Are you looking to buy a home but struggling to afford the full purchase price? If so, you may want to consider a shared ownership mortgage.
This a type of home financing that allows you to buy a portion of the property and pay rent on the rest.
Shared Ownership Mortgages
Shared Ownership Mortgages | Mortgage Advice | Kind Financial
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Last Updated: 13th April 2023
Are you looking to buy a home but struggling to afford the full purchase price? If so, you may want to consider a shared ownership mortgage.
This is a type of home financing that allows you to buy a portion of the property and pay rent on the rest.
What Are Shared Ownership Mortgages?
Shared ownership mortgages are a type of home financing that allows you to buy a share of a property, typically between 25% and 75%, and pay rent on the remaining share. This can make it more affordable to get on the property ladder, especially for first-time buyers or those with limited funds.
The Benefits of Shared Ownership Mortgages Include:
Lower upfront costs: Because you’re only buying a share of the property, you’ll typically need a smaller deposit than you would for a traditional mortgage.
Lower monthly payments: Your mortgage payments will be based on the share of the property you own, rather than the full purchase price, making them more manageable.
Potential for equity growth: If the value of the property increases over time, the value of your share will also increase, allowing you to build equity and potentially sell your share for a profit.
Option to buy more: You may have the option to buy additional shares of the property over time, known as “staircasing,” which can increase your ownership and potentially lower your rent payments.
Who Should Consider Shared Ownership Mortgages?
Shared ownership mortgages may be a good option for:
First-time buyers who can’t afford to buy a property outright.
Those with a low income or limited savings.
Those who don’t qualify for a traditional mortgage due to credit or income issues.
Those who want to own a property but can’t afford the full purchase price.
How Much Can You Borrow With A Shared Ownership Mortgage?
The amount you can borrow will depend on your income and financial situation, as with any mortgage. However, because you’re only buying a share of the property, your mortgage amount will be based on the share you’re purchasing, rather than the full purchase price.
What Are The Minimum And Maximum Shares You Can Buy?
Typically, you can buy a share of between 25% and 75% of the property, although this may vary depending on the property and the lender.
How Are Mortgage Payments Calculated?
Your mortgage payments will be based on the share of the property you own, plus the rent you pay on the remaining share. For example, if you own a 50% share of a property and the rent on the remaining 50% is £500 per month, your total monthly payments will be your mortgage payments plus £500.
Eligibility for Shared Ownership Mortgages
To be eligible for a shared ownership mortgage, you’ll typically need to meet the following requirements:
Income: You will need to have a stable and regular income, and it should be enough to cover the mortgage payments and other related costs.
First-time buyer status: You will typically need to be a first-time buyer, or have previously owned a property but are unable to afford one now.
UK residency: You must be a UK resident, and you will usually need to have lived in the UK for a certain period of time to be eligible.
Age: You must be over the age of 18 to apply for a shared ownership mortgage.
Credit score: You will need to have a good credit score to be approved for a shared ownership mortgage.
It’s important to note that these eligibility criteria can vary depending on the specific shared ownership scheme and the housing association or developer that is offering the property. Therefore, it’s important to check the specific eligibility requirements for the scheme or property you’re interested in.
Further Guidance
Shared ownership mortgages can be a good option for people who want to get on the property ladder but can’t afford the full purchase price. They offer lower upfront costs and monthly payments, as well as the potential for equity growth and staircasing.
However, there are also additional costs and fees, as well as restrictions on subletting or making changes to the property. If you’re considering a shared ownership mortgage, it’s important to do your research and compare it with other types of mortgages to find the best option for your situation.
Overall, shared ownership mortgages can be a great way to get on the property ladder and to owning your first home. With the right research and preparation, you can find the perfect shared ownership property and start building equity in your own home. If you would like further guidance on shared ownership mortgages, simply give us a call on 0121 796 6655 or click to send us a message.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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