Shared Ownership Mortgages

For those who cannot afford to buy their home outright, they may want to consider part buying, part renting by way of a shared ownership mortgage.

What are Shared Ownership Mortgages?

Available through government-backed housing associations, shared ownership mortgages help buyers to purchase between 25% and 75% of the market value of their property, while also paying rent on the remaining share of their home. Shared ownership houses can be of great help to first time buyers who may not have saved enough to put down a large deposit on a house, but who are able to purchase a small percentage of the property, whilst still giving them the opportunity to own their homes in the long term. Shared ownership mortgage lenders have been known to offer mortgages with loans of higher percentages, though these have become scarce.

As they are not initially owned outright, shared ownership homes are leasehold properties, meaning a person will only own the lease on their house for a fixed term, though this can be as high as 99 years. The rent they pay is usually up to 3% of a housing association’s share of the property value, though this varies between lenders; it is worth performing a survey of the various building societies, banks and other bodies that offer these mortgages to check who offers the best deal.

Difference Between Shared Ownership Mortgages and Shared Equity Mortgages

Mortgages taken out for shared ownership properties differ from shared equity mortgages, in that a shared equity mortgage gives the borrower a loan for part of a house deposit, but legally gives them 100% ownership of a home, whereas a shared ownership mortgage does not provide such entitlement. Someone living in a shared ownership house can, however, subsequently buy further shares on their home until they own 100% of the property.

Advantages of Shared Ownership Mortgages

There are many benefits of shared ownership schemes for those who consider affordability as a key requirement when buying a house. A shared ownership home is designed so that money conscious home buyers can take advantage of low deposits and monthly housing costs that are around 20% lower than with houses that must be bought outright.

Disadvantages of Shared Ownership Mortgages

Those taking out a shared ownership mortgages may believe these products offer an affordable way to purchase property, but substantial costs can still be incurred. Because a proportion of a shared ownership property is owned by a housing association, monthly fees may include service charges and ground rent, which are not charges that need considering when taking out a more traditional type of mortgage, where rent is not a consideration. Also, some housing association policies tend to favour first time buyers and social tenants, so if an existing shared property owner wants to move to another shared ownership house, they may be at a disadvantage in terms of eligibility. All these issues, including details of relevant mortgage rates and mortgage fees, should be factored into consideration before considering a shared ownership mortgage, and a shared ownership mortgage calculator can be used to assess whether the borrower can afford to buy a property in this way, aside from other considerations.

Compare Shared Ownership Mortgages

Nevertheless, a shared ownership scheme may be the only option available for certain buyers: it still remains a popular and affordable product.  Those considering such a scheme can compare shared ownership mortgages online to source the best shared ownership mortgages offered by lenders.