How does shared home ownership work?

Happy couple lying on the floor face to face looking at each other and holding paper red house

Ask the expert at Smith & Pinching about Shared Ownership Mortgages - Credit: Getty Images/iStockphoto

My partner and I would like to buy a property but we don’t have a large deposit and we can’t afford to pay a big mortgage. We’d like to know more about shared ownership of homes as this sounds like it could be what we need. Can you help, please?

Diane Fish, mortgage and equity release adviser with Smith & Pinching

Diane Fish, mortgage and equity release adviser with Smith & Pinching - Credit: Smith & Pinching

Diane Fish of Smith & Pinching responds:

Shared ownership schemes help people get onto the housing ladder who have a lower level of deposit available or are unable to afford a 100% mortgage straightaway. You don’t have to be a first-time buyer to qualify for a Shared Ownership Mortgage.

Shared ownership schemes are generally run by housing associations providing new-build properties or older properties (usually available through a housing association’s resale programme). You can normally buy between 10% and 75% of the property under a shared ownership scheme.

Under the scheme, you purchase a share of your home rather than the whole thing, and then pay rent on the remaining portion to the landlord. The rent is set out in the agreement at the outset. Properties are usually leasehold so there may also be a share of the ground rent and possible service charges to consider too.

You can increase your share if you wish: this is known as ‘staircasing’. Not all housing associations will allow you to staircase to full ownership. These types of properties have always been popular and can be sold like a normal residential freehold property. Each housing association will have their own criteria around future sales.

One of the advantages of shared ownership is that your deposit can be less than it would be for the whole property. Repayments will also be lower as you would be borrowing less.

Disadvantages include the fact that you will be paying legal fees and mortgage charges every time you staircase up. The ongoing maintenance of the property is likely to be your responsibility too. There may also be restrictions on renting your property out.

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There are a number of lenders who will provide mortgages for a shared ownership property. You may be able to borrow up to 90% of the cost of your share, depending on your circumstances: lenders will apply their usual eligibility and affordability checks before agreeing to lend you the money.

I suggest you get advice from an independent mortgage broker to explore whether a shared ownership scheme is the best solution for you and to look at the available options.

Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.

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