Shared Ownership Scheme
Getting a foot on the UK property ladder can be a challenge; following the banking crisis, lenders became much less likely to offer mortgage deals unless people met quite strict criteria.
The government recognised the difficulties people were facing and introduced a range of schemes aimed at alleviating the problem. There has however been one scheme that has been in existence for some time being Shared Ownership.
The Shared Ownership scheme enables people who may not be able to afford a mortgage big enough to buy an entire property, or have a suitable sized deposit, to purchase a share in one. The share is generally one quarter, one half, or three-quarters, and the balance is owned by a government-backed housing association. The homeowner then pays rent to the housing association for the share they have not purchased.
If you start out with a 25% share and your circumstances change, meaning you can afford a bigger mortgage, then you can increase your stake at a later date to 50% or 75% or with some schemes up to 100% for full ownership. The rent paid will decrease in line with the reduced amount of the property owned by the housing association.
The scheme has been created to help a quite specific range of people. They are:
- first-time buyers
- people who have previously owned a property but do not own one now, and who can not currently afford to buy one outright
- people who have an existing mortgage under the Shared Ownership scheme and who wish to move
- people who have less than £80,000 per annum (£90,000 in London) coming into the household (regardless of which of the above categories they fit into)
I have a bad credit history; do I still qualify?
For customers with bad credit ratings, it can be difficult to secure a shared ownership mortgage. Having negative items, for example missed credit card or loan repayments, County Court Judgments (CCJs) or a previous bankruptcy, on record in your credit history can mean that lenders may see your involvement in a shared ownership mortgage as more of a risk than they are willing to accept.
Having said that, while it might rule out some options and restrict your choice of lender, it is not necessarily a brick wall. The financial situation is easing a little, and people who might have been turned down for a mortgage just a few years ago could now be in a better position to secure one.
With an good credit history, you will generally only need a small deposit for a shared ownership mortgage – typically 5% – although mortgages with no deposit are also sometimes a possibility.
With a recent history of bad credit, or with more serious adverse credit events such as a previous property repossession or a bankruptcy on your record, you might be asked to put down a deposit of 15%, perhaps more. You are also likely to be charged a higher rate of interest on the loan.
However, this should be balanced against the fact that in your current financial situation, a shared ownership mortgage may be the best way, and possibly the only way, to become a home-owner.
The most important thing is the need to be able to prove you can afford the mortgage and rent on the property.
To get an idea of where you stand – and to make sure the details on your credit record are correct – it is a good idea to get a copy of your credit report from each of the UK’s credit reference agencies, Experian, Equifax and Callcredit. If anything is incorrect, get it adjusted before you start to look for a mortgage, to improve your chances.
Obtaining a shared ownership mortgage with bad credit needn’t be a difficult task. At Just Mortgage Brokers, we have a specialist bad credit team that understands the market inside out and knows exactly where to turn to find the best deals to suit your financial needs. With unlimited access to the market and exclusive rates that are not available on the high street, we can help you find the right mortgage deal for you, regardless of your credit history and score. We can also help you with your mortgage application and provide you with personalised specialist mortgage advice.
We work with a range of people, including first time buyers, and recognise that a shared ownership mortgage may be the best option for people with limited funds plus a bad credit rating. So if you have a history of bad credit and are looking to obtain a shared ownership mortgage, speak to Just Mortgage Brokers today for free initial advice and no-obligation quotes from our team of experienced bad credit brokers.