What is Shared Ownership?
A shared ownership mortgage is a government scheme and it helps those who are on a lower income to get on the property ladder.
It’s very simple in the way that it works. You’ll essentially split the purchase with the housing association in your area. There are some pros and cons to getting a shared ownership property. The pros include the fact that you can buy a share of a home with a much smaller deposit. The cons are that, if the property value does increase, then you may find it very difficult to purchase the entire home.
What is a Shared Ownership Mortgage?
The shared ownership scheme was first introduced by the government, and it is completely designed to help those who are on a lower income to become homeowners. In recent times, more and more people are now taking up this kind of mortgage through the Help to Buy scheme. This was launched by the government and it is designed to help those who are on a low income to make their way onto the property ladder.
How much could you Borrow?
If you want to see how much you could borrow then the first thing that you need to do is enter how much you and your partner earn on a mortgage calculator.
How do the Mortgages Work?
Shared homes are normally given through a housing association. They work by giving first-time buyers the chance to buy a share in a property. You can buy a share that ranges from 25-75%. You will then pay rent on the percentage that is left over. It should be noted that shared ownership is only available to those who are first-time buyers, or those who have owned a home previously but can no longer afford it. Further to this, the scheme is only open to those who are earning less than £80,000 per year. The government have stated that in London, this will be raised to £90,000. You will need a mortgage to help you to buy your share of the property, but you can get one with a smaller deposit than normal.
Pros and Cons of Shared Ownership
The shared ownership scheme can easily be one of the cheapest ways for you to get your first step on the property ladder. The deposit means that you’d only need to raise £7,500 to get a property which is valued at £150,000 if you got the 5% rate.
If you are able to put up more and if you can keep up with the monthly repayments then it may be worth you trying to put down a 75% share, but you have to make sure that you factor in the cost of your rent for the remaining share.
If you do make the decision to go ahead and upgrade your share of the home, then you will need to get your property valued. If you know that the price of properties in your area have gone up, then you might end up paying more than you did in your initial share. If you go for part-ownership then you may find it difficult to rent out your property if you do decide to move on. This could make the idea of moving tricky, if you can’t afford to upgrade your share to the 100% mark.
It’s also worth keeping in mind that the housing association will of course, have first refusal if you make the decision to sell the property. Their right to purchase the property back, before you sell will last for 21 years. This is done from the date that you acquire 100% ownership.
What are 0% Mortgages?
It’s more than possible for you to get a mortgage without having to save up for a deposit at all, but these types of mortgages are rare. The only mortgage out right now for this would be a guarantor mortgage This will require a family member who owns their home to be on your mortgage as well. This can put their own savings and property at risk if you fail to make your payments, so keep that in mind.