Shared ownership mortgages are just one of the few options now available to those who are struggling to get onto the property ladder and can only provide a small deposit. Shared ownership allows you to purchase a share of a property (usually between 25% and 75%) while paying rent on the rest. You will need to provide a 5% deposit for the share you plan to purchase.
Who is eligible for a shared ownership mortgage?
To be eligible for a shared ownership mortgage you must be a first time buyer, an existing shared ownership homeowner or a previous homeowner who cannot afford to purchase another property.
Your household income will also be used to determine your eligibility. Your total household income must be less than £80,000 if you live outside London or £90,000 if you are living in London.
How do I apply for a shared ownership mortgage?
The first thing you need to do is locate a Help to Buy agent using the government’s Help to Buy website. Here you can find details of how to apply for shared ownership.
During this step you will be asked questions regarding where you want to live and financial details such as income, savings as well as debts and credit history as well as your history with making credit repayments and debts. The assessment following your application will take up to four days.
If your application is accepted you can start property searching. This should be made easier if your agent is able to show you available properties in your local area. You can also find many available shared ownership properties using the Property Booking and Share to Buy portals.
Once you have found a property you will need to book a viewing through the relevant housing association and put down a reservation fee. This can vary but is typically £250 but is taken off your deposit amount.
You will then need to complete a mortgage application with a mortgage broker. Like most mortgage applications you will need to go through a full financial assessment and credit check.
You should expect to show the following:
- Three months of bank statements
- Three months of payslips
- Proof of identity
- Proof of savings
- Information about existing debts and other credit arrangements
- Information about any benefits you receive
What is staircasing?
If you are in a position to buy a greater share of your property you can do this by 'staircasing'.
The amount you are able to staircase will depend on the market value of the property at the time and the rules of your housing association. Generally, 10% is the minimum, however if you want to buy a higher share you can do this in 5% increments
Before you can staircase you will need to pay for and arrange a valuation of the property carried out by the housing association. In most cases you will only be able to staircase up to three times.
Before you begin staircasing you should consider your long term plan as some housing associations will only allow you to staircase if you intend to buy the remaining share of the property, making your ownership 100%.
How do I sell a shared ownership property?
Although you can sell your shared ownership property at any time, there will be a number of fees to take into account. This could include the cost of a valuation, marketing fees to advertise the property and an assignment fee for when a buyer is found. The value of the property at the time will influence the total sum you and the housing association receive when it is sold.
When the time comes to sell your property, your housing association will have first refusal about whether to buy it back from you or find you a buyer. This will usually happen within an eight-week period, after this time you can put it on the open market through an estate agent.
If you have any other questions or would like to know more about our shared ownership mortgages services, get in touch using our contact form or give us a call.