A new type of mortgage has become available in recent years known as a shared ownership mortgage. This is where a homebuyer purchases a share of a property (usually between 25% and 75%) and pays rent on the remaining share. The government has unveiled a comprehensive guide to shared ownership mortgages in an attempt to make this type of housing more accessible to first-time buyers.
Under the current system, would-be homeowners need to have a minimum 5% deposit before they can access a shared ownership mortgage. The government has said that it will now provide a minimum 20% deposit for those looking to buy a home through the scheme. This will make it much easier for people to get on the property ladder and should help to increase the number of people who own their own home.
1. The basics of Shared Ownership Mortgages
A Shared Ownership Mortgage is a mortgage product that allows you to buy a percentage of a property, usually between 25% and 75%, and pay rent on the remaining portion. It is a government-backed scheme that is designed to help first-time buyers get on the property ladder.
The minimum deposit for a Shared Ownership Mortgage is usually 5% of the property value, although this can vary depending on the lender. The mortgage term will also usually be between 25 and 30 years.
The interest rate on a Shared Ownership Mortgage is typically higher than the rate you would get on a standard mortgage. This is because the lender is taking on more risk by lending you money to buy a property that you do not fully own.
Your monthly payments on a Shared Ownership Mortgage will consist of two parts: the mortgage repayments and the rent. The rent is paid to the landlord (usually a housing association) and is typically lower than the market rent for the property.
You will only be able to remortgage your property if you can find a lender who is willing to lend you the amount you need. This can be difficult as most lenders will only lend up to 75% of the value of the property.
The main benefit of a Shared Ownership Mortgage is that it allows you to get on the property ladder with a smaller deposit than you would need for a standard mortgage. It is also a good option if you cannot afford to buy a property outright.
The main downside of a Shared Ownership Mortgage is that you will have to pay rent as well as your mortgage repayments. You will also have to be careful when remortgaging as it can be difficult to find a lender who is willing to lend you the full amount you need.
2. The benefits of Shared Ownership Mortgages
If you’re looking to enter the property market but find yourself priced out of the traditional market, then Shared Ownership Mortgages could be perfect for you. With a Shared Ownership Mortgage, you’re able to purchase a portion of a property (typically between 25-75%) and pay rent on the rest. This can make getting on the property ladder more affordable and is a great stepping stone if you’re looking to eventually purchase a property outright.
There are a number of benefits that come with Shared Ownership Mortgages, which we’ll outline below.
One of the biggest benefits is that you’re able to take out a mortgage on a property that you otherwise may not have been able to afford. This can make all the difference when it comes to getting your foot on the property ladder.
Another big benefit is that you’re able to gradually increase your ownership stake in the property over time. This can be done by ‘staircasing’, which is when you purchase additional shares in the property (usually in blocks of 10%). This can be a great way to eventually owning a property outright.
Shared Ownership Mortgages can also come with a number of other benefits, such as:
–Fixed monthly payments for the first few years, which can help with budgeting;
-The opportunity to purchase a brand-new property;
-Access to properties in desirable locations;
-A number of properties to choose from; and
-Potential stamp duty relief.
If you’re looking for a more affordable way to get on the property ladder, then Shared Ownership Mortgages could be the perfect solution for you. With a number of benefits on offer, they’re definitely worth considering.
3. The eligibility criteria for Shared Ownership Mortgages
Shared Ownership Mortgages are available to a range of eligible buyers. While the specific eligibility criteria will vary from lender to lender, there are some general criteria that all potential borrowers will need to meet.
First and foremost, potential borrowers must have a good credit history. Lenders will want to see that you have a history of making on-time payments and that you have not been delinquent on any previous loans.
In addition, potential borrowers must have a steady income. Lenders will want to see that you have a source of income that is reliable and that you will be able to make your monthly mortgage payments on time.
Finally, potential borrowers must have a down payment. Lenders will typically require a down payment of at least 5% of the purchase price of the home.
If you meet all of the above criteria, you should be eligible for a shared ownership mortgage. However, it is always a good idea to speak to a lender directly to learn more about their specific eligibility requirements.
4. The types of Shared Ownership Mortgages
If you’re looking to purchase a property through the Shared Ownership scheme, you’ll need to apply for a Mortgage. In this section, we’ll provide an overview of the types of Shared Ownership Mortgages that are available, so that you can make an informed decision about which one is right for you.
The first type of Shared Ownership Mortgage is an Affinity Mortgage. This is a Mortgage that’s specifically designed for people who work in certain professions, such as teachers, NHS employees, or members of the armed forces. If you qualify for an Affinity Mortgage, you may be able to benefit from a lower interest rate.
The second type of Shared Ownership Mortgage is a Help to Buy Mortgage. This is a government-backed Mortgage scheme that’s available to first-time buyers and existing homeowners. If you’re looking to purchase a property through the Shared Ownership scheme, you may be eligible for a Help to Buy Mortgage.
The third type of Shared Ownership Mortgage is a Lifetime Mortgage. This is a Mortgage that’s available to people over the age of 55. With a Lifetime Mortgage, you can borrow money against the value of your property, and you don’t have to make any repayments until the end of your life.
The fourth and final type of Shared Ownership Mortgage is a Shared Equity Mortgage. This is a Mortgage that’s available to people who are looking to purchase a property through the Shared Ownership scheme. With a Shared Equity Mortgage, you can borrow money against the value of your property, and you don’t have to make any repayments until the end of your life.
So, there you have it: an overview of the four types of Shared Ownership Mortgages that are available. Whether you’re a first-time buyer, an existing homeowner, or you’re looking to downsize in retirement, there’s a Shared Ownership Mortgage that’s right for you.
5. The process of applying for a Shared Ownership Mortgage
Shared ownership mortgages are a type of home loan that allows you to purchase a property with a smaller deposit than you would need for a traditional mortgage. In order to qualify for a shared ownership mortgage, you must be a first-time buyer or have previously owned a home that was your main residence.
The first step in applying for a shared ownership mortgage is to contact a participating lender. Not all lenders offer shared ownership mortgages, so it’s important to shop around and compare offers. Once you’ve found a lender that you’re comfortable with, you’ll need to complete a mortgage application.
The mortgage application will include a section on your income and employment history, as well as your debts and assets. Be sure to include all of your sources of income, such as alimony, child support, and investment income. You’ll also need to disclose any debts you have, such as credit cards, student loans, and car loans.
Once you’ve submitted your mortgage application, the lender will order a property appraisal. The appraiser will visit the property and determine its market value. If the appraised value is less than the purchase price, you may need to renegotiate the price with the seller.
Once the appraisal is complete, the lender will review your application and make a decision. If you’re approved, you’ll receive a loan commitment letter outlining the terms of the loan. The loan commitment letter will include the interest rate, monthly payment, and loan term. Be sure to review the loan commitment letter carefully before you sign it.
Once you’ve signed the loan commitment letter, the lender will arrange for a loan closing. At the closing, you’ll sign the mortgage documents and pay any closing costs. Once the closing is complete, the lender will provide you with the funds for the purchase.
The new Shared Ownership Mortgage scheme unveiled by the government is a great way to help first-time buyers get on the property ladder. With a minimum deposit of just 5%, these mortgages are very accessible to people who may not have the savings for a traditional mortgage. The Shared Ownership Mortgage scheme is a great way to get started in the property market, and with the help of a mortgage advisor, you can find the perfect mortgage for your needs.