Shared Ownership Mortgages

Helping you take your first step onto the property ladder with a shared ownership mortgage

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MEET THE AUTHOR

Mike Morris

Mortgage & Protection Specialist

Knows About: Shared Ownership Mortgages

Shared Ownership Mortgages

Buying your first home or moving to a new property can feel like a huge challenge, especially when house prices keep rising. If you are looking for a way to get onto the property ladder with a smaller deposit, shared ownership could be a helpful option. Our team at Windsor Hill talks to many people every day who want to understand how the scheme works in the real world.

To make things as clear as possible, we have answered the questions we get asked most often. You can find out how deposits are worked out, how lenders check what you can afford, and how the rules apply if you are self-employed. We also look at how you can buy a bigger share of your home as time goes on, and what you need to know if you want to sell in the future.

How does a shared ownership mortgage work, and what share can you buy?

Shared ownership allows you to buy a percentage of a property, typically between 10% and 75%. You then pay rent on the part you do not own.

Your mortgage is only taken out on the share you are purchasing. This can make getting onto the property ladder more affordable.

What deposit do you need for shared ownership, and is it based on the share or the full value?

One of the advantages of shared ownership is that your deposit is usually based on the share you are buying. This is instead of being based on the full property value.

This can mean a much smaller upfront deposit. The reduced amount applies compared to purchasing a property outright.

Which lenders offer shared ownership mortgages, and why do fewer of them do it?

A number of lenders offer shared ownership mortgages, though the choice is smaller than for standard residential mortgages.

That is because shared ownership has additional rules and legal requirements which some lenders choose not to accommodate. However, there are plenty of options from very good lenders.

How does rent on the unowned share affect what you can borrow?

When lenders assess your affordability, they take the rent on the unowned share into account. This is because you will be paying both a mortgage and rent each month. That combined monthly commitment directly affects how much you are able to borrow.

What is staircasing, and do you need a new mortgage each time you buy more of your home?

Staircasing is the process of purchasing additional shares in your property over time. Typically, you can buy these extra shares in 10% increments.

Whether you need a mortgage depends on how you are funding the purchase. Many people either remortgage or borrow additional funds to increase their ownership.

Speak To an Expert

Contact us for a fee-free initial consultation, our team of mortgage and financial experts is here to help. There may be a fee for arranging a buy-to-let mortgage, and the exact amount will depend on your specific circumstances. Typically, we do not charge a fee for residential mortgage advice.

Can you remortgage a shared ownership property, and what are the restrictions?

You can remortgage a shared ownership property, provided the new lender accepts shared ownership cases. The main restriction is that not every lender operates in this market.

It is important to explore the options available before your existing deal ends, typically six months before.

What happens when you sell a shared ownership home?

When you decide to sell, the housing association will often have a period during which they can help find a buyer. The sale proceeds are then split according to the share you own, and any outstanding mortgage is repaid from your portion.

Is shared ownership better or worse than buying a smaller property outright?

There is no one-size-fits-all answer. Shared ownership can help buyers access a larger or better-located property sooner.

Buying outright means you own 100% of the home from day one and avoid paying rent alongside the mortgage. It really depends on individual circumstances, so speak to an adviser for assistance.

Can self-employed applicants and contractors get a shared ownership mortgage?

Yes, self-employed applicants and contractors can get shared ownership mortgages. Lenders will simply need to assess your income in the same way they would for a standard mortgage application, using the relevant proof of earnings.

What are the common reasons a shared ownership application is declined?

The most common reasons include affordability concerns, adverse credit history, and insufficient income. Applications can also be declined due to issues meeting the housing association’s eligibility criteria.

In many cases, speaking to a mortgage broker early can help. This approach identifies and addresses potential issues before an application is submitted.

Summary

At Windsor Hill, our team knows that getting onto the property ladder can be tough, and shared ownership is a great way to make buying a home more affordable. By purchasing a share of a property and paying rent on the rest, you can often save on your upfront deposit and access a better home sooner.

Whether you are looking to buy your first share, staircase to own more of your property, or understand how lenders assess your income, our advisers are here to help. We can guide you through the process, check your eligibility, and find the right mortgage for your situation.

Key Points

You can buy a share of a property between 10% and 75% and pay rent on the part you do not own.
Your deposit is usually based on the price of the share you are buying rather than the full property value.
Lenders look at your mortgage payments and your monthly rent together when checking how much you can borrow.
You can buy extra shares over time through a process called staircasing, usually in 10% steps.
Self-employed workers and contractors can apply for shared ownership mortgages by showing standard proof of earnings.
Our advisers can help you check your options early and address any issues before submitting an application.