Shared Ownership – What is it? How does it work?

Introduced off the back of the credit crunch in 2012, the Shared Ownership scheme gives first time buyers and home movers the opportunity to buy a share of and rent a property.

Shared Ownership Mortgage Advice in Sheffield

What is shared ownership?

Utilising the Shared Ownership scheme will allow you to take out a mortgage on/purchase a percentage of a property and then pay the remainder back on rent. The percentage that you take out will usually be between 10%-75%. Although, in some cases, you may be allowed to take out a 10% share.

As a result of taking out a mortgage in this fashion, you’ll be able to put down a smaller deposit. This makes your task of getting onto the property ladder a whole lot easier!

Perhaps partial homeownership is the route that you need to take.

How does the scheme work?

Since it’s likely that you’ll only be purchasing a 25%-75% share in the property, the minimum required deposit should be lower; although, this can still differ depending on your credit history.

You’ll be accessing Shared Ownership through the ways of a mortgage, meaning that you’ll only need to take out a mortgage on the percentage that you’re buying. For example, if you’re buying a share of 50% on a £250,000 house, you’ll only need to take out a £125,000 mortgage. Plus, rather than producing a deposit that’s based on the full property price, you’ll only have to supply a deposit based on the percentage that you’ve taken out; in this example, if you were required to put down 5% or more, you’d only have to supply £6,250.

After you’ve put down your deposit and your offer is accepted, you’ll start paying back your mortgage month on month; just like any other mortgage. As an additional cost, you’ll also be paying rent to the housing association. Your rent plus your mortgage payments shouldn’t be as expensive as had you taken out a 100% mortgage.

Costs and fees

There are lots of different costs to consider when taking out any type of mortgage. In terms of Shared Ownership costs, you will have the obvious set-up/arrangement fees and maybe some booking fees. Also, you are likely to receive stamp duty tax if your property is above the stamp duty threshold and you’ll have to consider legal solicitor fees too.

Costs will vary depending on the property that you’re buying. Factors such as deposit size, monthly payments, arrangement fees will differ from property to property.

How can I apply?

To qualify for Shared Ownership, you will have to meet certain requirements:

• You have to be at least 18 years of age.
• If you live outside of London, your combined household annual income must be less than £80,000. If you live in London, this is upped to less than £90,000.
• You cannot own another property during your Shared Ownership mortgage application. You must either be a first time buyer in Sheffield or in the process of selling your current property.
• If you can afford a house on the open market, you will not be able to access this scheme. It was designed to help struggling homebuyers.
• You must prove that you are not in any kind of arrears, this includes mortgages and rent.
• You’ll have to provide evidence that supports a good, clean credit history. This means that you will struggle if you have a CCJ (county court judgement) associated to your name or have had previous credit problems.

Speak to a Shared Ownership Mortgage Advisor in Sheffield

We have been working within the mortgage industry for over 20 years now and have successfully helped many applicants get through their Shared Ownership journey.

We offer a free Shared Ownership mortgage consultation to all customers; take advantage of this 7 days a week! We hope to hear from you soon.

Date Last Edited: February 19, 2024