Mortgage Guide
Shared Ownership Mortgages
To buy a home through New Build HomeBuy or any other shared ownership scheme you will need to know about shared ownership mortgages. Over the last few years, 'shared ownership mortgages' has become a bit of a buzzword, generating a great deal of interest in this type of mortgage.
Shared ownership mortgages enable qualifying applicants to buy a share in a property, usually part or fully funded by a mortgage, and pay rent to a housing association for the rest. The rent is normally a percentage of the value of the share of the property owned by the housing association and is kept as low as possible. Eventually you will be able to buy more of the housing association's share of the property, possible with a 100% shared ownership mortgage - if you can get one.
As a result, a shared ownership mortgage potentially allows you to buy a bigger property than you would otherwise be able to afford. Joint ownership (buying with a friend) and shared ownership can also sometimes be combined.
If you need to take out a mortgage for shared ownership to enable you to buy a share of a property, you'll need to know how much you can borrow and what is the most suitable mortgage for your circumstances. Work with a good shared ownership mortgage advisor for mortgage advice. Your mortgage advisor will know all about the 100% shared ownership mortgages about who are the best shared ownership mortgage lenders and who offers the best shared ownership mortgage. That said, you may find you need to provide some sort of a deposit and also costs associated with this purchase.
As shared ownership mortgages are seen as less attractive business propositions not all lenders will offer mortgages for this purpose. There are currently around 25 lenders that offer shared ownership mortgages but this number is growing. Around half of these will lend you 100% of the value of the share you are buying. Interest rates may be slightly higher than for conventional mortgages but fees are generally comparable.
Make sure you budget for items such as legal fees and stamp duty, if applicable, as you cannot borrow more than 100% to cover such costs.
Similar criteria for lending apply for shared ownership mortgages than for conventional mortgages but some lenders will not lend on certain types of property – above a certain number of stories, for example – so check this.
The scheme must be through a registered social landlord for a mortgage to be granted and the lease must contain an adequate mortgagee protection clause, which protects the lender against any losses should you fall into arrears with your repayments and the property is repossessed. The initial share purchased must usually be at least 25%.
If you want to increase your share of ownership of the property, once the housing association has granted you approval to buy a further share, you should apply to your lender for a further advance. The lender is likely to want to carry out another valuation of the property for which fees will be payable and the housing association may also want to get its own valuation done. To find out about shared ownership schemes in your area, identify your nearest HomeBuy Agent
To get a clearer idea of the legal costs involved and the intricacies of any shared ownership contract offered by your local housing association, contact our property lawyers.
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Other mortgage guides, advice and useful pages:
Mortgage Comparison - First Time Buyer Mortgages - About First Time Buyer Mortgage Advice - First Time Buyer Mortgage Brokers - Buy to Let Mortgages for First Time Buyers - Remortgages for First Time Buyers - Help with Mortgages for First Time Buyers - Mortgages for Parents of First Time Buyers - Shared Appreciation Mortgages - Shared Equity Mortgages - Joint Mortgages - Financial Advice for First Time Buyers - Overseas Mortgages for First Time Buyers - Request First Time Buyer Mortgage Advice - Find your First Property - New-Build Gifted Deposit Deals - Best First Mortgages Comparison Table
Features, advantages and disavantages of specific first time buyer mortgages:
100% Mortgages l Cashback Mortgages l High LTV Mortgages l Graduate Mortgages l Professional Mortgages l Mortgages with Parents l Guarantor Mortgages l Family Offset Mortgages l Mortgages with Friends or Family l Mortgages at University l Rent a Room Mortgages l Affordable Mortgages l Interest only Mortgages l Part Repayment Part Interest Mortgages l Interest-free Start Mortgages l Shared Ownership Mortgages l Poor, Adverse or Poor Credit Mortgages l Key Worker Mortgages l Shared Equity Mortgages l 30, 35, 40 Year Term Mortgages
Useful websites:
www.housingcorp.gov.uk
www.communities.gov.uk
www.englishpartnerships.co.uk
www.housing.org.uk
www.cml.org.uk – council of mortgage lenders.