What Is A Shared Ownership Mortgage?

Owning a property is a life goal for many, and a shared ownership mortgage can put you one step closer to your dream home if you haven’t saved a large deposit.

A shared ownership mortgage helps you buy a share of the property, with the option to ‘staircase’ your way to full ownership. But with a mortgage and monthly rental payments to balance, it’s essential to know what a shared ownership mortgage could mean for your budget.

Could shared ownership unlock the door to property ownership? As expert mortgage brokers in Preston, Southport, and Garstang, we’re here to simplify the pros and cons to help you through the shared ownership maze.

What Is The Government’s Shared Ownership Scheme?

Put simply, the government’s shared ownership scheme allows you to buy a share of your new home, typically ranging from 10% to 75%. Your landlord (who may be a housing association, private provider or local authority) owns the remaining share.

To take out a shared ownership mortgage, you must:

Have a total household income below £80,000 (£90,000 if you live in London).
Be unable to afford a deposit and mortgage payments on a home that meets your needs.

For more information on eligibility criteria, visit the gov.uk website.

How Do Shared Ownership Houses Work?

Think of shared ownership as a halfway house between owning and renting. You’ll pay a mortgage on the part of the property you own, and rent on the part you don’t.

Is Shared Ownership Better Than Paying Rent?

Paying a mortgage and rent might feel overwhelming. But with a lower initial outlay, a shared ownership mortgage could pave the way for a property owning future:

Pros:

You only need a small deposit and mortgage. Shared ownership makes it much more affordable to own your own home, as you only pay for part of the property.

You’ll have the option to buy more shares over time. ‘Staircasing’ can help you own 100% of your property.

A shared ownership mortgage with a lease agreement offers long-term stability. You’ll remain in the property for as long as the agreement states.

Your home will grow in value, and that equity can help you take the next step towards your dream home.

Cons:

You still have to pay rent. If you fail to keep up your payments, you may be evicted.

You’ll have additional charges. You’ll be liable for service charges and ground rent on top of your rent and mortgage payments.

You may be liable for stamp duty if you don’t qualify as a first-time buyer.

How Much Is The Rent On A Shared Ownership?

The rent you pay depends on how much of the property you own, its market value and the percentage rental you’re charged on what you don’t own – typically, 2.75%.

Here’s an example of how shared ownership could work for you:

You buy 50% of a property worth £200,000
You pay a 10% deposit of £10,000
You need a shared ownership mortgage for £90,000
You pay rent on the £100,000 of the property you don’t own

Our mortgage calculator enables you to check affordability at a glance.

On top of your mortgage, you’ll be paying an annual rent of £2,750 or £230 a month. Sounds affordable? Since shared ownership houses are leasehold, you’ll also be expected to cover additional costs, including ground rent and service charges.

Can You Sublet A Shared Ownership Property?

Shared ownership could help you make your property ownership dreams a reality. However, there are downsides when it comes to subletting your property.

In exceptional cases, your landlord may agree to you letting out your property. For instance, if you’re in the army and are stationed elsewhere. Generally speaking, you’ll need to own 100% of your property to be able to rent it out.

How Do I Get A Mortgage For Shared Ownership?

At Key Mortgage Advice, we’ll help you find a shared ownership mortgage that meets your budget, saving you time and money. Moreover, we’ll walk you through the costs of ownership, so there are no surprises along the way.

You can check the available options using our mortgage calculator, and we’ll take the next steps together to help you find the best deal for your budget today and in the future.

Contact your local office for further help and advice:

Looking For A Shared Ownership Mortgage? Talk To Key Mortgage Advice

Ready to pursue your property owning dream and start building your future? It’s closer than you think when you talk to us. Don’t hesitate to get in touch with our brokers at enquiries@keymortgageadvice.co.uk or book your free consultation today for trusted mortgage advice.