Shared Ownership Mortgage

Getting a shared ownership mortgage is one of the ways in which people who are restricted financially can purchase a property. Buying any kind of property is a serious financial commitment to make for someone and it usually costs a six figure sum. With a standard mortgage, a lender will pay for the majority of a property's asking price and a smaller percentage will be left to the borrower to pay for it. The percentage that the borrower pays for is known as a mortgage deposit and a mortgage lender will usually require a borrower to pay them this mortgage deposit before they contribute their share of the money toward buying the property. By paying this mortgage deposit a lender is reducing the amount of risk they are exposed to because they are not putting up all of the money for a property.

It is also a way for a borrower to show a lender that they are financially stable enough to get the money together for a deposit. On average a deposit requirement is around 25% of a property's value, so if you are hoping to buy a £100,000 house you would have to give your prospective lender £25,000. For many people this amount of money is too much for them to save up and hand over in one lump sum. With the increasingly risk aversive attitude that has dominated banks and building societies, small deposits are becoming less common and bigger ones are becoming more common. As a result many people never have enough money to ever get a property and have to depend on their parents helping them.

How To Stop The Problem

Shared ownership mortgages was brought about to help deal with this problem. A shared ownership mortgage is one in which you are not the sole owner of a property. Instead you share it with a housing association that puts up some of the money toward a property. This means that the deposit requirements are spilt and are not so heavy for people. This often enables someone who did have the cash to buy a property to be able to do so.

The drawback of these shared ownership mortgages is that they mean that the individual opting to go for one is not going to get the benefits of full ownership. They are not given access to all of the equity of a house and instead are only given a percentage. This means that the housing association can do as they please with their equity and perhaps opt to take out an equity release scheme if they wanted.

This means that they sell off some of their equity of the house in return for money. Or they could just keep it to themselves until the house is sold. Either way as the individual on the other side of the deal, you will not see any money from the equity of the property which does not belong to you. So with a shared ownership mortgage, you will not make as much money as you would do with a full ownership mortgage when selling the property.

How Do I Get One?

For many people however a shared ownership mortgage is the only way they will ever be able to get a property. To find out what housing associations offer a shared ownership scheme go to your local authority and ask which housing associations nearest to you are willing to get into a shared ownership mortgage. You should be given a list of providers and once you have this list you can approach each one of these housing associations and see what the application process for a shared ownership mortgage is.

If you are a couple who wants to get a shared ownership mortgage you can get joint or shared agreement on it. This means that there will be three parties on the mortgage scheme, you, your partner and the housing association. This reduces the costs even more for you and your partner as individuals and means you have an even better chance of purchasing a good property with a shared ownership mortgage.

One of the best aspects of a shared ownership mortgage is that upon buying the property, you can buy back some of the shares of the property from the housing associations. If you buy all the shares back, the property will no longer be shared between you and your housing association and you would get full ownership. This helps those who would be able to build up the money to buy a property outright but cannot save up the large lump sum of capital it costs to one buy one all at once. If this is you, become a shared owner for a period of time until you have saved enough money to buy back the rest and be the full owner.