Hi, my name is Morgan Miner, and I am a Finance Expert. In this article, I want to share with you everything you need to know about shared ownership mortgages. As a professional writer, I understand how important it is to provide helpful, reliable, people-first content. So, if you're interested in buying a home through shared ownership, keep reading!
The Problem with Traditional Mortgages
For many people, buying a home can seem like an impossible dream. Traditional mortgages often require a large deposit and a high income, making it difficult for first-time buyers to get on the property ladder. Shared ownership mortgages offer a solution to this problem by allowing you to buy a portion of a property and pay rent on the rest.
The Solution: Shared Ownership Mortgages
Shared ownership mortgages are a type of government-backed scheme that allows you to buy between 25% and 75% of a property's value. You'll need to take out a mortgage for the share you want to buy, and then pay rent to a housing association on the remaining share. Over time, you can buy more shares in the property until you own it outright.
How Does It Work?
Shared ownership mortgages work by allowing you to purchase a share of a property, while a housing association or other organization owns the rest. You'll need to take out a mortgage for the share you want to own, and then pay rent to the organization for the remaining share. You can then increase your share in the property over time through a process known as staircasing.
Who Is Eligible?
To be eligible for a shared ownership mortgage, you must meet the following criteria:
- You are a first-time buyer, or you used to own a home but can no longer afford to buy one
- Your household income is less than £80,000 per year (£90,000 in London)
- You have a good credit rating and can afford the mortgage payments and rent
What Are the Benefits?
There are several benefits to getting a shared ownership mortgage, including:
- You can get on the property ladder with a smaller deposit
- You can buy a larger share of a property over time
- You have the option to buy the property outright in the future
What Are the Drawbacks?
There are also some drawbacks to consider, such as:
- You'll have to pay rent on the share of the property you don't own
- You may be limited in your choice of properties
- Staircasing can be expensive, as you'll need to pay for a valuation and legal fees each time you increase your share
How Do You Apply?
If you're interested in getting a shared ownership mortgage, you can start by contacting a housing association or developer that offers the scheme. They will be able to guide you through the application process and help you find a property that meets your needs and budget.
Success Story
John and Sarah had been renting for years and thought they would never be able to afford a home of their own. They heard about shared ownership mortgages and decided to give it a try. They were able to buy a 50% share of a two-bedroom flat, which they loved. Over time, they increased their share to 75%, and now they own the property outright. They're so happy they took the leap and bought their own home.
FAQs
1. What happens if I want to sell my shared ownership property?
If you want to sell your shared ownership property, you'll need to contact the organization that owns the remaining share. They will have the option to buy your share back or find a buyer for it.
2. Can I make improvements to my shared ownership property?
Yes, you can make improvements to your shared ownership property, but you will need to get permission from the organization that owns the remaining share.
3. What happens if I can no longer afford the mortgage payments?
If you can no longer afford the mortgage payments, you should contact your mortgage provider as soon as possible. They may be able to offer you a payment holiday or adjust your payments to make them more manageable.
4. Can I rent out my shared ownership property?
You cannot rent out your shared ownership property, as it is intended for owner-occupiers only.
5. How much will my rent be?
Your rent will depend on the share of the property you don't own. It will be calculated at an affordable rate, which is usually around 3% of the remaining share's value.
6. Can I buy additional shares in my property at any time?
Yes, you can buy additional shares in your property at any time. This is known as staircasing.
7. What happens if the value of my property goes up?
If the value of your property goes up, the value of your share will increase too. This means you will need to pay more to buy additional shares in the property.
8. Can I get a shared ownership mortgage for a new build property?
Yes, you can get a shared ownership mortgage for a new build property. In fact, many developers offer shared ownership as an option for buyers.
Pros of Getting a Shared Ownership Mortgage
Getting a shared ownership mortgage has several pros, including:
- You can get on the property ladder with a smaller deposit
- You have the option to buy the property outright in the future
- You can buy a larger share of a property over time
Tips for Getting a Shared Ownership Mortgage
If you're thinking about getting a shared ownership mortgage, here are some tips to help you:
- Do your research and make sure you understand the scheme before you apply
- Speak to a financial advisor to get a better understanding of your options
- Make sure you can afford the mortgage payments and rent before you commit
Summary
Shared ownership mortgages are a great way for first-time buyers to get on the property ladder. They allow you to buy a portion of a property and pay rent on the rest, with the option to buy more shares over time. While there are some drawbacks to consider, such as the need to pay rent on the share you don't own, shared ownership mortgages offer a viable solution for those who want to own their own home.