Getting a Mortgage or Remortgage on a UK Shared Ownership Property
Looking for a mortgage on a Shared Ownership property? Get the right advice here.
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Getting a Mortgage or Remortgage on a UK Shared Ownership Property
We’ve been approached by lots of people who want to know more about how they can get a Shared Ownership mortgage in the UK.
In this article, we’ll tell you the key information about the Shared Ownership scheme, including how it could help you get onto the property ladder quicker, and potentially with a lower deposit in comparison to a standard mortgage.
The following topics are covered below…
- What is a Shared Ownership mortgage?
- How to get a Shared Ownership mortgage
- Who is eligible for Shared Ownership?
- How much can you borrow?
- How much deposit will you need?
- How many shares can you get with a Shared Ownership mortgage?
- Shared Ownership mortgage advantages and disadvantages
- Getting a shared ownership mortgage with bad credit
- Remortgaging a Shared Ownership property
- Shared Ownership mortgages FAQs
- Why you should speak to a Shared Ownership mortgage broker
- Contact a Shared Ownership mortgages expert
What is a Shared Ownership mortgage?
Shared Ownership schemes are a cross between buying and renting. They are usually aimed at first-time buyers. ‘Shared Ownership mortgage’ is a term you might hear when a borrower uses a Shared Ownership scheme to purchase a percentage of a property they’re planning to live in. You basically, own some of the property and rent the rest. What’s the idea of this? – Read on for the explanation.
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Shared Ownership mortgage meaning
Let’s add some extra context to the term ‘Shared Ownership mortgage’: not all lenders offer home loans to customers who are applying through the government scheme, but using a whole-of-market broker, like the ones we work with, can help you find the most favourable deal.
You can use one of these products to buy a share of a property and pay rent on the remaining percentage. You can increase the share you own over time via a process called ‘staircasing’.
Shared ownership mortgages explained
If you are eligible, you can purchase a percentage of the property, usually between 25-75% and then pay rent on the percentage of the property that you do not own, usually to a local council or housing association.
By purchasing a percentage of the home, you only require a smaller mortgage. This is often why Shared Ownership mortgages appeal to first-time homeowners as since the normal deposit of around 10% give or take is only required for the share being purchased, as opposed to the value of the property as a whole. It is therefore a way for those with little deposit to get on the property ladder.
How does the Shared Ownership scheme work?
Shared Ownership is usually, but not always, offered on new build properties built by a housing association or private developer. When you buy shares, the housing association owns the remainder of the shares you have not purchased.
So, you pay mortgage and rent on a Shared Ownership property?
Yes. As well as paying for your mortgage for the percentage of the property you own, in a Shared Ownership, you are also required to pay rent on the percentage of the property that you do not own. The rent on a Shared Ownership property is generally calculated at 3% of the equity owned by the landlord.
For example, if the property is worth £200,000 and the share owned by the leaseholder is 50%, the rent will be 3% of £100,000 (the remaining share held by the landlord.) This would equate to £3,000 which would be payable over 12 months at £250 per month.
Therefore, in most cases, the more equity you own, the cheaper the rent payable to the landlord/housing association each month.
Property price of £200,000
Your share as a percentage
|Your share as GBP||Landlord’s share as GBP||Yearly rent||
Monthly rent in GBP
Furthermore, if stated in your lease, your percentage of rent can increase each year in line with inflation.
How to get a Shared Ownership mortgage
To start the process of getting a Shared Ownership mortgage, speak to a mortgage advisor who can search the market for the best deal for you.
Only specific properties are available through Shared Ownership, and you will find them listed on that website (updated regularly by housing associations), as well as services such as Rightmove and Zoopla.
The housing associations who operate these properties will usually handle the Shared Ownership part for you and they might ask you for the following…
- 3 months wage slips or your most recent P60
- Proof of savings you may have
- Photo ID
- Proof of address (recent utility bill etc)
After this point, you will need to obtain a mortgage for the share of the property you’re buying.
The whole-of-market brokers we work with will then calculate how much mortgage each lender may give you and under what conditions. A mortgage advisor can guide you through the entire Shared Ownership process from start to end and find you the best rates for your circumstances.
Who is eligible for the Shared Ownership scheme?
People often ask us, “Can I get a Shared Ownership mortgage?” You may be eligible for a Shared Ownership mortgage for a property, be it a house or a flat, if the following apply to you:
- You are a first-time homeowner, or have owned a home previously but can no longer afford a mortgage
- You have a combined income of less than £80,000 if you live outside of London, and less than £90,000 if you live in the capital
- You plan to live in the property and not rent out any part of it
- Have the permanent right to live in the UK
- Are 18 years old or over
How much can you borrow on a Shared Ownership mortgage?
The criteria for a Shared Ownership mortgage is fairly flexible in terms of lending high loan to values to people with bad credit and other financial issues. But how much mortgage can you afford to get with Shared Ownership?
Well, this will largely depend on your income. You will need to show that you can afford the mortgage, rental payments and other costs that may arise such as repairs and maintenance. You’ll also need to prove that you have enough deposit to put down which can vary depending on the lender.
Every lender has a different level of generosity when it comes to how much they will consider lending you and the criteria they use to assess your affordability will vary.
Keep in mind that you will only need to qualify for a mortgage that covers your ownership percentage of the property, rather than its entire market value, so the income multiple you need will not be as high as it would for a standard mortgage application.
For more information on how your income can affect how much you can borrow, speak to an advisor here.
How much deposit will you need for the Shared Ownership scheme?
All lenders are different and will have different criteria.
It also depends on your personal circumstances (bad credit can have an effect on how much deposit you need).
Can I get a shared ownership mortgage with 5% deposit?
Generally, mortgage providers ask for 10% – 20% deposit for a standard mortgage, the attraction of this type of mortgage is that most lenders require only a 5% deposit on a Shared Ownership mortgage.
Can I get a shared ownership mortgage with no (0%) deposit?
We’re often asked. ‘Do I need a deposit for a shared ownership mortgage?’ The short answer is, not always.
A few lenders will lend 100% if the circumstances are right. This would include affordability and your credit history.
But bear in mind that the higher the deposit, the lower the loan to value (LTV) and the lower the rent will be.
How is the deposit calculated for a shared ownership mortgage?
Another benefit of Shared Ownership is that the deposit is calculated based on the percentage of the purchase price of the share that you own (not the total property value).
For example, if a customer wished to purchase 25% of a property worth £200,000 and they were able to pay a 5% Shared Ownership mortgage deposit (£2,500), they would need to apply for a mortgage for £47,500.
The below examples are based on a 5% deposit. (Subject to affordability and credit checks the size of the required deposit may increase or decrease.)
|Property price of £200,000|
|Share Percentage||Share as GBP||Deposit amount||Mortgage amount|
Could a large deposit improve my chances of approval?
This is because it would mean that the customer would own more equity and therefore require a smaller mortgage. Some lenders also see a larger deposit as proof to the financial commitment to the mortgage.
However, this varies from lender to lender and is not always the case. Most lenders assess each person’s affordability based on their own criteria which could include:
- Deposit size
- Deposit source
- Credit history
- Income source
- Property type
How many shares can you get with a Shared Ownership mortgage?
If you are buying your home through a private Shared Ownership developer, the amount of equity (shares) you own in a Shared Ownership mortgage is usually up to you (as long as you have the finance and can afford the repayments).
The only exception to this is if you’re buying a property through Help to Buy: Shared Ownership, which is a government scheme that allows you to buy between 25 – 75% of the property’s value.
To give you an example of how much a share could be and how this can affect your mortgage amount, please see the table below.
Property price of £200,000
Share Percentage of Shared Ownership mortgage
|Share as GBP||Deposit amount (5%)||
Can you buy more shares later?
Yes. If you want to increase the amount of shares you own in the property and you can afford to do so, you can. In fact, in most cases you can purchase up to 100% of the property’s value, meaning that you could eventually hold the full equity of the property. This process is called “staircasing”.
As a word of caution, a lot of housing associations will cap the amount of the property own this preventing you from ever owning the property outright. If your plan is to slowly “staircase” until you own the property fully it’s essential that you find out if the housing association will allow this before making the purchase.
How do you buy more shares?
- Contact the housing association or the organisation you have bought the property from
- Inform them about how many shares you would like to buy
- Have the property revalued (the value of the property may have increased or decreased and this could affect the price of each share)
- Purchase more shares (by adding to your existing mortgage, remortgaging or using savings)
Shared Ownership mortgage advantages and disadvantages
Now that we’ve covered the meaning of the term ‘Shared Ownership mortgage’, it’s time to explore their pros and cons to help you determine whether one is right for you.
To decide whether a Shared Ownership mortgage is a good idea or worth it for you, you really need to talk to a mortgage advisor who can listen to what you want from a mortgage whilst looking at your finances and other affordability factors.
To give you an idea of how this type of mortgage could affect you, we’ve listed the pros and cons of a Shared Ownership mortgage.
Getting a shared ownership mortgage with bad credit
Applying for a Shared Ownership mortgage with bad credit on your file isn’t really any different to applying for a standard residential mortgage under the same circumstances. Some lenders might turn you away or offer unfavourable rates, while others will be more flexible, depending on the age, severity and cause of your credit problems.
You can read more about bad credit mortgages in our dedicated guide.
Remortgaging a Shared Ownership property
In the right circumstances, it is completely possible to remortgage a Shared Ownership property. You’ll need to go through a similar process as a standard remortgage but the big difference is that you’ll be limited to lenders that offer Shared Ownership mortgages.
If you are in a position to buy the rest of the shares in your property, then you might be eligible for a standard remortgage product. This could open up the market to you and give you access to better rates of interest.
How do I go about switching from a Shared Ownership mortgage?
Switching from a Shared Ownership mortgage to a standard remortgaging product isn’t always simple but if you have an experienced mortgage advisor to take you through the process, then it can be made a lot easier and could save you money. Get in touch and one of the Shared Ownership mortgage brokers we work with will help you.
Can you remortgage on Shared Ownership with debt consolidation?
Yes! Over the years, we’ve helped lots of homeowners with debt to remortgage their Shared Ownership property.
Many people are unaware that there are mortgage lenders who specialise in customers with debt or bad credit. Of course, with there being a limited amount of lenders that offer Shared Ownership mortgages, it can be difficult to find one that offers mortgages for borrowers with “bad credit” or debt issues who wish to consolidate them on top of this.
However, it isn’t impossible. In fact, the brokers we work with have helped over [customers-helped] people find a mortgage, usually with circumstances that other brokers would decline because of their lack of experience or knowledge.
Where can you find the best Shared Ownership remortgage deals?
Remortgaging your property can potentially save you a lot of money, so if you are interested in switching your Shared Ownership mortgage, you’ll want to find the best rates possible.
Without in-depth knowledge about the current market, rates and which lenders offer Shared Ownership mortgages, this can be overwhelming and time-consuming.
So, what’s the best way to compare Shared Ownership mortgages?
Going to a mortgage advisor who can do this for you is so beneficial. Not only can the advisors we work with find you the best rates on the market, they can also compare Shared Ownership mortgages and calculate which one is best for you based on what you want and your affordability.
To find the best Shared Ownership remortgage rate, contact an advisor.
What about using a Shared Ownership remortgage calculator?
There are many online Shared Ownership mortgage calculators that provide an “estimation” on how much you can expect to pay on your new mortgage but the problem with some of these, is that they don’t take personal factors into consideration.
We’ve helped a lot of borrowers who have used a calculator and been confused with the quote they have received. For example, an online tool won’t adjust your estimation based on the type of property you have.
This is a really important factor for most lenders because some property types such a high rise flats or homes with non-standard construction are deemed as a higher risk. Therefore, with some lenders, you might be asked either for a larger deposit or to pay a higher rate of interest.
Can you get a shared ownership Buy to Let mortgage?
No. Shared Ownership is only available to people who plan to live in the property and not rent out any part of it. If you want to let your first property out, you will need a Buy to Let mortgage, which are available for first-time landlords and often require larger deposits of around 25-30%.
See our Buy to Let mortgage section for more information.
Do you need a guarantor for a shared ownership mortgage?
No. For a lender to be confident that you can afford your mortgage and rent payments, you will need a deposit (often 5%.)
Can you get a Shared Ownership mortgage on a new build?
Yes, many Shared Ownership schemes are offered on new build properties.
Can you get a Shared Ownership mortgage on your own?
If you can prove that you are able to afford a mortgage in your sole name as well as the rental payments and any other outgoings you have, then Shared Ownership could be an option for you.
Are there Shared Ownership mortgages for disabled people?
If your income consists solely of benefits, it may be difficult to get a mortgage as must pass strict mortgage affordability criteria when you apply.
However, this doesn’t mean that it is impossible. For example, there are mortgage products such as HOLD (Home Ownership for People with Long-term Disabilities) which offers an alternative route into shared ownership. Speak to a Shared Ownership expert for more information.
Can you get a Shared Ownership mortgage if you’re over 50?
This may be possible subject to affordability and credit checks. There are specialist Shared Ownership schemes for people aged over 55. Once the customer owns 75% of the property, they are exempt from paying rent on the rest.
Can you get a Shared Ownership contractor mortgage?
In the right circumstances, it is possible to get a Shared Ownership mortgage if you are self-employed. Lenders will want to look at your books as proof of your income to ensure that your accounts are up to date and are looked at by a chartered accountant.
If you have 2 to 3 years of accounts then getting a mortgage on a Shared Ownership house can be more straightforward as there is a larger number of lenders that will consider an application.
Can you get a Shared Ownership mortgage on benefits?
When you apply for a mortgage, the lender will want to assess your income and be confident that you are able to pay and continue to your mortgage as well as your percentage of rent.
For someone on a lower income or claiming benefits, you may find that there are fewer lenders to choose from as they may deem your finances as “risky.”
But that’s not to say that it is impossible. Speak to an advisor here to learn more about this.
Can I buy a Shared Ownership property without a mortgage?
Yes, buying a Shared Ownership property without a mortgage is possible as to pay for your share, you can either use cash to buy it outright or borrow the funds via a mortgage.
Can you get interest-only Shared Ownership mortgages?
Shared Ownership mortgages are usually repayment only. Interest only is difficult to come by when purchasing through the scheme, and the few lenders which might consider it will insist that you have a high deposit and a viable repayment plan in place.
That said, housing associations are generally against entering agreements with borrowers who are planning to take out a Shared Ownership mortgage on interest only.
Can I get a Shared Ownership tracker mortgage?
Yes, they come in both ‘fixed rate’ and ‘tracker’ varieties, just like standard residential mortgages. With a fixed rate mortgage, the amount of interest you pay will be locked in for a set amount of years before the lender’s standard variable rate kicks in.
A tracker rate mortgage, meanwhile, follows an external interest rate – usually the Bank of England’s base rate.
Can I get a joint Shared Ownership mortgage?
Yes, the lease can be in sole or in joint names. If one of the people named on the mortgage passes away, the lease will transfer over to the other joint owner.
Can I get a Shared Ownership mortgage with a friend?
Yes, as long as you and your friend pass the lender’s eligibility checks and have a combined household income of under £90,000 in London and £80,000 outside of the capital.
Can you get a Shared Ownership mortgage on any house?
No, usually only on specific new build homes and existing properties through resale programmes from local housing associations.
Why you should speak to a Shared Ownership mortgage broker
Applying for a Shared Ownership mortgage in 2018 can be a daunting experience, especially if you aren’t up to date on the current mortgage rates within the market that may be available to you. A mortgage advisor can search the market for you, saving you time and stress.
As well as this, a good broker will ensure that the mortgage you apply for is affordable and right for you based on your circumstances. We only work with trusted experts that are:
- Knowledgeable about which lenders to go to for Shared Ownership mortgages as they successfully arrange these deals already
- Able to guide you through the Shared Ownership application process and offer bespoke advice along the way
- OMA Accredited advisors
- LIBF Training course certified
Can a mortgage advisor find a Shared Ownership mortgage near me?
The advisors we work with have access to hundreds of lenders and can help customers all over the UK including:
- Bognor Regis
Speak to a Shared Ownership mortgage broker for free today
Ready to apply for a mortgage through Shared Ownership? Make an enquiry and we’ll introduce you to a broker with specialist knowledge of the scheme for free. They can guide you through the application process and potentially help you save time and money by pairing you up with the right lender first time.
Speaking to one of the experts we work with won’t affect your credit rating and there’s absolutely no obligation.
Shared ownership mortgage information
Looking for specialist advice? Read through our articles about different shared ownership situations, and how best to prepare yourself to find the right mortgage for you.