Shared Ownership Mortgages

Shared Ownership mortgages

Shared ownership is a great way to get your foot on the property ladder. These are not straight forward so it’s always best to speak to someone who has experience of how shared ownership purchases work.

My first ever home was a Shared-Ownership property so I have firsthand experience with this type of application.

Shared ownership works where you would purchase a percentage of a property and pay rent on the percentage you don’t own. Most shared ownership properties are sold with a 25% minimum initial share, up to 75%. But this can vary from landlord to landlord (local authority or housing association/developer)

Example: If a property has a full market value of £400,000, and you purchase a 25% share, you would be buying £100,000 of the full market value. You pay a deposit on the share you are purchasing and not the full market value. This works well when you have a small deposit and want to live in an area that has higher property prices like London. You then pay rent on the share (£300,000 or 75%) of the property you don’t own.

You are not restricted to only ever owning the initial % share you purchased. You can purchase more shares in the property as and when you can afford to. This is called staircasing. When you purchase more shares the amount of rent you pay will reduce as you will own more of the property. Most landlords will expect you to staircase in no more than 3 applications. So if you purchase 25% initially you have another 75% to purchase within 3 applications.

It is not compulsory for you to staircase at all. If you want to sell and buy another property and you only own a share of the property rather than 100% of it, you can sell your share. There are always buyers out there looking for shared ownership properties, so don’t feel it would be an impossible task.

Affordability with a shared ownership application isn’t as straight forward as a standard purchase. Mortgage lenders will take your existing credit commitments, living costs and the shared ownership rent/service charge into account when it comes to affordability. You also have to have an affordability assessment with the landlord. So there are 2 different affordability assessments to pass before any mortgage application can be submitted.

We have helped a number of clients with their shared ownership purchases. If this is something you would like to explore or if you have further questions, then please contact us. We are more than happy to discuss everything with you.