A shared ownership mortgage gives you the opportunity to purchase a share in your home. Put simply, you choose the percentage that you want to own whilst paying rent (at a reduced rate) on the rest. Gradually, you increase your ownership over time.
If the dream of homeownership seems increasingly out of reach due to rising property costs, a shared ownership mortgage may be welcome news. It’s an option that’s great for those who have limited savings but still want to enjoy the security of owning property.
Through this scheme, aspiring homeowners can get a foot in the door with a fraction of the cost typically associated with buying a house. As a whole-of-market mortgage broker, our team here at My Mortgage Finder has access to 99.9% of lenders across the UK – making us the go-to partners in shared ownership mortgages, bringing you the best value on the market.
Let’s explore what shared ownership mortgages are, how they work, and what benefits they offer.
What Is a Shared ownership mortgage?
Shared ownership mortgages, sometimes referred to as ‘part buy/part rent’, are mortgages available to those registered under the Government’s shared ownership initiative.
It is an increasingly popular type of mortgage for first-time buyers or those who wouldn’t otherwise qualify for a full mortgage. With this type of mortgage, you purchase a partial share of the property (usually 10% to 75%) and pay rent on the remaining share. This option is usually cheaper than taking out a full mortgage on the house as it offers significantly lower upfront costs, as well as cheaper monthly mortgage payments.
The size of the share you get will depend on the lender and how much you can afford. In most cases, you will eventually own 100% of the property – this is known as staircasing. Staircasing is when you buy additional shares of the property on top of your initial share, usually increasing by 10% or more each time.
My Mortgage Finder can help you navigate the application process on your shared ownership property, from finding what initial share you can afford to applying for mortgages on your behalf.
Applying for a shared ownership mortgage with us:
- Initial 15-30 minute call – With one of our mortgage advisers, where they’ll get all the information they need to carry out their research. This will usually be personal and financial information that will help our advisers later find a mortgage service for you.
- Expert research – After doing their research on which services you will benefit from, they’ll come back with mortgage options and financial guidance. It is then that you can choose which mortgage you want to apply for.
- Finally, sit back and let us do the hard work – Once you have chosen the mortgage you want to go for, we’ll apply for an agreement in principle that tells you how much you can borrow. We’ll be with you every step of the way after that.
Who are the benefits of Shared ownership for?
With the help of shared ownership mortgages, anyone – including first-time buyers – can purchase a property with less upfront costs and smaller monthly payments than you would normally find if you were to opt for a traditional mortgage. They are available on existing builds, as well as brand-new developments, giving buyers the choice.
With a shared ownership mortgage, it’s much easier to get on the property ladder if you have a limited income or credit history. As you can purchase additional shares over time (until you own 100% of your home), it’s considered a more flexible mortgage type. This flexibility means you can increase your stake in the property without having to take out an entirely new mortgage.
FAQs: Exploring shared ownership mortgages
A shared ownership mortgage works similarly to a standard mortgage but with an added layer of flexibility. It allows you to part-rent and part-buy a property. Typically, you purchase a partial share in the property (usually 10% to 75%) and pay rent for the remainder.
Who owns the other share of your home (who you’ll pay the rent to) will depend on the property type. For existing builds, you’ll typically co-own with a housing association, whereas for a new build, you’ll pay your rent to an individual landlord.
In order to qualify for a shared ownership mortgage, applicants must meet certain income limits and household size requirements set by the local housing provider or lender.
Not at all! Sometimes it can be easier to get a shared ownership mortgage compared to a more traditional one. This is because you are getting a mortgage on a share of the house, which is lower than the house value.
If your future house is worth £200,000 and you get 50% house share, you are getting a mortgage only on that 50% share. Lower monthly costs and lower deposits mean you can get accepted by lenders easier than with another mortgage option.
What happens if you have a bad credit history? It’s slightly harder to get approved for a shared ownership mortgage with a bad credit history. However, not impossible. What’s great about shared ownership mortgages is that they are very flexible – for example if you can’t get a mortgage on 50% of the house due to bad credit, you can opt for a lower share to start out. Then, as your credit and finances improve, you can increase your percentage.
At My Mortgage Finder, we are bad credit & specialist lending mortgage experts. We believe that everyone should have the chance to own their home. Our advisers will work with you to find you something that works for you based on your credit history and needs. If we can’t find one for you, our experts might help you work on your credit score in order to be approved for a mortgage later down the line.
In a way, a shared ownership mortgage is the same as a traditional mortgage. You’ll get asked for at least 5-10%, but instead of the total property value, it is just your share of the property. This is why shared ownership mortgage deposits are so much more affordable.
Taking the example from above, if your potential home is worth £200k and you buy a 50% share of that property – the deposit ends up being £5,000 to £10,000 minimum instead of £10,000 to £20,000.
Call our mortgage professionals on 0113 868 7860 today for personalised advice for your unique mortgage situation.
Shared ownership mortgages: Do you meet the criteria?
To qualify for a shared ownership mortgage, you will generally need to have a household income of less than £80,000 per year (or £90,000 or less in London) and be unable to buy a property on the open market. You also need to demonstrate that you cannot afford all of the deposit or mortgage payments for a home through a traditional mortgage.
Alongside this, you must fit within one of the following statements:
- You previously owned a home, but your current financial situation prevents you from buying another to live in.
- You’re forming a new household – for example, after a relationship breakdown.
- You’re an existing shared owner, and you want or need to move.
- You own a home and want or need to move but cannot afford a new home that meets your needs.
- You’re a first-time buyer.
How can My Mortgage Finder help you?
Ready to start your journey to getting a shared ownership home? My Mortgage Finder is the mortgage partner you’re looking for. Unlike other mortgage brokers, we don’t work just for our specialist lenders, we work for you and are here to support you as you strive to buy your shared ownership house.
My Mortgage Finder doesn’t work on a typical 9-5 schedule. Instead, we work around your schedule and what your needs are. We will be with you at every step of the application process and ready to offer mortgage advice when needed.