Shared Ownership | IMC Mortgage Brokers

What is a Shared Ownership Mortgage?

A shared ownership mortgage is a government scheme which is primarily focused on helping people to get onto the property ladder who may otherwise not be able to due to their income and savings in relation to property prices. Between 25% and 75% of a property is usually bought from a housing association or house builder, allowing you to take out a smaller mortgage, usually with a lower deposit and then paying rent on the remaining part.

A possible option for those people is a shared ownership scheme – whereby the `homeowner` part owns and part rents the property. This enables people to have lower mortgage repayments to make each month, albeit there is still the monthly rent to take into consideration, and over time allows you the option to buy off the `rented` part of the property if desired.

Shared ownership makes homeownership a possibility for many; there are many different types.

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Shared Ownership specialists

Becoming a homeowner is something that most people dream of, but unfortunately not all manage to see be a reality. For many people, perhaps especially those who are on a low income, getting the deposit and then be accepted for the mortgage that they need, can prove particularly difficult.

Can I remortgage a Shared Ownership property?

Yes, you can remortgage a Shared Ownership property – the mortgage is very similar to a conventional mortgage, but you were only being lent money against a percentage of the property rather than the whole property itself. So it’s only the portion of the property’s value that you can claim that you will be remortgaging against, but this should not prevent you from remortgaging if you want to switch to a more favourable deal on the loan, or take advantage of the increased value of your share of the property and release some of the equity.

The only difference between a shared ownership mortgage and a standard mortgage is that shared ownership mortgages are only available via selected lenders, so your options will inevitably be more limited from the start. It may be that you will not be able to access all shared ownership remortgage deals by yourself directly, as most specialist lenders only work through trusted intermediaries, so they know for sure that borrowers will be suitable for their products and vice versa.

You may also need to check with the housing association or other authorised body who you share the ownership with, depending on their criteria and rules. These may vary from one area to the next, so it’s worth checking your agreement.

As with any mortgage deal, the most suitable one for you will depend entirely on your individual circumstances. What might be the right terms for one borrower may be entirely wrong for another. Our expert mortgage advisers can help you find the right shared ownership remortgage deal from those available to suit your needs, and can guide you step-by-step through the process to making a successful application. The first consultation is free and comes with no obligation – contact one of our team today.

How are Shared Ownership mortgages different?

One of the main differences for those who take out a shared ownership mortgage is that the deposit required is only for the part that is to be borrowed – therefore, for example in a £200,000 property that you are looking for a 50% stake, a 10% deposit required would be £10,000. A `regular` 90% LTV mortgage to buy the property outright would be twice this amount at £20,000.

There are a number of criteria which must be met in order to qualify for a shared ownership mortgage, including maximum incomes, the fact that you should be a first time buyer or previous homeowner who cannot afford to buy now, or renting from a housing association or the council, or have a long term disability. Another stipulation is that you must live in the property and cannot rent it out either fully or partially.

A process known as `staircasing` is also a benefit of the shared ownership mortgage giving you the ability to purchase more of your home from the housing association or house builder as and when you are ready to and where your circumstances allow.

The other big difference between shared ownership schemes and other mortgages is in when you come to sell. If you have purchased the entire 100% of the property, you can sell it yourself. However, the housing association usually has the right of refusal for the first 21 years after you have bought your property. If you do not have the full ownership of your property, the housing association will have the right to find their own buyer initially.

How to find a Shared Ownership mortgage?

If you are thinking about applying for a shared ownership mortgage and fit the criteria, the best place to start is with an adviser who understands this market – such as our specialist shared ownership mortgage advisers here at IMC Mortgage Brokers. We can help you to understand your options, and find the right scheme for you.

Shared Ownership mortgage lenders

Shared ownership is a scheme whereby a potential homeowner will have the ability to purchase a share of a property (typically starting at a minimum of 25%) and then paying rent on the other part. Not all lenders offer funding for shared ownership and therefore if needing a mortgage to assist with the purchase of your share or possibly to remortgage you will need to ascertain who you may have available to you. As those that participate can vary it is difficult to provide an accurate list of such lenders and, as the pool of choice is limited with even some of the more recognised names not appearing, it is perhaps advisable to speak to a shared ownership mortgage specialist who should be best placed to assist.

Shared Ownership mortgage rates

For those that qualify and are looking to arrange a mortgage for their shared ownership property, finding the right mortgage scheme is an important element of the whole process. Shared ownership mortgage rates are offered by a select number of lenders in the market and are usually specific products priced differently to their standard mortgage ranges. As with all mortgages, the amount of your deposit available or the amount of equity you have in your shared ownership home (calculated as a percentage of the share you own) will determine which of the rates a lenders has on offer being available to you. When deciding on the most appropriate rate available to you, do ensure you still factor in other associated monthly costs such as any applicable rent payable in addition to the mortgage payment itself.

Shared Ownership mortgage broker

By taking advantage of these schemes, such as taking out a shared ownership mortgage, you can build towards owning your home in a manageable fashion. To be able to find a home in the area of your choice, the first step is to get in touch with a local agent to check both your eligibility and the availability of homes in the area.

Our brokers can then help you to get the right mortgage deal specifically for you, according to your unique situation. For more information about how our expert mortgage brokers can help you to get your shared ownership mortgage, get in touch with us today.

- How does shared ownership work when you sell?
If you look to sell your shared ownership property, the housing association has first refusal to buy the share of the property back. They will then see if they can sell your share to someone else on the waiting list. If this is not possible, you may then be able to market your property on the open market.
- Do I have to pay Stamp Duty If i buy a shared ownership Property?
Stamp Duty Land Tax (SDLT) is payable on property purchases over a certain value – currently £125,000 – in England and Northern Ireland. Different transaction taxes apply in Scotland and (after 1 April 2018) in Wales. If you purchase a property on a Shared Ownership basis from an approved qualifying body, such as a local authority or housing association, then you may have to pay Stamp Duty. The amount of Stamp Duty you owe is worked out each time you buy a share of the property.

When you buy property on a Shared Ownership basis, you can opt to either make a one-off Stamp Duty payment based on the total market value of the property (this is known as making a “market value election”), or you can pay any Stamp Duty due in stages. If you choose to pay in stages, you have to pay anything due on the first purchase of a property share, but don’t have to pay further Stamp Duty until you own more than an 80% share of the property. The government’s online guidance on Stamp Duty Land Tax provides more details.
- What type of shared ownership property can I buy?
The Shared Ownership scheme allows buyers to purchase shares of either new-build or existing properties, that are owned by an approved qualifying body. For the most part this means local authority and housing association homes, but it can also apply to properties owned by other bodies such as a housing action trust, a development corporation, the Northern Ireland Housing Executive, or the Commission for the New Towns. Shared Ownership properties are always leasehold.
- What is the minimum share I can purchase?
Under the Shared Ownership scheme, the minimum share of a property you can purchase from a housing association, local authority or other approved qualifying body is 25%.
- What is the maximum share I can purchase?
Under the government’s Shared Ownership scheme, the maximum share of a property you can purchase from a housing association, local authority or other approved qualifying body is 75%. If you want to own a share of more than 75%, you must buy the property outright.
- Can I purchase more shares at a later date?
Yes, you can buy extra shares in the property up to a maximum of 75% of the property value – this is known as “staircasing”. If you want to own a share of more than 75%, you must buy the property outright. Most housing association and local authorities require a minimum 25% share purchase when staircasing, although some may allow smaller purchases such as 20% or 10% shares.

Be aware that the cost of purchasing more shares in the property will be based on a new market valuation of the property at that date. That means it may cost more or less than you paid for your first share, depending on whether the property has increased or decreased in value.
- When can I buy more shares?
There are no time restrictions imposed by the government under the Shared Ownership scheme. However, individual housing associations or local authorities may impose time restrictions or other staircasing restrictions in their lease conditions.
- How is shared ownership rent calculated?
The exact rent calculation varies depending on the individual housing association or local authority, however it is in many cases based on a percentage of the retained equity – typically around 3%. For example, if you bought a 50% share of a £200,000 property the retained equity would be £100,000 – this is the share of the property on which you would pay rent. Assuming a typical rental calculation of 3%, the annual rent would be £3,000, which equals £250 per month.

If you look to sell your shared ownership property, the housing association has first refusal to buy the share of the property back. They will then see if they can sell your share to someone else on the waiting list. If this is not possible, you may then be able to market your property on the open market.

Stamp Duty Land Tax (SDLT) is payable on property purchases over a certain value – currently £125,000 – in England and Northern Ireland. Different transaction taxes apply in Scotland and (after 1 April 2018) in Wales. If you purchase a property on a Shared Ownership basis from an approved qualifying body, such as a local authority or housing association, then you may have to pay Stamp Duty. The amount of Stamp Duty you owe is worked out each time you buy a share of the property.

When you buy property on a Shared Ownership basis, you can opt to either make a one-off Stamp Duty payment based on the total market value of the property (this is known as making a “market value election”), or you can pay any Stamp Duty due in stages. If you choose to pay in stages, you have to pay anything due on the first purchase of a property share, but don’t have to pay further Stamp Duty until you own more than an 80% share of the property. The government’s online guidance on Stamp Duty Land Tax provides more details.

The Shared Ownership scheme allows buyers to purchase shares of either new-build or existing properties, that are owned by an approved qualifying body. For the most part this means local authority and housing association homes, but it can also apply to properties owned by other bodies such as a housing action trust, a development corporation, the Northern Ireland Housing Executive, or the Commission for the New Towns. Shared Ownership properties are always leasehold.

Under the Shared Ownership scheme, the minimum share of a property you can purchase from a housing association, local authority or other approved qualifying body is 25%.

Under the government’s Shared Ownership scheme, the maximum share of a property you can purchase from a housing association, local authority or other approved qualifying body is 75%. If you want to own a share of more than 75%, you must buy the property outright.

Yes, you can buy extra shares in the property up to a maximum of 75% of the property value – this is known as “staircasing”. If you want to own a share of more than 75%, you must buy the property outright. Most housing association and local authorities require a minimum 25% share purchase when staircasing, although some may allow smaller purchases such as 20% or 10% shares.

Be aware that the cost of purchasing more shares in the property will be based on a new market valuation of the property at that date. That means it may cost more or less than you paid for your first share, depending on whether the property has increased or decreased in value.

There are no time restrictions imposed by the government under the Shared Ownership scheme. However, individual housing associations or local authorities may impose time restrictions or other staircasing restrictions in their lease conditions.

The exact rent calculation varies depending on the individual housing association or local authority, however it is in many cases based on a percentage of the retained equity – typically around 3%. For example, if you bought a 50% share of a £200,000 property the retained equity would be £100,000 – this is the share of the property on which you would pay rent. Assuming a typical rental calculation of 3%, the annual rent would be £3,000, which equals £250 per month.

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