How To Apply For A Shared Ownership Mortgage

Check your eligible for the scheme

Before even looking for a property under the scheme, make sure you meet the following criteria:

• Your household income is £80,000 a year or less. If you are buying in London, your income can be up to £90,000.
• AND, you cannot afford all of the deposit and mortgage repayments on a home that meets your needs.

Plus, you need to be one of the following:

• A first-time buyer
• A previous homeowner who can no longer afford to buy a new property
• An existing shared owner, and you want to move
• Forming a new household – i.e. because of a relationship breakdown
• A homeowner that has to move but cannot afford a new home that meets your needs

Find a qualifying property

To find a home, you need to register with a local Help to Buy agent for Shared Ownership. The agent will confirm whether or not you are eligible at this stage. Plus, you’ll be asked to take part in an affordability assessment to ensure that purchasing through the scheme won’t overstretch your finances. Be prepared to provide 3 months’ worth of wage slips, proof of a deposit, proof of address and a photo ID to pass the agent’s checks.

Once they have confirmed you are eligible, you can find potential properties through the Help To Buy website. After conducting in-person viewings and finding one you want to purchase, you’ll have to pay a reservation fee. These fees range between £250 and £500, but you’ll get it deducted from your final balance on completion. If you don’t complete, it’s non-refundable.

Talk with a specialist Shared Ownership broker

Once you have found a property, your next best step is to speak with a mortgage advisor who is experienced in the Shared Ownership scheme. They’ll be able to guide you through the rest of the process, minimising any difficulties and helping you with your application to mortgage lenders. Plus, as Shared Ownership properties are always leaseholds, a broker can help you identify hidden extra charges or clauses which can affect your expenditure and therefore a mortgage application.

Your broker can also help you calculate the following:

How much you have for your deposit

You need to weigh up how much you need for your deposit versus how much you have. Generally, the lowest amount you can have is 5%.

When it comes to Shared Ownership, your deposit amount is in relation to the size of your share. So, if you are buying 25% of a property worth £200,000, you are purchasing that share for £50,000. If a potential lender requires a 5% deposit, you need £2,500 of your own money to invest as a down payment.

However, maximising a deposit can reduce your monthly mortgage repayments and also make you eligible for better rates. So, increasing it to as much as you can afford can be helpful.

How much you want to buy

Alongside your deposit calculations, you can start to work out the size of the share you eventually purchase. Generally, Shared Ownership applicants look to buy between 25% and 75% of a property. The share you don’t own is what you pay rent on, which is generally worked out at 3% of the landlord-owned portion.

It’s possible to buy more in the future through a process called staircasing, but as market values increase, you could have to pay more per share so you may want to maximise your share amount now. On the flip side, buying a smaller share means borrowing less, improving your loan-to-value ratio which can help secure a better rate for your mortgage.

Find a lender and make an application

With the help of a broker, finding a lender for whom you meet all eligibility requirements should be straightforward. That’s crucial as lenders often perceive Shared Ownership mortgage applications as riskier so they are more difficult to be approved for on your own.

Typically, lenders will look at how big a deposit you have, your credit rating, your age and your income plus income source to determine what kind of deal you qualify for. With Shared Ownership, they’ll look at the percentage you want to buy too, as sometimes they have maximum and minimum amounts (usually between 25% and 75%). They’ll also conduct an affordability assessment looking at your income versus all your expenditure to see if you could withstand increases in interest rates in the future.

Receive a Shared Ownership agreement in principle

Once you have submitted your application, and you’ve been approved, you will then receive an Agreement In Principle, often referred to as an AIP. You’ll also receive a valuation that will need to reflect the property’s sale price. Crucially, the agreement lasts for six months. It means that you need to ensure contracts with the vendor are exchanged before the expiration date.

Your solicitor should take care of this part of the process. They’ll work with the vendor and their solicitor by sending them your AIP, a property valuation and what your deposit amount will be. For you, they will read through all leasehold contracts and highlight any issues to ensure that you are still happy with the purchase and that the property meets all requirements stipulated by your mortgage provider.

Complete

Once you have exchanged contracts, you’ll set a completion date when all funds are transferred to the vendor – both your deposit and your loan from your mortgage provider. Once that has been finalised, you can move into your home.