgage scheme somewhat differently. In England, all shared ownership homes are on a leasehold only basis. Fees As with any mortgage product, there will be the usual lump sums when to paying solicitors and stamp duty etc. So, just make sure you’ve factored this in ahead of any deal struck.
Not all lenders offer mortgages on shared ownership properties. Fortunately, here at MortgageKey we have secured solid relationships with lenders who are willing to support this scheme. We will take away the hassle from you by reviewing and comparing the best prices for you, so that we can obtain the most suitable mortgage to meet your individual circumstances. Our up-to-date knowledge of the latest government schemes allow you to get your foot on the property ladder that bit quicker and a whole lot smoother. Contact a member of our team or visit our Shared Ownership Mortgages page for more detail.
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