Shared ownership mortgages

Shared ownership mortgages were originally intended for those with financial difficulties as a means of helping them afford to buy a home.  However, they have become more ordinary of late, with first time buyers turning to shared ownership as a means of affording to buy in today’s high priced property market.

With shared ownership mortgages, you buy a percentage of the property – typically between 25% to 50% - from a public body such as a housing association. The type of mortgage scheme varies from lender to lender, with some offering a 100% loan to value mortgage on a shared ownership property, meaning that you do not have to find a deposit.   

Shared ownership is sometimes referred to as ‘part buy, part rent’ because you pay a mortgage to the lender on the part that you own and pay rent to the housing association on the part that you do not own.  As with a traditional mortgage, lenders will access your application on affordability and your ability to make the monthly payments on both the mortgage - and the rent.  Therefore, the lender will want to know at the outset what proportion of the property you are intending to own and the amount of rate you will be due to pay.

The drawback with shared ownership mortgages is that if the property increases in value whilst you occupy it then you will not benefit from the full increase because of only owning a percentage of the property.  You may, however, be in a position to look at increasing your percentage of the property in the future – otherwise known as ‘staircasing’. 

Details of shared ownership schemes can be found at http://www.housingcorp.gov.uk, under the Government’s HomeBuy scheme.  

We recommend that you seek expert advice when considering a shared ownership mortgage.  At L&C, the fact that we offer free advice will be of help at a time when you will be watching your finances carefully.

Useful links:
How to become a first time buyer
Free guide to first time buyer mortgages
100% mortgages