Houses are expensive and sometimes can see out of reach simply because of that. When you are looking at house prices in your area upwards of £230,000 and your salary is around the national average of £28,677 for full-time employees, it can just seem ridiculous – after all who is going to offer you a mortgage eight or more times your salary?
Shared ownership offers you a way onto the elusive property ladder, enabling you to buy part of a property in collaboration with a housing association – you buy a quarter, they buy three-quarters and you pay them rent for their part. Plus, though a process known as staircasing you can increase your share each year until you own the whole thing.
A quarter of a property is a lot easier to afford than the whole thing.
Shared Ownership Mortgages for People with Bad Credit
What is shared ownership?
Who is shared ownership for?
How does shared ownership work?
Remember that £230,000 house? Let’s start there.
With a salary of £28,677 you would be looking at a mortgage that has a maximum limit of £115,000. Conveniently, that’s half the value of the house. With shared ownership you can typically buy 25%, 50% or 75% of the property – a half-sized share is perfect.
You will need a deposit that’s at least 5% of the size of your mortgage – so that’s £5,750. More is better, so if you can stretch to £11,500 (10%) that’s great, but if not then there are plenty of lenders who will talk to you.
Once you get your mortgage (more on that later) you will be able to buy a 50% share in the property, and the housing association will buy the other 50%. You’ll have your monthly mortgage repayments to make (around £575 a month) and you will rent the other half – this will cost approximately 3% of the value of the housing association’s share per year £3,450. That’s £287.50 a month.
In total, your mortgage-plus-rent will total around £862.50 per month.
Of course, a lot will depend on your mortgage deal, and at The Mortgage Hut we’d help you get the very best shared ownership mortgage available in the UK, but the numbers given here are a good indictor.
Staircasing – owning the whole property
Depending on your shared ownership deal which will be different depending on your housing association, you will have the option to improve your share a when you can afford to. Some deals will let you go all the way to 100% (which is really what you are after), while other’s will have a maximum cap (typically 80%) so that the housing association keep some part of the property.
You will be entitled to buy 10% or more in shares as time goes on until you own the whole property. These will be calculated based on the current market value of the property, so if it goes up in value, future shares are going to cost more than ones bought earlier.
In the example given, each 10% share will cost £23,000 and can be paid for by saving, or by extending your mortgage through discussion with the lender.
Your rent will drop as your shares increase as the housing association owns a smaller and smaller percentage.
With a salary of £28,677 you would be looking at a mortgage that has a maximum limit of £115,000. Conveniently, that’s half the value of the house. With shared ownership you can typically buy 25%, 50% or 75% of the property – a half-sized share is perfect.
You will need a deposit that’s at least 5% of the size of your mortgage – so that’s £5,750. More is better, so if you can stretch to £11,500 (10%) that’s great, but if not then there are plenty of lenders who will talk to you.
Once you get your mortgage (more on that later) you will be able to buy a 50% share in the property, and the housing association will buy the other 50%. You’ll have your monthly mortgage repayments to make (around £575 a month) and you will rent the other half – this will cost approximately 3% of the value of the housing association’s share per year £3,450. That’s £287.50 a month.
In total, your mortgage-plus-rent will total around £862.50 per month.
Of course, a lot will depend on your mortgage deal, and at The Mortgage Hut we’d help you get the very best shared ownership mortgage available in the UK, but the numbers given here are a good indictor.
Staircasing – owning the whole property
Depending on your shared ownership deal which will be different depending on your housing association, you will have the option to improve your share a when you can afford to. Some deals will let you go all the way to 100% (which is really what you are after), while other’s will have a maximum cap (typically 80%) so that the housing association keep some part of the property.
You will be entitled to buy 10% or more in shares as time goes on until you own the whole property. These will be calculated based on the current market value of the property, so if it goes up in value, future shares are going to cost more than ones bought earlier.
In the example given, each 10% share will cost £23,000 and can be paid for by saving, or by extending your mortgage through discussion with the lender.
Your rent will drop as your shares increase as the housing association owns a smaller and smaller percentage.
Your credit history – the potential stumbling block to your shared ownership mortgage
Getting a mortgage for shared ownership with The Mortgage Hut
You’ve saved up for a deposit, you’ve cleaned up your credit history and improved affordability, you know the house you want and have spoken to the housing association to ensure you are eligible for shared ownership – it’s time to give us a call.
Our experts on shared ownership at The Mortgage Hut will work with you to speed your application through, often with a mortgage in principle agreed within hours. From then on, it’s plain sailing!
For more information, fill in our contact form or call us today!
Our experts on shared ownership at The Mortgage Hut will work with you to speed your application through, often with a mortgage in principle agreed within hours. From then on, it’s plain sailing!
For more information, fill in our contact form or call us today!
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