A shared ownership mortgage is an option for first time buyers, who cannot finance an outright mortgage. It allows the occupier to take out a mortgage on a share of the property, and pay rent to a local housing association on the rest.
This is a way of enabling those on low incomes, or with a small deposit, to take a step onto the property ladder. Here’s a closer look at what’s involved.
As part of the government’s Affordable Homes Programme, a shared ownership candidate would need to buy at least 10% of the home, which was reduced from 25% in April 2021. There is the option to buy a bigger share of the home in the future, with a minimum instalment of 1%. These can be increased until you own 100% of the property.
To qualify, candidates must not already own or part own a home, and must have a combined household income of no more than £80,000. You would typically need a good credit history, and have a deposit of 5% or more for the share you are buying. If you have a long-term disability or are employed in the miliary, you may be entitled to further help.
To apply for a shared ownership, check with your local council to see what’s available in your local area. You will need a tailored mortgage, which not all lenders provide. Therefore, it’s best to find a broker with previous experience of shared ownership mortgages, as they will know how to find the best deal for you.
Bear in mind that if you want to sell your share of the home in the future (unless you have purchased 100%) you will need to find a shared ownership buyer, which may take longer than selling it on the open market.
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