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.
This will depend on your situation. With house prices rising in general, especially in London and the South East, the government created the scheme to help people in some specific circumstances to buy a home:
- First-time buyers
- People who have an existing mortgage under the Shared Ownership scheme, and who wish to move
- People who have previously owned a property, but do not own one now, who cannot afford to take on a full mortgage outright
- People who have less than £80,000 (£90,000 in London) coming into the household as a combined annual income (regardless of whether they fit into one of the above categories)
If you meet one or more of the above criteria, then you should be eligible for a Shared Ownership Mortgage. The percentage, or share, of the property you are able to buy will be 25%, 50% or 75%, with the balance being co-owned by the local housing association. You should bear in mind that, as well as paying the instalments on the mortgage, you will also need to be able to afford to pay rent on the shared portion of your home.
The Shared Ownership scheme is a useful way to get your first foot on the property ladder. If you want to find a new mortgage that will grant you a stake in your home, then it is worth talking to our team, who will be able to go over all your options and show if Shared Ownership is the right way to go for you.
“I have a bad credit history. Do I still qualify?”
Customers with bad credit ratings can sometimes find it difficult to secure a Shared Ownership mortgage. Negative items in your credit history, such as missed credit card or loan repayments, County Court Judgments (CCJs) or a previous bankruptcy can raise red flags for many lenders, and certainly those on the high street. Any mention of a serious issue in the past can mean some lenders might see your involvement in a shared ownership mortgage as more of a risk than they are willing to accept.
Having said that, while having one or more adverse credit events in your financial history might rule out some mortgage options and restrict your choice of lender, you are not necessarily facing a brick wall. Over the last few years, the previous tightening of the financial industry has eased somewhat and, with more new ‘specialist’ lenders entering the market – often catering to demands or needs that mainstream lenders avoid or overlook – there will be products available to help you obtain a Shared Ownership mortgage and stay on the property ladder.
The upshot is that people who might have been turned down for a mortgage a few years ago could now be in a far better position to secure one. To find out what options could be open to you with the bad credit items on your record, you will need to talk over your situation and your aims with an expert specialist mortgage broker. They’ll be able to show you which lenders will be willing to grant a loan, what their criteria will be, and together you can map out the route to Shared Ownership on a property.
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 might appear to be an uphill struggle, but when you know how to approach it, it needn’t be a difficult task. At Just Mortgage Brokers, we focus on finding ways to make applying for a mortgage much easier for you – the advisers in our specialist bad credit team understand the market inside out and know exactly which lenders to turn to find the right deals to suit both your financial needs and your credit rating.
With access to over 12,000 mortgage products, including exclusive deals and rates you won’t find available on the high street, we’ll be able to identify the right mortgage deal for you, regardless of your credit history and score. Furthermore, to give you the best chance of securing a Shared Ownership mortgage, we can help you to frame your mortgage application in the most favourable light, and provide you with additional personalised specialist mortgage advice that relates directly to your circumstances.
We’ve had years of experience working with a wide range of people, including first time buyers, and recognise that a Shared Ownership mortgage can be the best option for people with limited funds plus the additional burden of a bad credit rating. The world of mortgages, while still having its rules, is far more dynamic than it once was, and recognises that people and their fortunes change over time. Just because you’ve suffered from financial problems in the past, it doesn’t mean that you should be labelled as such forever.
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.
Remember that when taking out a Shared Ownership mortgage, you will own only the portion of the property that you agreed with the Housing Association – be that 25%, 50% or 75% – and you will be required to pay rent on the remaining share. You will need to allow for this in your household budgets, and make sure that you are able to keep up with both payments. You might also need to seek their approval for any changes or improvements you want to make to the property.
You should be able to have the choice at a later date to increase the percentage share that you own of the property, if your finances allow, and take on new chunks. Through a process called ‘staircasing’, you can jump from 25% to 50%, 50% to 75%, and sometimes 75% to 100%, if the particular Housing Association’s policies permit it.
Another thing to bear in mind is that, if you decide to move house and sell your share of the property, the Housing Association will have first refusal. Even if you achieve 100% ownership, they must still be given the first option to buy it back if your sale takes place within 21 years of you buying your home.
With these added complications, it’s advisable to take expert professional advice before embarking on the process towards a Shared Ownership mortgage, with or without a poor credit record, so you can be sure it’s the right route for you to go down. At Just Mortgage Brokers, our team of advisers has the advantage of many years of handling enquiries and mortgage applications for a huge range of people, in just about every state of finances you can imagine. Get in touch for a free, no-obligation initial discussion, and we’ll give you a clear picture of all your options going forward.