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Shared Ownership Mortgages - The Basics

There are three facts about Shared Ownership Mortgages that will help you understand the process better. The first fact is that Shared Ownership Mortgages make home buying affordable for those who cannot afford to buy or privately rent. This is because Shared Ownership works on a ‘part rent, part buy’ scheme, where you partly buy your home and partly rent it from the Housing Association.

The second fact about shared ownership schemes is that it is a Government run project and refers to the Homebuy scheme.

The final fact is that these shared ownership schemes are run by your local authority, meaning that regardless where you are in the UK, there is a scheme to help you to get on the property ladder.

If you are just starting out on your journey to get a shared ownership mortgage, then your first port of call is to contact your local housing association and get a homebuy agent. They will work out whether you are in fact eligible for a shared ownership mortgage and walk you through how to register.

A ‘part rent, part buy’ scheme allows you to do just that. Partly buy your home and partly rent it. You purchase a percentage of a share in a property and then you pay rent to the housing association on the remaining balance.

You can buy a small share in the property and then, over time, increase your share. This is termed as ‘Staircasing’, but not all shared ownership schemes work on this basis and there are many different types of shared ownership schemes.

Before you apply for a shared ownership mortgage, you will need to consider the share that you can afford in the property i.e.: 25%, 50% etc. Next you will need to consider how much you have to put down as a deposit. You can go for a 100% shared owner mortgage, but you will more likely than not be asked to fill in a protection clause. The rent that you pay on the property is then deemed by your income and working out home much you can in fact borrow.

The final stage in working out the right shared ownership mortgage for you is to fully understand what is meant by each type of shared ownership mortgage that falls under the affordable housing term.

A New Build Home Buy is pretty much a traditional shared ownership scheme, where younpart buy and part rent and then ‘staircase’ your way into the property. An Open Market Home Buy is a relatively new scheme where you buy 75% of a property and then get two loans on the remaining amount. One loan is from the mortgage lender and the final 12.5% is from the Government or homebuy agent.

Another type of shared ownership mortgage is called a Shared Equity Mortgage and here you do not pay any rent on the remaining amount, however you are expected to buy a percentage of the property which is usually between 60-75%. There are some quite strict rules with this type of mortgage, which often rule out the option of staircasing.

The final type of shared ownership mortgage is a ‘First Time Buyers Initative’, which is effectively a Shared Equity Scheme that aims to help eligible first time buyers to buy a share in a new home. The first time buyer will buy at least 50% and then the English Partnership, a Government run agency, will retain the rest of the share in the property.

If you are interested in a Shared Ownership Mortgage, then Click n go Mortgages can help you will every aspect of getting a foot on the property, so contact them for impartial advice.

Shared Ownership Mortgages - The Basics / Author: LolitaBrown

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