Shared Ownership Mortgages

If you’re a first-time buyer and you’re saving for your first home, you’ll want to know how much deposit you’ll need to get together as early on in the process as possible.

Just to clarify – you’ll be classified as a first-time buyer if you’ve never owned a property, either freehold or leasehold in the UK or abroad.

In most cases, you’ll need to have a deposit of between 5% and 20% of the cost of your first home. The more you save, the less you’ll need to borrow. By having less to borrow, the greater access you’ll have to more mortgages with better rates as you’ll be a less risky investment for lenders.

The difference between the deposit you’ve saved and the first-time buyer mortgage you need is known as the loan to value (LTV) ratio – the higher your LTV, the higher the interest rate you’re likely to pay.

Remember there are other costs associated with buying a new home. You’ll need to pay solicitor’s fees, survey and search costs, mortgage arrangement and valuation fees, buildings insurance and removals costs. As a first-time buyer, you don’t have to pay Stamp Duty on the first £300,000 for homes worth up to £500,000.

There are many different Government-led schemes to help first time buyer get onto the property ladder. These include 95% mortgages, First Home Scheme, Shared Ownership and more. Be aware that schemes for England, Greater London, Wales and Scotland, and they all vary.

Buying your first home can be as nerve-wracking as it can be exciting, so talk to our team of expert mortgage advisers about your options and we’ll guide you through the process. Call us on 03454 500200 or click here to make an enquiry.

Staircasing is a unique feature of shared ownership schemes that allows you to gradually increase your ownership percentage in the property over time. With each step you take, you ascend towards greater homeownership, gaining more control and building further equity in your property.

Here’s how the staircasing process works:

1. Assess your eligibility: Typically, there are specific criteria set by the housing association or registered provider, such as a minimum period of ownership. It’s crucial to review the guidelines and ensure you meet the requirements to proceed.
2. Valuation and cost: The next step involves arranging for a valuation of your property. A professional valuer will assess the current market value of your home. Mind you, any improvements or changes you have made since originally purchasing the property will be taken into consideration. Based on the valuation, you will have a clear understanding of the cost involved in increasing your ownership share.
3. Finance your staircasing: To finance the increased share, you have several options. You can utilize your savings to fund the purchase, or you can explore mortgage options specifically designed for staircasing. These specialized mortgages allow you to borrow the necessary funds to buy the additional share.
4. Purchase the additional share: Once you have the necessary funds in place, you can proceed with purchasing the additional share. The housing association or registered provider will assist you in the legal process, ensuring a smooth transition and updating the relevant documentation to reflect your increased ownership stake.
5. Greater ownership benefits: With each step of staircasing, you gain more control and reap the benefits of increased homeownership. As your percentage of ownership increases, your mortgage repayments may decrease, and you build more equity in your property. Because of your increased ownership of the property, You will have more freedom to make modifications or improvements to your home.

It’s possible, but it will depend largely on how much of the property you own.

Here are some things to consider:

Right of first refusal

When selling a shared ownership property, the housing association or registered provider that owns the remaining share typically has the right of first refusal. This means they can purchase your share before it can be sold on the open market. They will assess their interest and evaluate whether they wish to acquire the share or have a suitable buyer in mind.

Consult contract terms

It’s crucial to review the terms and conditions outlined in your shared ownership agreement. This will provide insights into any specific requirements or restrictions regarding the sale of your property. Understanding these provisions will ensure a smoother process and avoid any surprises along the way.

Seek professional advice

Selling a shared ownership home involves navigating specific procedures and obligations. It’s advisable to seek guidance from professionals such as real estate agents and solicitors who specialise in shared ownership transactions. They can help you navigate the legal aspects, communicate with the housing association or registered provider, and ensure a seamless sale process.

If you want to be a homeowner but do not have much savings, a shared ownership mortgage could be a great option for you!

Still, there are factors you need to consider before jumping into the process. Remember, on top of a monthly mortgage payment, you’ll also have to pay rent. The rent is usually lower than traditional rent, but it’s still another expense you’ll need to be able to cover every month. You’ll also have to be able to afford leaseholder fees.

If you still think this process is right for you, call us and we’ll talk you through the process and offer you our best advice!

You can also check out this page to determine which mortgage would be the best option for you.

While you have the freedom to undertake certain home improvements, it’s important to consider specific guidelines and seek necessary permissions.

Here’s what you need to know:

Cosmetic changes

You are generally allowed to make cosmetic changes to your shared ownership home without seeking prior permission. This includes painting the walls, changing light fixtures, adding curtains or blinds, and decorating according to your personal taste. These changes allow you to create a space that reflects your style and preferences.

Structural and major modifications

For more significant alterations or structural changes, such as installing a new kitchen, bathroom, or extending the property, you may need to obtain permission from the housing association or registered provider that owns the remaining share. They will assess factors such as the impact on the property’s structure, compliance with building regulations, and overall aesthetics. It’s important to consult with them and obtain the necessary approvals before proceeding with such modifications.

Improvements and leasehold restrictions

Shared ownership properties are often leasehold, which means you may need to comply with leasehold restrictions and obtain the necessary approvals. These restrictions may include limitations on certain types of modifications or the need to seek consent from the freeholder or management company. It’s crucial to review your lease agreement and consult with the relevant parties to ensure compliance.

Adding value and equity

Making home improvements can add value to your shared ownership property and potentially increase your equity. By enhancing your home, you not only create a more enjoyable living environment but also increase its market appeal. This can be beneficial if you decide to sell in the future or if you plan to staircase (increase your ownership share) over time.

Seek professional advice

Before undertaking any home improvements, it’s recommended to seek professional advice from contractors, architects, or surveyors. They can provide guidance on the feasibility, costs, and necessary permissions for your desired improvements. They can also make sure that the work meets the required standards and regulations.

The ability to build an extension may be subject to certain considerations and restrictions. Shared ownership houses are typically owned by both the occupant (buyer) and a housing association or registered provider. As such, any modifications or alterations to the property must adhere to the terms and conditions outlined in the shared ownership agreement.

Before proceeding with any construction or extension plans, review the specific terms and restrictions set forth in the shared ownership agreement. These agreements vary from property to property and may include provisions that govern alterations or modifications to the house.

In many cases, you will need to seek permission from the housing association or registered provider before building an extension on a shared ownership house. They will evaluate the feasibility of the proposed extension, considering factors such as the impact on the property’s structure, aesthetics, and compliance with local planning regulations.

You may need to consider other aspects such as funding for the extension. Shared ownership properties typically involve a mortgage and a monthly rental payment to the housing association or registered provider. Before commencing any extension project, it is advisable to consult with your mortgage lender and discuss the financial implications of the proposed changes.

Shared ownership offers an affordable way for individuals to step onto the property ladder by purchasing a portion of a property and paying rent on the remaining share. However, buying a shared ownership house outright is indeed possible and is known as “staircasing.”

Staircasing allows shared ownership homeowners to gradually increase their ownership percentage in the property over time. By purchasing additional shares, you can eventually reach 100% ownership and own the property outright. This process provides you with the flexibility to increase your stake as and when your financial circumstances permit.

To initiate the staircasing process, you should refer to the terms and conditions outlined in your shared ownership agreement, which will provide specific instructions and requirements. It is essential to engage with the housing association or registered provider that oversees your shared ownership property to obtain the necessary guidance and support throughout the staircasing process.

The cost of purchasing additional shares will depend on the market value of the property at the time of staircasing. A qualified surveyor will assess the property’s current value to determine the price of the additional shares you wish to purchase. It is important to note that the market value can fluctuate, and you will need to arrange a valuation to determine the correct price.

As you progress towards full ownership, it is worth considering the financial implications and feasibility of buying the remaining shares outright. This may involve arranging a mortgage or using your own savings or funds to complete the purchase. It is recommended to consult with a mortgage advisor or financial professional who specializes in shared ownership transactions to explore the most suitable financing options for your specific circumstances.

Once you have acquired 100% ownership, you will no longer be required to pay rent on the remaining share. You will have complete control and responsibility for the property, including maintenance, repairs, and any associated costs.

Shared ownership properties are available across a wide range of locations in the UK, catering to individuals and families looking for affordable homeownership opportunities. These properties can include houses, flats, apartments, and sometimes even bungalows. They are typically offered by housing associations or registered providers who aim to support first-time buyers, key workers, and those with lower incomes to enter the property market.

The availability of shared ownership properties may vary depending on the region, local housing market conditions, and the specific housing associations or registered providers operating in the area. The types of properties on offer can also vary, with some areas having a greater selection of flats and apartments, while others may have a mix of flats and houses.

Shared ownership properties are usually new builds or resale properties, often forming part of larger developments. These developments may offer a range of amenities such as communal spaces, playgrounds, parking facilities, or nearby access to public transportation. It’s important to note that shared ownership properties are subject to eligibility criteria set by housing associations or registered providers.

The deposit required for a shared ownership mortgage may vary depending on several factors, including the specific mortgage lender and the value of the share you are purchasing. Generally, the deposit for a shared ownership mortgage is calculated based on a percentage of the share you wish to buy, rather than the full market value of the property.

Traditionally, shared ownership mortgages have required a deposit of at least 5% to 10% of the share being purchased. For example, if you are purchasing a 50% share of a property valued at £200,000, you would typically need a deposit ranging from £5,000 to £10,000 (5% to 10% of £100,000, representing your share).

All homes purchased through shared ownership in the UK are leasehold properties. But what exactly does “leasehold” mean?

In England and Wales, there are primarily two types of property ownership: freehold and leasehold. With shared ownership, you enter into a leasehold agreement, which is essentially a contract between the leaseholder (that’s you) and the freeholder or landlord. This agreement grants you the right to reside in the property for a specific number of years.

As a leaseholder, you have ownership of the property itself but not the building or the land it is situated on. These aspects are owned by the freeholder. Therefore, it’s necessary for leaseholders to pay rent to the freeholder for the use of the building or the land.

Owning a leasehold property under the shared ownership scheme allows you to enjoy the benefits of homeownership, such as building equity and personalizing your living space, while providing a more affordable and accessible route into the property market.

It’s important to note that as a leaseholder, you will have certain rights and responsibilities outlined in the lease agreement. These may include obligations such as paying service charges and ground rent, as well as abiding by specific rules and regulations set by the freeholder or management company.

Stamp Duty is a tax that may be applicable when buying a residential property or land in England or Northern Ireland, provided it exceeds a certain price threshold. In this case, the threshold for residential properties is £250,000. To be clear, this means if the property you plan to purchase is more than £250,000, you will have to pay Stamp Duty.

However, there are exceptions for first-time buyers. If you’re an eligible first-time buyer, the good news is that you won’t have to pay any Stamp Duty on properties priced up to £425,000. There is also a discount for properties priced between £425,000 and £625,000.

You can try our Stamp Duty Calculator to have a better idea of how much you will pay.

Properties located in Scotland and Wales are subject to different taxes. If you plan to secure a property in Scotland, you will have to pay a Land and Buildings Transaction Tax (LBTT). If you buy a property in Wales, the tax applicable will be the Land Transaction Tax (LTT).

If you are not a first-time buyer or if the property you are purchasing is not your main residence, you will be subject to different stamp duty rules and rates. If this is the case, we encourage you to speak to legal professionals or tax advisors who specialize in property transactions. They can help you to determine the specific stamp duty obligations for your circumstances.

There are two options available for individual’s seeking alternatives to shared ownership mortgages. These alternatives are specifically designed to assist individuals in different circumstances. Here are the options:

Help to Build: Equity Loan (in England, Scotland, and Wales):

Help to Build loans are aimed at those who want to build their own home or hire someone to build one. This initiative provides financial support to cover the cost of building a new home.

Under this scheme, the government provides an equity loan to help with the costs associated with the construction process. This loan is interest-free for a set period and aims to make self-building more accessible and affordable.

Help to Buy Loan (in Wales):

The Help to Buy Loan scheme is specifically available for first-time buyers in Wales who are purchasing a new-build home. This scheme offers a loan to help with the cost of buying a new property, making homeownership more achievable.

The loan provided by the government is interest-free for a specific period and will reduce the initial mortgage amount required. This loan is designed to help first-time buyers in stepping onto the property ladder.