Shared Ownership Mortgages may be a great option for you if you can’t quite afford to buy a home but are interested in entering the property ladder. With shared ownership mortgages you buy a stake in a property and pay your lender rent for the remaining share. There are a number of investors and lenders who offer shared ownership mortgages. However, we recommend you use a government sponsored agent to finance your purchase. Government agencies are non-profit institutions and offer better terms and protection to buyers. The British government provides access to shared ownership mortgages through its HomeBuy scheme. Click here for contact details of a HomeBuy agent near you.

Eligibility:

To qualify for a government sponsored shared ownership mortgage, your household must have a total income of 60,000 pounds or less, and cannot afford to buy a home in your area. Note the government defines household as the number of people that are buying the home not the people living in the home. In other words, as long as the total income of those buying the property is lower than 60,000 pounds, it does not matter what your combined family-income is.

The government opens this scheme to people who rent council or housing association properties, key workers in the public service, such as teachers who work in the area and first-time-buyers who have never owned a home. You can also qualify if you used to own a home but can no longer afford to buy one.

How It Works:

Shared Ownership Mortgage schemes allow you to buy a share of 25 to 75 percent of the property’s value. The housing association will own the remaining stake in your home. You will then have to pay rent on the house association’s share. Rent can cost up to 3 percent of the housing association’s stake in the property.

How Much Does It Cost?

Let us illustrate this with an example. Imagine you buy a property worth 100,000 pounds with a shared ownership mortgage. You decide to buy half of the property so you get a mortgage for 50,000 pounds. At 6 percent interest over 25 years (your interest rate and term will probably be different) this will cost you around 320 pounds a month. You will then have to pay 3 percent (per year) on the share you don’t own: 3 percent of 50,000 pounds is 1,500 pounds a years, which over 12 months comes to 125 pounds a month. That is a grand total of 445 pounds a month for a 100,000 pound house.

So what is the difference between a shared ownership mortgage property and a conventional mortgage? Read our next article on the rights and responsibilities of owning a shared ownership mortgage.

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