Shared ownership mortgages can be a great stepping stone onto the property ladder, especially for first-time buyers struggling to afford a home outright. This government-backed scheme allows buyers to purchase a share of a property (usually between 25% and 75%) and pay rent on the remainder. While it can be more affordable than buying a home outright, navigating the process comes with its unique challenges.
Here are some top tips to help you make informed decisions and get the most out of shared ownership. Read on.
Contents
- 1 Understand How Shared Ownership Works
- 2 Check Eligibility Requirements
- 3 Work with a Specialist Mortgage Advisor
- 4 Budget for Additional Costs
- 5 Think Long-Term: Consider Staircasing
- 6 Know the Limits on Subletting and Alterations
- 7 Review the Lease Agreement Carefully
- 8 Understand the Resale Process
- 9 Manage Your Mortgage Today
Before diving in, it’s crucial to understand the fundamentals of shared ownership. You’ll buy a portion of the property with a mortgage and pay rent on the rest, which is owned by a housing association. Over time, you may be able to increase your share through a process called “staircasing” eventually owning 100% of the property in some cases.
Check Eligibility Requirements
Shared ownership schemes have eligibility criteria, such as income limits and whether you’re a first-time buyer or previously unable to buy. Typically, your household income must be under £80,000 (£90,000 in London). Be sure to check the most current requirements from your local housing association or the government’s shared ownership website.
Work with a Specialist Mortgage Advisor
Not all lenders offer shared ownership mortgage, so working with a mortgage broker or advisor who specializes in them can be incredibly helpful. They can guide you through the application process, help you find the best deals, and ensure you meet all lending criteria.
Budget for Additional Costs
Aside from the mortgage and rent, don’t forget to budget for other costs such as the service charge, ground rent, legal fees, and valuation fees. These can add up quickly and might affect your affordability in the eyes of lenders.
Think Long-Term: Consider Staircasing
If your goal is full ownership, understand how staircasing works from the start. Each time you buy an additional share, you’ll need to pay for a property valuation, legal fees, and possibly mortgage arrangement fees. Planning for this in advance can help you avoid financial surprises down the line.
Know the Limits on Subletting and Alterations
With shared ownership, you typically can’t sublet your home or make significant alterations without permission from the housing association. These restrictions can affect how flexible the property is as your life circumstances change.
Review the Lease Agreement Carefully
Shared ownership properties usually come with long leases, but terms can vary. Make sure to review the lease thoroughly with your solicitor, paying close attention to clauses on:
- rent increases
- maintenance responsibilities
- staircasing rules
Understand the Resale Process
When it’s time to move, selling a shared ownership property can be more complex than selling a fully owned one. Most housing associations have the right to find a buyer for your share first. Knowing this ahead of time helps manage expectations.
Manage Your Mortgage Today
Shared ownership can be a smart way to get on the property ladder, but it’s essential to do your homework. By understanding the scheme, working with the right professionals, and planning ahead, you can navigate shared ownership with confidence and make the most of your investment.
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