When it comes to buying a home, it is essential to seek out help. There are many schemes in place, and these often make the difference in helping someone step on the property ladder. One plan which is available to first-time buyers is a shared ownership scheme, and it may be right for you.
Shared ownership mortgages are an element of the Government scheme which sets out to help first-time buyers and lower-income households get on the property ladder. The process works out by the buyer taking out a mortgage for the share of the property they own, which is usually between 25% and 75%. The homeowner then pays rent on the rest of the property.
Am I eligible for shared ownership?
If your household income is less than £80,000 or less than £90,000 in London, you pass the first eligibility criteria for the shared ownership scheme. You will also have to be buying your first home, be a previous property owner who now cannot afford to buy without assistance, or you could be renting from a housing association or local council.
You also need to ensure you are:
- Not in rent arrears or mortgage arrears
- In possession of a good credit history
- Able to afford the costs of purchasing a shared ownership property
This range of criteria ensures the scheme isn’t available for everyone, providing it helps those who need additional support to buy a home.
Is it possible to increase my ownership share at a later date?
One of the most appealing aspects of the shared ownership scheme is the ability to increase your ownership share at a later date. This process is called staircasing, and it enables the buyer to buy sections of the rented property from the relevant housing association. It is possible to own the entire property with this method eventually.
The amount of money the buyer pays for each additional share is dependent on the value of the property, and the time. The housing association has a role to play in this. If the value of the home increases, the buyer will pay more for a share at this time, and if the value of the home decreases, the buyer will pay less for a share at this time.
This style of property ownership isn’t the standard method of buying a home. Therefore, not every mortgage lender will provide a loan to people looking to buy under the shared ownership scheme. However, there is a range of lenders who are keen to support buyers in this process. After all, the scheme is provided by the Government, which means many lenders are happy to back it.
No matter your circumstances, there are mortgage lenders and options which is right for you. Shared ownership isn’t ideal for everyone, but for many buyers, it represents the perfect chance to step on to the property ladder. Before committing to this scheme, or any mortgage, it is best to review your finances and liaise with professionals to determine what is best for your needs.