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Shared Ownership – What is it? How does it work?

The Shared Ownership scheme was introduced following the credit crunch in 2012, the scheme gives first time buyers and home movers the chance to buy a share of a property and then rent the remaining part of it.

Shared Ownership Mortgage Advice in Coventry

What is shared ownership?

Shared Ownership will let you take out a mortgage/purchase a share of a property. This is a percentage-based share; usually, you will have to own a share of at least 25%-75%. However, in recent times, some properties are letting you have a share as low as 10%.

You will also have to pay rent back on the remaining share of the property. Your mortgage bills should be lower as you’ve taken out a mortgage on a lower share, so you should be able to compensate for the rent payments.

Furthermore, since you’re taking out a lower share in the property, your initial mortgage deposit should be lower.

Maybe partial homeownership is the route that will help you get onto the property ladder.

How does the scheme work?

Although it can differ based on your credit history, since it’s likely that you’re only purchasing between 25%-75% of the property, the minimum deposit required should be lower.

Here’s an example of how Shared Ownership would work. If you take out a 50% share of a property that’s valued at £250,000, you’ll only need to borrow £125,000 for your mortgage. In addition to this, say that you’re required to put down a 5% deposit, you’ll only have to supply £6,250 rather than the whole £12,500 if you were to take out a 100% mortgage on the same property.

Once your Shared Ownership papers have gone through and you’ve put down your deposit, just like any other mortgage type, you’ll start paying back your mortgage each month. You’ll also be paying rent to the housing association that is linked to the property.

In theory, your combined mortgage and rent payments shouldn’t be as much as if you were to have taken out a 100% mortgage. Your mortgage advisor in Coventry can go through the costs with you.

Costs and fees

With any type of mortgage, you’ll be faced with a few different costs and fees; the same costs should apply to Shared Ownership.

You’ll have to consider obvious set-up/mortgage arrangement fees and possibly booking fees. There may also be a stamp duty charge on your property, it depends on the property price and how much you’re buying it for. You can speak to your mortgage advisor in Coventry about stamp duty to find out which threshold your property is in. Don’t forget about solicitor and legal fees too.

Costs may vary depending on the property that you’re buying. Deposit size, monthly payments, arrangement fees will differ from property to property.

How can I apply?

You’ll have to match the Shared Ownership criteria before you can move forward with your application:

  • You must be at least 18 years old.
  • If you live outside of London, your household annual income must less than or equal to £80,000. If you live in London, this is upped to less than or equal to £90,000.
  • You can’t have ownership over another property during your Shared Ownership mortgage application. You must be a first time buyer in Coventry or in the process of selling your current property.
  • If you can afford a house on the open market, you will not be able to take out a Shared Ownership mortgage. It was introduced to help struggling homebuyers.
  • You must prove that you are not in any kind of arrears, this includes both mortgages and rent.
  • You’ll need to show evidence of a good, clean credit history. This means that you may struggle if you have a CCJ (county court judgement) in your name or have had past credit issues.

Although this may seem like a long list of requirements, you must remember that most of the other home buying schemes are the same or have an even longer list!

At the end of the day, the scheme was made for a specific target audience, so if you don’t match it, it probably isn’t for you.

Speak to a Shared Ownership Mortgage Advisor in Coventry

Our team has been working as a mortgage broker in Coventry for over 20 years now. Along the way, we have helped many applicants secure Shared Ownership mortgage products – it’s one of our many specialities.

Shared Ownership fits within the government-led ‘Own Your Home’ project. There are many different schemes available through this project; you can find out more information here: www.ownyourhome.gov.uk

We offer a free Shared Ownership mortgage appointment to every customer. Book online today and speak with a mortgage advisor in Coventry at a time that suits you.

Coventrymoneyman.com & Coventrymoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited registered in England, registered number 6789312 and registered office 10 Consort Court, Hull, HU9 1PU.

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