Shared Ownership Mortgage
What's On This Page?
GET IN TOUCH
Shared Ownership Mortgage (Part 1)
Paul Collinson talks to us about shared ownership and answers some frequently asked questions. Episode one of two, recorded in October 2024.
What is shared ownership and how does it work?
Shared ownership is when you buy a share of a home. You can buy a share between 10% and 75% of a property’s value. You pay the mortgage and also pay rent to the landlord or housing association for the share that you don’t own.
These are normally leasehold properties, which means you would also pay a ground rent and service charge towards the maintenance of communal areas.
Who is eligible for shared ownership? Who could get a shared ownership mortgage?
On the eligibility side, you can’t already own another home, although you can be in the process of selling one, and your household income must be £80,000 a year or less. In London the limit is £90,000.
Anyone who fits affordability and the lender’s credit appetite can get this kind of mortgage..
Which lenders offer shared ownership mortgages? Are there many?
A few years ago there weren’t many at all, but a few of the main High Street lenders have now taken it on. Some smaller banks also do it.
Examples are Barclays, Halifax, Leeds Building Society, Lloyds, Nationwide and a smaller one called Newbury Building Society. There’s also Santander, Skipton, TSB and Virgin [Information correct at time of recording in October 2024].
Which properties are available for shared ownership?
Shared ownership is available on both new build properties and resale homes. New homes are usually part of a regeneration project or a large development, while resale ones have normally been under the scheme and are sold on again as a shared ownership property.
They are leasehold, so they’re usually flats. It’s rare to have leasehold houses.
How much deposit do I need for a shared ownership mortgage?
The minimum deposit you need is 5%, but that’s actually just 5% of the share that you are buying.
Will my shared ownership property be freehold or leasehold?
It will be leasehold.
Can I buy a bigger share of my home at a later date?
Yes, you can, and this is called staircasing. Many people remortgage to do it. I’ve seen that a few times – they take out a new mortgage and buy another percentage of the value of the property.
Can I ever fully own a shared ownership home?
Yes. This is staircasing up to 100%, to cover the whole value of the property. That is the right thing, really, because then you own all of the property and no longer pay any rent on the part you don’t own.
What happens if the value of my house changes?
If the value of the property changes, then your share amount will also change – along with the housing association’s share amount. It can either go up or down. Essentially if the value changes, the shares do as well.
What if I have bad credit? Can I still get a shared ownership mortgage?
You may be less likely to get the mortgage, but it depends on the nature of the bad credit. It is possible, but we will point you in the right direction. We would have a full inspection of your credit file first, to assess it and find out what’s achievable for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
Speak To an Expert
Buying a new home can be a stressful time for anyone. Our job here at Brick2Brick Mortgage Solutions is to make the process a lot easier, taking the stress out and making the clients journey smooth and so much more.
Shared Ownership Mortgage (Part 2)
We continue the conversation on shared ownership with Paul Collinson, and he answers some frequently asked questions. Part two of two, recorded in October 2024.
How do I sell my shared ownership home?
If you own less than 100% of the property, you’ll need to speak to the Housing Association first. They have to be given first refusal on the property because they still own a portion of it.They may be willing to take it back, but they may decide not to do that. If not, they’ll find an eligible buyer for it. If you do own 100% of the property, you would just sell it as normal via an estate agent.
Can I make home improvements to my shared ownership property?
Yes, you can paint it or put a new kitchen in or a new bathroom. You just can’t make any structural alterations like an extension.How does the remortgaging process work with shared ownership?
It does take longer than a standard remortgage. It is advisable to come to us six months before the end of your current fixed period and we’ll guide you through, by finding you the most suitable deal at that time.At the mortgage offer stage, your solicitors will do their bit and the landlord or housing association will get involved during the process. Otherwise, it’s largely the same.
How does stamp duty work for shared ownership properties?
Stamp duty would work the same as if you were buying the property outright. You still have to pay it on the full value of the property, even though you don’t own all of it.It’s quite unfair, I think, but you would pay all the stamp duty that’s due. However, the usual thresholds and exemptions for First Time Buyer would apply.
Are there any other fees we need to know about?
Yes, and housing associations generally say that you should have between £3,000 and £5,000 available to cover all the fees and costs of moving, which includes solicitors’ and brokers’ fees.Remortgaging costs a few extra hundred pounds as well, to cover charges from conveyancers.
What are the alternatives to shared ownership mortgages?
There are other schemes such as First Homes, Deposit Unlock and Discount Market Sale. Those are a few of the options. But just give us a call and we can talk you through these and see what might work for you.What are the advantages and disadvantages of shared ownership?
The advantages are, basically, that you can get onto the property ladder with a lower deposit. Also, you can staircase up to buy a greater share of the property.A disadvantage is that shared ownership properties can be more difficult to sell, and if the value rises, the housing association’s share increases as well as your own.
If the property decreases in value, there is a greater negative equity risk as you only own a share of the property. And, as I said before, there are extra conveyancing costs on remortgaging.
How do I apply for shared ownership? What is the process?
First, you come in and see us and find out what you can borrow. Once you find a property, you’ll reserve the home by paying the landlord a fee of up to around £500. That will come off the amount you have to pay on completion day.Then, we look at the most suitable mortgage option for you and apply for the mortgage. We can arrange conveyancing at that time, as well.
How can a mortgage broker help with shared ownership?
Just come to us at the start and find out what your maximum borrowing amount will be. Then we’ll know where to start and can carry it on from there.YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
