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Shared Ownership Mortgages

If you are buying a property through a shared ownership scheme then you'll need a shared ownership mortgage.

When it comes to shared ownership mortgages there are two types of lenders - those that lend you 100% of the share you're buying, and those that lend you up to 95% of the share you're buying requiring you to put down 5% deposit.

If you have a deposit to put down then it opens up your lending options because there are a lot more lenders who will lend you 95% of the share you're buying than will lend you 100%.

How much can I borrow...

The mount you can borrow is approximately 3.5 to 4 times your income. So for example if your annual income is £20,000 then you'll be able to borrow up to £80,000.

Make sure that this amount will be enough to buy the share of the property you plan to buy.

E.g. if you're looking at a property worth £200,000 and looking to buy a 50% share then you need to borrow £100,000.

On the same salary of £20,000 you will be short by £20,000 as the maximum you'll be able to borrow is £80,000, hence you won't be able to buy the property (unless you can add the £20,000 from your savings on top to make up the £100,000).

Alternatively if you were planning to buy a 25% share of the property i.e. £50,000 instead of £100,000 then this could work. The maximum you'd be able to borrow is £80,000 which is higher than the amount you need of £50,000 hence you'll be able to get the lending and buy the property.

Remortgaging to buy a larger share...

As well as buying a shared ownership property you can also remortgage to buy a larger share of your existing property, e.g. increase from 25% share to 50%.

In order for this to happen, you need to make sure that you property value has risen significantly since you purchased it, or alternatively you have saved up a large deposit that you can use to buy the extra share. This is called stair casing and is the process by which you eventually buy up all of the share to own your property 100%!

Final note...

One thing you have to be aware of when applying for a shared ownership mortgage is that you need to shop around and not just go with the lenders recommended by the housing association.

Also if you have some bad credit then you need to check whether the housing association will allow you to get a mortgage with a bad credit lender as they sometimes insist that you get your lending from a specific list of lenders which often excludes bad credit lenders.

Click here to get advice on getting a shared ownership mortgage