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Designed to help you onto the property ladder
How Shared Ownership works
Shared Ownership helps you to make that all-important first step onto the property ladder. It is the most common affordable purchase option. Quite simply, you purchase a share of a property with the remaining proportion retained by a Housing Association who then charges you a monthly rent. Think of it as a cross between buying and renting a house.
Share values vary, but most commonly you can purchase between 30-50% of a property. Once you have owned your share for a fixed period of time, you can ‘staircase’ out and buy further shares, enabling you to own more of the property.
By owning a larger percentage of the property it means that the Housing Association owns a smaller percentage and consequently the rent you pay them decreases. Eventually, you will be able to staircase out to the full 100% share and this would mean you will not pay any rent.
Here’s an example
Mr Smith earns £23,000 a year and is currently paying £700 a month in rent. Mr Smith has no loans, credit cards or student loans and has a clean credit history. Mr Smith wants to get on the property ladder but needs a little financial help.
He finds a Shared Ownership property for £58,500. The full market value of the property is £195,000, of which 30% can be bought and the remaining is owned by the Housing Association. He will need to pay £370 in rent.
He approaches us here at Mortgage Light to help him find the right mortgage deal.
To purchase the 30% share, Mr Smith wanted to put down a minimum deposit of £2,925 (5% of £58,500), £2,000 to cover his solicitor fees and £349 for using Mortgage Light’s services. In this case, he does not have any valuation fees. The total upfront amount Mr Smith needs to find to buy shares in this home is £5,274.
The monthly cost Mr Smith will pay for both the mortgage and the rent payments to the Housing Association came in cheaper than renting. There are also other options where currently you don't need deposit money.
Read Aimee and Lauren’s Shared Ownership story
Why use Shared Ownership?
- Shared Ownership can help those with lower incomes who might be struggling to save for a 10%+ deposit to get on the housing ladder
- You are able to buy with zero deposit money
- You can start with as little as a 25% share in the property in many cases
- You can benefit from any rise in house prices, as the value of your share in the property should rise too
- Shared Ownership can be cheaper than renting, plus your monthly payments will be going towards paying off your mortgage
- You may be able to purchase a bigger house than you would have been able to if you were buying outright
- The rent associated with Shared Ownership is generally less than the rate charged on the open market and is usually charged at 2.75% of the property value per annum
- Stamp Duty Land Tax can usually be deferred until your share reaches 80%
- Shared Ownership properties can often be found in private developments and a certain number of Shared Ownership homes will often be required as a part of the planning permission for a development. This can help to put affordable housing in the heart of sought-after areas
Who can get a Shared Ownership mortgage?
Shared Ownership mortgages are available to first-time buyers, or to someone who used to own a home and now cannot afford to buy a new one. You must be at least 18 years old and your household income must be less than £80,000 a year (£90,000 in London) to qualify.
It’s also worth noting that you cannot get a Shared Ownership mortgage on any property for sale on the market. It is only applicable to certain homes and these are usually specifically purpose-built.
Will I be able to own 100% of the property?
Yes, if you keep buying shares from the Housing Association, you can eventually own 100% of the property. This is called ‘staircasing’. Before you can increase your share, you will need to pay your Housing Association to carry out a property valuation to see if it has increased in price - which involves a valuers fee.
You can buy shares in increases of 10%. The cost of your new share will depend on how much your home is worth when you want to buy the share. Shares will cost more if your home’s value has increased, and less if it’s decreased. Remember - the more shares you buy, the less rent to the Housing Association you will pay.
How do I apply for Shared Ownership?
Firstly, you will need to find your local Help to Buy Agent which you can do on the government’s Help to Buy website. Once you’ve found your local agent, their website should contain details of how to apply for Shared Ownership. You’ll be asked a few questions such as:
- Where you want to live
- What your income is
- How much money you have in savings
- A brief summary of your history of making credit repayments and debts
When you have been accepted, you can begin to look around for a Shared Ownership property.
Once you have found a property you will need to go through a full financial assessment with their designated financial adviser, and you may also have to have a credit check. You will discuss what kind of share you can afford and what your rent payments would be.
Upon being approved, you will need to put down a reservation fee which is typically £200, but varies.
When it’s time to find a Shared Ownership mortgage, using a mortgage broker such as Mortgage Light will make the process much easier. You will go through a similar process of financial checks and we will ask you for:
- 3 months wage slips & proof of any commission or bonuses
- 3 months bank statements
- Proof of ID & proof of address
- Proof of deposit money
- Mortgage statement
We can then find you a suitable deal and help you complete your mortgage application.
The Step-by-Step guide
Mortgage Process
- Register with your Help to Buy government agent - search ‘Help to Buy’ & location of your property. For properties in Buckinghamshire, Bedfordshire, Hertfordshire, Essex, Cambridgeshire, Norfolk, Suffolk, Surrey, East & West Sussex or Kent, then choose www.helptobuyese.org.uk
- Contact Mortgage Light to be qualified. Your affordability needs to be assessed for each property you are interested in as every Housing Association has different rent/service charge amounts. These can all affect affordability
- Set a time to meet or speak to Mortgage Light
- Provide requested documentation to enable Mortgage Light to provide an AIP/DIP
- Once you have been approved by the Property Provider / Housing Association, you will need to pay your reservation fee, then discuss mortgages and pick a product
- Mortgage Light will submit your application to the lender
- The valuation will be instructed
- Valuation will be received by the lender
- The documentation that the lender requested will be assessed
- The mortgage offer will be issued and a copy sent to yourselves and your solicitor
- Set a time to meet or speak to Mortgage Light to review your mortgage offer and discuss your protection needs
Solicitor process
- Contact solicitor for an estimate of costs
- Call solicitor to accept the quote and complete and return the instruction form they send to you
- Make payment for searches (usually between £300 - £350)
- Authorise your broker to email certified ID to the solicitors
Solicitors will receive a contract pack from the sellers (within 5-10 working days), solicitor will request searches and raise enquiries (within 5 working days) - Send bank statements and evidence of funds to quantify how the funds have been accrued
- Call solicitors to check all enquiries have been answered and they have a copy of the mortgage offer
- You will receive a contract to sign, along with a full copy of the solicitors title investigations and the fixtures and fittings list
- Sign and return your contract and send the deposit funds to your solicitor
- Set a completion date. The solicitor will exchange contracts and fix the date for completion
- Completion day arrives and you can now collect the keys. You are now a homeowner!
FAQs
How Mortgage Light can help
We are an experienced Shared Ownership mortgage broker. We have dealt with Shared Ownership mortgages since we began trading and have helped many people to own 100% of their house after only a few years, depending on their circumstances.
Our team of Shared Ownership mortgage advisors are waiting to help you make use of this affordable scheme, and we promise that you’ll be in the best hands.
