Shared Ownership Mortgages

Benefits of shared ownership mortgages

One of the key benefits to shared ownership is the option of investing in a proportion of a property if you are unable to afford to buy a home elsewhere. The scheme offers lower mortgage payments, whereby the owner partially owns the property and rents the remaining share. It is important to understand that rent remains payable on the percentage of the property owned by the housing association, and this needs to be paid alongside the shared ownership mortgage repayments. Over time, the scheme allows homeowners the option of purchasing the residual proportion of the property from the association, and thus complete whole ownership.

How shared ownership mortgages work

The main difference between typical residential mortgages is that the deposit requirements are lower. This makes it more accessible to more people who do not have the minimum deposit available to invest in other purchase options. Through shared ownership mortgages, you only need to have the deposit available for the proportion of the property that you are purchasing. For example, a traditional mortgage on a £200,000 property would be around 10%, or £20,000. If you are buying 50% of the same value property through a shared ownership mortgage, you need to have 10% of that 50% value available; i.e. £10,000.

Criteria for shared ownership mortgages

As with any mortgage product, lenders have criteria that applicants need to adhere to apply.

These include:

1. Maximum income bands
2. Being a first-time buyer or not being able to afford a property through a traditional mortgage 
3. Renting from a housing association or local council 
4. Being a resident in the property
5. Not sub-letting the property or any part of it

Selling a home with a shared ownership mortgages

It is crucial to understand that if you have a shared ownership mortgage, you do not own the entirety of the property. This means that if you wish to move and sell the property, your housing association has the first right of refusal for 21 years after you have made the purchase. They can, therefore, choose to find their own buyer, rather than your being able to sell your home on the open market. Over time, there is the potential to purchase a larger proportion, or all of, your home from the association. The timing of this process will depend on your circumstances and at which stage you are financially able to commit to purchasing a larger share of the property.

Key factors in shared ownership mortgages

As with any property, the value of your home will change with the property market. This means that the price you will have to pay to buy a larger percentage of your property may increase or decrease depending on the current market value at the time. The system is not the same as owning a property with friends or family members, so you need to understand your rights and obligations as a co-owner before deciding to proceed with a shared ownership mortgage.