Shared ownership mortgages help buyers who can't secure the full mortgage. If you want to get a property but can only secure part of the mortgage, a shared ownership mortage might help. In this situation you would get the amount of the home you do get a mortgage on and pay rent on the remaining percent. You can buy the remaining percent at a later point when you are able to secure a larger mortgage.
Buy part of the house and pay the rent in the rest
Under normal circumstances you will buy and own between 25% and 75% of the property under shared ownership. And you will pay rent on the remaining percent. When you are in a position to get a larger mortgage you can buy more of the property.
There is another shared property system for 55 year olds and over, called shared property for seniors. It is similar to a shared ownership mortgage except the owner will not have to pay rent on the remaining 25%.
Can I buy a higher share of my home at a later date?
Yes, it is possible to buy a higher share of the property at a later date. You can buy parts from what you are renting from the association until you have bought and own all the property.
The amount you pay to buy the rest of the property depends on the current value, usually. If the property has increased in value you will likely have to pay more to buy further shares. If the property value has decreased, you can buy further shares for cheaper than when you first purchased.
How can I sell my house?
If you have bought the remaining shares so not own all of the property you are able to sell the property. However, there are certain rules in place which you must follow.
If you have not purchased the full property and only own part of the property then the association may find their own buyer.
Advantages of a Shared Ownership Mortgage
A shared ownership can be a good way to get on the property ladder, as long as you meet the criteria. You can buy what you can afford now, when you can afford more you can take out a higher mortgage. As you only pay rent on the part you don't own your monthly repayments may be less than if you were renting the whole property.
What are the drawbacks?
It may be difficult to get on to the scheme, you may not meet the criteria. Also, when it comes to selling the shared property there are more conditions you must follow. Also as you only own part of the property, you may have further restrictions. You are still renting part of the property and will have to follow guidelines which may be more restrive than when owning the full property. Guidelines may restrict you in areas such as when it comes to sub letting, or having a pet.
How can I apply for a shared ownership system?
The shared ownsership scheme is part of a HomeBuy programme, introduced by the government. To start you should contact your local housing organisation or local council.
If you are in social housing or in a council property you may be able to apply for a similar program. There are plans for social and council housing where you can buy part of the property you live in and pay rent on the remaining part.
You must also be able to get a mortgage for 25% of the property. The minimum critera is that you must buy at least 25% of the property.