Shared Ownership mortgages are part of a government scheme aimed at helping those who are looking to get on the property ladder but cannot afford to buy a home on the open market.
Also referred to as ‘Part Buy, Part Rent’ or Share to Buy’, the scheme can be a great option for those who can’t afford a full mortgage on their home but are capable of paying a certain amount of it each month.
How Does Shared Ownership Work?
Shared ownership mortgages allow people living in housing association properties to buy a percentage of their home whilst still renting the rest which can provide a much smaller, more affordable mortgage option that requires a lower deposit.
To begin with you will be offered an initial share or percentage of the property based on what you can afford, this will typically be between 25% and 75% of the property value. You pay a mortgage for this percentage that you ‘own’ whilst paying rent to the housing association for the remaining amount.
You will be allowed to purchase larger shares as and when you can afford them at a later date with the end goal of owning 100% of the property. Paying both a mortgage and rent might not sound very cost effective but because of the way the payments are calculated, some buyers actually find their combined monthly payments lower than when they are payingjust rent.
What are the Eligibility Criteria For a Shared Ownership Mortgage?
The exact eligibility criteria can vary across the UK, but shared ownership mortgages are typically suited for applicants who;
- Are first time buyers.
- Have previously owned property but no longer do and are unable to afford a full mortgage.
- Arelooking to move home and already have a mortgage under the scheme.
- Have an annual household income of less than £80,000 (£90,000 in London).
- Are looking to downsize to a part-buy, part-rent retirement property.
- Have saved a deposit of around 5-10% of the equity share they are buying.
- Can afford to cover the additional costs such as legal fees, stamp duty etc.
- Plan to live in the property and not rent out any part of it.
- Havethe permanent right to live in the UK.
Can I Get a Shared Ownership Mortgage If I Have Bad Credit?
If you have a less than favourable credit history or a poor credit score, then it can hinder your chances of being accepted for a mortgage due to the additional risk involved for lenders. Although this can greatly limit your mortgage options, there are a number of specialist lenders who are able to offer bad credit mortgages for clients with a poor credit history.
Are Bad Credit Shared Ownership Mortgages Available Over Longer Period of Time?
Depending on the individual circumstances, it is possible to obtain funds to buy your share of the property through bad Credit Shared Ownership Mortgage Lenders.
If successful, then depending on the lender’s individual terms most of the conditions of the mortgage should remain the same, including the length of time or number of years which it is spread over. However, it could be that in order to successfully get a shared ownership mortgage with bad credit that you are required to;
- Pay a larger deposit.
- Demonstrate that the bad credit is in the past and does not reoccur regularly.
If you are concerned about your credit score or adverse marks on your credit record that could affect your chances of securing a mortgage then it is always advisable to seek advice from a professional mortgage broker who has experience in handling Shared Ownership Mortgages for clients with adverse credit. They will have the necessary information, resources and relationships with specialist lenders already in place that will help narrow down all the options and find the right mortgage deal for you.