Shared ownership mortgages: Buying a share of a property

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Shared ownership mortgages are part of a government scheme to help people with low incomes buy their first home. Essentially, you buy a part of your property, which can be anything from 25% up to 75% in England and Wales and then a housing association buys the remaining 25%, which you then pay rent on.

You’ll generally need to put down less of a deposit, for example, a 5% deposit rather than the usual 10–20% deposits required for standard mortgages, as the deposit you pay is only for the part of the property that you’ll own.

Shared ownership mortgages are usually available on new-build properties as they tend to be built for that specific purpose by a housing association.

While shared ownership mortgages might make sense for some people, they’re not without risks so it’s important to get your head around them first before deciding if they’re right for you.

Pros and cons of shared ownership mortgages

Who qualifies for a shared ownership mortgage?

Not everyone is entitled to a shared ownership mortgage and the eligibility criteria does vary across the UK.
In England, you may be eligible to purchase a home with a shared ownership mortgage if you meet the following criteria:

• You’re aged 18 or over.
• Your household earns £80,000 or less a year (£90,000 or less a year in London).
• You’re allowed to permanently live in the UK.
• You’re trying to get on the property ladder as a first-time buyer, or you previously owned a property but can no longer afford to buy a property now, or you’re already a shared owner of a property.
• You haven’t fallen behind with your rent or mortgage payments.
• You have a good credit history and can afford to make regular payments.
• You have some savings to cover the expenses associated with buying a property.

All shared ownership properties are leasehold in England and Wales so check your own circumstances carefully to see if you qualify for a shared ownership mortgage.

Increasing my share of the property

You’ll be able to carry on buying more of the rented portion of your home from the housing association, generally until you own 100% of it. This is known as “staircasing” but the amount you pay for the remaining shares of your property will depend on what the housing association charges you. For example, if the value of your property has increased over time, expect to pay more for the remaining share, and if its value has decreased, expect to pay less.

The housing association is likely to get your property valued first and then decide on the cost of the remaining share, though you may be required to pay for any fees associated with this valuation.

What should I consider before applying for a shared ownership mortgage?

Each shared ownership mortgage lender will have its own set of eligibility criteria but it’s also worth considering some of these factors before committing to a mortgage:

• Do you have any outstanding debt? If so, are you taking steps to regularly pay this debt off?
• Do you have any savings and if so, how much of your savings can you put towards a deposit?
• How much money do you need to borrow? And will you be able to make the monthly repayments through a steady job and regular income?
• Will you be able to afford a mortgage on top of your regular outgoing expenses?
• Do you have a good credit rating? Could a poor credit rating hinder your application approval?
• Do you meet the eligibility criteria for a shared ownership mortgage?

What is a shared ownership mortgage broker and why should I use one?

A mortgage broker is a professional with an in-depth knowledge of the mortgage market, who you can instruct to find the best mortgage for your circumstances.

They have a deep understanding of individual lender’s eligibility criteria, so they’ll be able to point you towards the lenders most likely to approve your application.

This can be particularly useful for applicants who have low income or a poor credit score, as it can save them from being rejected by multiple lenders.

It’s possible to work with a mortgage broker that specialises in the shared ownership market. By doing so, you can gain the peace of mind of knowing you’ve secured the best possible deal available to you.

Some mortgage brokers charge a one-off fee, but this is usually eclipsed by the savings you make when choosing the best mortgage over more expensive ones.

What are the pros and cons of using a shared ownership mortgage broker?

Frequently asked questions about shared ownership

• Who is eligible for a shared ownership mortgage?

  Shared ownership is only available to first-time buyers, existing shared ownership homeowners or homeowners who can no longer afford to buy a house.

  Your household income must be less than £80,000, or £90,000 if you live in London.

• Who offers shared ownership mortgages?

  There are some small lenders that specialise in offering shared ownership mortgages, while a growing number of mainstream lenders will offer their first-time buyer mortgage products to shared ownership applicants.

  Use a professional mortgage adviser to help you find the deal most suitable for your needs.

• When should I apply for a shared ownership mortgage?

  You’ll need to be approved by your local housing association before you can apply to live in one of its shared ownership properties. The application process is similar to a mortgage application, as it requires personal details and financial checks.

  Once you’re approved, you can start searching for properties and applying for mortgages. A “mortgage in principle” could improve your chances of being chosen to live in a shared ownership property. You can be approved for one of these before finding a property. It’s valid for 90 days after approval.

• What if I have bad credit?

  There are a few shared ownership mortgage providers that will lend to applicants with bad credit. However, there are only a few to choose from and the interest rates are highly uncompetitive.

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