This is a type of mortgage only available to First Time Buyers. You will buy a percentage of the property via a mortgage and then pay a subsidised amount to a housing association. Because the mortgage is smaller, the borrower usually requires a lower deposit, which can be challenging to save for.
Understanding Shared Ownership Mortgages
Are you wondering what a Shared Ownership mortgage is? Instead of buying the whole property, you buy a part of it, usually between 25% and 75%. You pay rent on the part you don’t own to a housing association or developer.
We’re going to explain Shared Ownership mortgages, including:
What they are.
Who can get one?
How to apply.
The good and bad points.
How to sell a Shared Ownership home.
Plus, we’ll answer some common questions.
Decoding Shared Ownership Mortgages
A Shared Ownership mortgage helps people who can’t afford to buy a whole house. It lets you own part of a house and pay rent on the rest. This way, you can start owning a home without buying it all at once.
When you choose Shared Ownership, you first pay a deposit and then get a mortgage for the part of the house you want to own. The rest of the house is usually owned by a housing group or a company that builds houses, and you pay them rent for the part you don’t own. There are different kinds of shared ownership mortgages, like fixed equity shared ownership and leasehold shared ownership. Each type has its own special features.
Eligibility for Mortgages for Shared Ownership
Shared ownership mortgages help make it more affordable for people to own a home. To make sure this option is available to those who really need it, there are certain rules about who can apply.
These mortgages are for people buying a home for the first time or those who used to own a home but can’t afford to buy one now. To apply for a shared ownership mortgage, you need to:
– Be at least 18 years old.
– Make a certain amount of money.
– Have a good credit history, which means you’ve been responsible with your money.
– Be able to pay for the costs of owning a home. This includes the mortgage, rent for the part of the home you don’t own, and other bills.
After you check that you meet these rules, you’ll need to show proof, like how much you earn and who you are, through a process that checks your information.
Applying for a Mortgage for Shared Ownership
If you’re interested in applying for a shared ownership mortgage, the process can be broken down into five steps:
1. Initial Enquiry. To begin, check whether the property you are interested incan be bought through a Shared Ownership.
2. Application Submission. Once you’ve made your initial enquiry and decided to proceed, you’ll need to complete a mortgage application form. This will include providing details about your personal and financial circumstances, as well as information about the property you’re interested in.
3. Required Documentation. Along with the application form, you’ll also need to provide supporting documentation such as proof of identity, income, bank statements, and details of any existing financial commitments.
4. Assessment and Valuation. Next they’ll assess it, verify your financial information, and value the property you’re interested in.
5. Approval. The approval process can take anywhere from a few days to a couple of weeks, depending on the complexity of your application and the availability of the required documentation.
Pros and Cons of Mortgages for Shared Ownership
Pros:
- They’re cheaper at the start compared to buying a whole property by yourself. With Shared Ownership, you buy just part of the property and pay rent on the rest. This makes it easier to afford, especially if you’re buying a home for the first time.
- You can buy more of your home over time. This process is called staircasing, and it helps you own more of your home as you get more money.
Cons:
- You might not have many homes to choose from since Shared Ownership is usually for new houses or those owned by housing groups.
- If you want to sell your share of the home, the housing group might get to say yes or no first.
When thinking about getting a mortgage for Shared Ownership, it’s important to look at the good and the bad sides. Shared Ownership can be a great way to get started with owning a home if saving a lot of money for a down payment is tough. But, it’s not perfect for everyone. Always think about what you need and what your money goals are before you decide.
Selling a Shared Ownership Property
If you’re thinking about selling a property that you own with someone else, there are a few important steps to follow.
- First, you need to tell the housing association or the group that helped you buy the home that you want to sell. They often have the chance to buy it back before anyone else does.
- Next, you can start to look for a buyer. This buyer needs to be someone who is allowed to buy a Shared Ownership home. When selling, you might have to pay off your whole mortgage or move it to a new home. Sometimes, you have to pay extra fees for paying your mortgage early, so it’s a good idea to check your mortgage papers.
Selling a shared ownership home can take more time than selling a regular home because the buyer has to be eligible and go through the application process for Shared Ownership. To make things smoother, stay in touch with your housing association and give them any paperwork they need quickly. If you’re not sure about something, it’s always best to ask a professional for advice.