Shared Ownership Mortgage

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Shared Ownership Mortgage (Part 1)

Rico Christofides explains how a shared ownership mortgage works. Episode one of two, recorded in November 2024.

What is shared ownership and how does it work?

Shared ownership is for people who’d like to purchase a property but can’t afford to buy on the open market. You usually buy a portion of 10%, 25% or up to 75% – and you pay rent on top of this to the Housing Association.

Who is eligible for shared ownership? Who can get a shared ownership mortgage?

It’s normally aimed at First Time Buyers who obviously don’t own a property, but we also find it’s often suitable for divorcees who are selling their property. If they want to stay in the area this can make it a cheaper option, especially if they don’t have much deposit to buy a property.

Outside of London, your annual household income must be less than £80k and in London that limit is £90k [podcast recorded in November 2024].

Which lenders offer shared ownership mortgages?

There are many. We can’t specify for compliance reasons, but a lot of high street lenders and specialist ones do offer shared ownership mortgages.

Which properties are available for shared ownership?

You would look on search websites like Rightmove or Zoopla, and you’d click on ‘affordable housing’. Generally they’re new homes or homes that were previously new and now being resold.

How much deposit do I need for a shared ownership mortgage?

It’s at least 5% of the price of the share you’re buying, if that makes sense. The deposit is not based on the whole value of the property, just the share.

Will my shared ownership property be freehold or leasehold?

It will be leasehold. You won’t own the property that the land is on.

Can I buy a bigger share of my home at a later date?

Yes, of course. The technical term for that is staircasing.

Can I ever fully own a shared ownership home?

It depends on the scheme you’re buying with, and the housing association running it. You can buy additional shares, but sometimes it’s capped at 75% or 80% of the property.

Ideally, they want them not to be owned as second homes in the future. So in certain developments you can only go up to 75% or 80%.

What happens if the value of my house changes?

It’s good for when you remortgage, but when you’re buying additional shares, obviously, they will cost more.

Can I still get a shared ownership mortgage if I have bad credit?

It’s all down to your personal circumstances. We’ll have a look at your credit report to see what will work for you. There are various lenders that will accept certain credit situations, but you won’t have the open market available to you. There’ll be fewer lenders to choose from.

Is there anything else we need to know before we come back with part two?

This might sound a bit weird, but if you’re buying a flat with shared ownership, you might not be able to own pets like a dog or a cat.

You might be allowed if it’s a ground floor flat, and if you’re buying a house you should be fine. It’s a bit of an odd one, and no one realises. So if you are an animal lover it’s worth being aware of that.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

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Shared Ownership Mortgage (Part 2)

We continue the conversation on shared ownership with Rico Christofides. Episode two of two, recorded in November 2024.

How do I sell my shared ownership home?

The good thing is you can actually sell it through the housing association. You have to go through that process, but they should actually have a lot of people on a waiting list.

If that doesn’t go well, you can obviously advertise on the open market.

Can I make home improvements to my shared ownership home?

Of course, except for structural home improvements like knocking walls down or extensions. For major work like that you would need permission from the Housing Association, which is essentially your landlord.

How does the remortgaging process work with shared ownership?

It’s very similar. If you’re buying additional shares, it’s just like raising capital on your mortgage.

How does stamp duty work for shared ownership properties?

You have a choice when you first buy the property. You have the option to pay the stamp duty on the full amount, or just on the share that you’re buying.

Are there any other fees I need to know about here when it comes to shared ownership?

Yes – you’ve got your legal conveyancing fees (your solicitor’s fees), your survey fees and the rent towards the property. You’ve usually got your service charges as well.

What are the alternatives to shared ownership mortgages?

There used to be an equity loan, but that has now ended. There are 5% deposit mortgages, and some lenders will offer you a mortgage of 5.5 times and even six times your income these days, just to bridge the gap [all information given is correct at the time of recording in November 2024].

What are the advantages and disadvantages of shared ownership?

I think it’s a great option. It allows you to buy a share of a property and you pay rent on the rest of it.

The only real pitfall to look out for is the need to pay the rent – and the rent potentially going up. But it’s definitely more secure than just renting. Obviously, you own part of the property, which is better for you and it feels more like a home.

How do I apply for shared ownership? What’s the process if somebody is doing this for the first time?

A broker will help direct you and help you apply for the mortgage. We will obviously point you in the right direction of where to buy property.

There are usually lots of new builds popping up these days – and the site developers will also give you information on what the process is.

We’d look after you, talk you through the house buying process and identify the lenders available for your specific needs.