Navigating the property market can be daunting, especially for first-time buyers. Shared ownership mortgages offer a unique opportunity to get your foot on the property ladder, making homeownership more accessible. However, the process can be complex, so it is essential to consult with someone experienced in shared ownership purchases.
What is Shared Ownership?
Shared ownership allows you to buy a percentage of a property while paying rent on the remaining share. Typically, you can purchase an initial share ranging from 25% to 75%, depending on the landlord, which could be a local authority or a housing association.
Example Scenario
Let us say you find a property valued at £400,000. If you decide to purchase a 25% share, you will invest £100,000. This means you only need to pay a deposit on that share, not the full market value. This arrangement is particularly beneficial in high-cost areas like London, where property prices can be prohibitive. You would then pay rent on the remaining 75% of the property, which in this case amounts to £300,000.
The Staircasing Option
One of the appealing aspects of shared ownership is the ability to increase your ownership stake over time, a process known as staircasing. You can buy additional shares as your financial situation improves, which reduces your rent since you own a larger portion of the property. Most landlords allow you to staircase in up to three applications, meaning if you start with a 25% share, you can purchase the remaining 75% in increments.
Selling Your Share
If you decide that shared ownership is not for you, or if you want to move, you can sell your share of the property. There is a steady demand for shared ownership properties, so finding a buyer is often manageable.
Affordability Considerations
Applying for a shared ownership mortgage involves a more complex affordability assessment compared to traditional purchases. Lenders will evaluate your existing credit commitments, living expenses, and the rent/service charges associated with the shared ownership. Additionally, you will need to pass an affordability assessment with the landlord, meaning there are two assessments to navigate before your mortgage application can proceed.
Our Experience
Having assisted numerous clients with their shared ownership purchases, we understand the intricacies involved. If you are considering this route or have any questions, do not hesitate to reach out. We are here to help you explore your options and guide you through the process.
Shared ownership can be a fantastic stepping stone toward full homeownership. With the right guidance and understanding, you can make informed decisions that align with your financial goals.