Shared Ownership Mortgages
You may be wondering what a shared ownership mortgage is? Simply, it is a mortgage that is partially funded by the government. This initiative was set up to help people struggling to save up for their first home deposit, actually reach the goal of owning their own property. Depending on the percentage of shared ownership you opt for you will pay a mortgage on the portion you own and rent on the portion owned by the government.
How Do I Qualify?
To be eligible for a shared ownership mortgage you will have to meet some basic criteria. Your combined household income must amount to less than £60,000. You will also need to be a first time home buyer. It is possible to qualify under other circumstances too; you cannot afford to buy but have owned a house previously, or you are currently living in council or housing association accommodation.
Applicants with long-term disabilities can also qualify under the HOLD(Home Ownership for people with Long-term Disabilities) scheme.
Can I Fully Purchase my Home Later?
Yes, is the short answer to this question. You can opt to purchase parts of the government share in your property in chunks or increments. The amount that you will be able to purchase at a time will depend on the amount of your property that the government owns. This will also be affected by fluctuating house prices, increasing value in the market will mean you have to pay more, however, this will mean the overall value of your property has increased.
Selling Your Home
To sell your home you will have to own 100% of the property, this means you will have to have bought out the government portion of your property before selling. There are fairly strict policies in place for selling; the government has first refusal to buy your home within 21 years of your initial purchase and if you have not paid off the government portion of your home they can legally source their own preferred buyer.
Pro’s and Con’s
The main benefit of this type of scheme is that the deposit you require for your mortgage will be much smaller than a bank would normally require. 5% is the deposit required in this case whereas a bank would usually be looking for you to come up with 10% minimum, but more likely 20% for a deposit.
The main negative here is that you do not own 100% of your home, as mentioned above you are restricted slightly when selling your property should you wish to move before paying off the government portion of your home. Not all lenders are taking part in this scheme so this will limit which lender you can take out your mortgage with.
How to Apply
All of the information you will need is available at www.helptobuy.org.uk, from here you can find a local agent that will be able to discuss your situation in more detail and give you the advice you need to purchase your home.
Social Homebuy is another option for those that are currently living in council accommodation. This works slightly different and allows you to purchase the council property you are currently living in. This scheme provides discounts to you on the home so you will end up paying under market value for the property. You must buy a minimum of 25% of your property to qualify for Social Homebuy. Once you have purchased a chunk of the property your landlord will reduce the rent by the same percentage per month as you have purchased ie. 25% of value purchased, rent reduced by 25%.