Shared ownership mortgages are designed to help people get onto the property ladder by allowing them to buy a share of a property and pay rent on the remaining share. Here’s a breakdown of key points to consider:
What is Shared Ownership?
- Definition: Shared ownership allows you to buy a percentage of a property (usually between 25% and 75%) and pay rent on the remaining portion, which is owned by a housing association.
- Eligibility: Typically aimed at first-time buyers or those who cannot afford to buy a home outright, it often targets individuals or families with a low to moderate income.
How It Works
- Buying a Share: You purchase a share of the property, which can be as little as 25% and as much as 75%. The larger the share you buy, the less rent you pay.
- Rent: You pay rent to the housing association for the portion of the property they still own. This rent is usually lower than market rates.
- Staircasing: Over time, you have the option to buy additional shares in the property, eventually owning it outright if you choose. This process is known as “staircasing.”
Financing a Shared Ownership Property
- Mortgage Options: You will need a mortgage for the share of the property you are buying. Shared ownership mortgages are available from many lenders, but terms can vary.
- Deposit: The deposit you need will be a percentage of the share you’re buying, not the full property value. Typically, this is around 5-10%.
- Interest Rates: Shared ownership mortgages can have different interest rates compared to standard mortgages. Rates may be higher, so it’s crucial to compare options.
Key Considerations
- Eligibility Criteria: Each housing association has its own eligibility criteria, including income limits and local residency requirements.
- Additional Costs: Apart from the mortgage and rent, you should budget for additional costs such as service charges, maintenance fees, and legal fees.
- Lease Terms: Shared ownership properties are sold on a leasehold basis, so you’ll need to understand the terms of the lease, including how long it lasts and any ground rent.
Finding the Right Mortgage
- Lender Selection: Look for lenders who specialize in shared ownership or have experience with these types of mortgages. They can offer tailored advice and competitive rates.
- Advice: It’s often beneficial to consult with a mortgage advisor who understands shared ownership. They can help you navigate the process and find the best mortgage deal for your situation.