Shared ownership
mortgages

The Shared Ownership scheme, also referred to as “part-buy, part-rent”, allows you to buy an initial share of 25-75% (usually with a Shared Ownership mortgage) in an eligible property and pay rent to the selling housing association for the remaining share. The rent is typically 2.75% of the share you don’t own, but it can be at a different rate.

The Shared Ownership scheme is available on both new build and older properties, where the seller advertises the property specifically for this scheme.

Dependent on the lender and affordability, 5% of the share you buy could be enough as deposit, which makes the Shared Ownership scheme ideal for those with a small deposit.

Although you share the ownership on paper with a housing association, only you (and your family) would live in the property without any unnecessary interference from anyone else. It also means that you shouldn’t rent out the property, as

• the Shared Ownership scheme aims to help those who can’t afford the purchase of a suitable property otherwise and
• your Shared Ownership mortgage will also specify the requirement for not letting out the property.

Over time, you can potentially buy additional shares or even 100%, or sell the property and move elsewhere.

There are a few requirements you need to meet to qualify for the Shared Ownership scheme:

• the annual household income has to be maximum £80,000 (or £90,000 in London);
• you are unable to purchase a suitable home on the open market;
• the subject property will have to be the only property you own when the purchase completes

The last point means that the Shared Ownership scheme is available to

• first time buyers,
• home movers and
• those who own a property (for example a share in a property they inherited together with other family members or property they own with an ex-partner).

All eligible applicants must not have an interest in another property when the Shared Ownership purchase completes.

Not every lender offers mortgages for Shared Ownership properties.

Those who do, understand that you may not have a big deposit and can accept 5-10% deposit in case of a Shared Ownership mortgage, even when they otherwise require 15-20% deposit for a non-Shared Ownership purchase.

When assessing your affordability for a Shared Ownership mortgage, lenders will take the rent payment that you will make to the housing association as a commitment, which will reduce how much you can borrow.

As a Shared Ownership mortgage is a specialist type of lending, a whole of market independent broker firm (like us) is best suited to find you the best mortgage deal and arrange it on your behalf to avoid disappointment.

Yes, the Shared Ownership scheme allows you to buy additional shares on top of your initial one and eventually own 100% of the property if you wish to do so and can afford it.

When you would decide to buy a further share in your home (also referred to as staircasing), first you will have to establish the property value in agreement with the housing association.

As a second step, a broker can work out your Shared Ownership mortgage affordability and establish how many additional shares you could buy based on the current property value and how much it would cost.

Then you can inform the housing association and apply for the Shared Ownership mortgage. As a whole of market independent broker, we can find you the best mortgage deal and then arrange it on your behalf to ensure that you get approved by the lender.

Once the Shared Ownership mortgage offer is issued, your solicitor will finalise the process with the housing association, the lenders (both your current mortgage lender and the new one, if we are changing lenders) and the Land Registry, as applicable.

Increasing your share in the property doesn’t necessarily mean that you have to put down an additional deposit, as you may finance the difference by a higher mortgage amount if your income is sufficient for it.

If you own your home with Shared Ownership, the housing association co-owning the property with you has the right to buy it first. This is known as ‘first refusal’.

The housing association also has the right to find a buyer for your home. However, if they can’t find a buyer, you would normally be able to sell it on the open market.

Normally, when you own 100% of your home, you can sell it yourself. This is not true in every Shared Ownership case, so you will need to check the terms and conditions of your Shared Ownership lease agreement.

When the sale completes, the outstanding Shared Ownership mortgage is repaid to the lender first. Your solicitor will pay you the difference between the value of your share and the outstanding mortgage – just like a sale where no scheme is involved.

Shared Ownership properties are usually advertised along with those selling without a scheme on most popular property search websites.

However, you can also search specifically for shared ownership properties on the following websites:

• https://www.sharetobuy.com/properties/
• https://www.ownyourhome.gov.uk/
• https://www.london.gov.uk/what-we-do/housing-and-land/homes-londoners/search/

Alternatively, you could contact the local council and housing associations operating in your target area(s) and check availability through them.

This version of the Shared Ownership scheme is only available for people who

• are aged over 55,
• are unable to buy a suitable property on the open market,
• have a total household income of less than £80,000 per annum and
• have no outstanding credit issues.

In case of the Older People’s Shared Ownership (OPSO) scheme, you can buy an initial share of 25-75% with a Shared Ownership mortgage and pay rent to the selling housing association for the share that you didn’t buy.

You can only own a maximum 75% of the property and once you own 75%, you will no longer have to pay any rent.

Just like in case of the “normal” Shared Ownership scheme, you can buy additional shares (up to 75%) or sell the property, if you wanted to move.

People with long-term disabilities may be eligible to buy a property using the HOLD scheme if no suitable property could be identified under the other schemes. If you do find a suitable property, the HOLD scheme allows you to buy it on a Shared Ownership basis.

Similarly to the “normal” Shared Ownership scheme,

• the total household income has to be less than £80k per annum (£90k in London);
• you could buy an initial share of 25-75% with a Shared Ownership mortgage;
• you pay a subsidised rent for the share that you don’t buy;
• you need to be a first-time buyer or moving houses without owning another property when the purchase completes.

Additionally, in the case of a purchase using the HOLD scheme, you receive support for mortgage interest (SMI) payments as a loan from the Department for Work and Pensions (DWP) and potentially from other organisations. When you sell the property (or if you die and the property has to be sold), the total SMI loan is repaid from the sale price.

You can find more information here.

Building insurance

If you buy a house, then building insurance will be mandatory to ensure that in case the structure is damaged (e.g. by fire, flood or movement), the insurance will cover at least the mortgage amount.

Nothing else is compulsory, but of course, it makes sense to cover costly unexpected events.

Contents insurance

Contents insurance can pay for replacing your personal belongings if someone burgles your home, there is fire, you accidentally drop your new flat screen TV…and the list goes on.

Landlord insurance

If you’re planning to rent out your property then you should consider getting landlord insurance. Landlord insurance protects you as a landlord from risks associated with your rental property. It usually includes buildings and contents insurance, but can also include rental-property specific covers such as protection against loss of rent, and tenant default. It can also cover legal fees and compensation for damage or injury to the tenant due to the property.

Life insurance

Life insurance is a one-off payment if you were to die during the mortgage term, so the insurance can settle your mortgage. This would allow your family to stay in the property without worrying about mortgage payments at an already stressful time.

Critical illness cover

Critical illness cover would give you a lump-sum if you had a serious illness like cancer, heart attack or stroke as well as dozens of other conditions. This payment may or may not settle the mortgage, but it can help pay for treatment, let you take time off work while recovering or alter your home, if necessary.

Income protection

Income protection is designed to give you a monthly income for some time in case you can’t work due to an accident or a long term illness. This covers mental health issues as well.

Of course, all the insurances come with terms and conditions, optional features and your medical history can influence your options.

To find the right insurance cover that fits within your budget, speak to our team today. We can compare the whole market, find the most suitable cover and apply on your behalf free of charge.