Shared Ownership mortgage (3 point guide)

People who cant afford for an outright mortgage on a property can opt to buy a proportion(25%- 75%) of the property through a shared ownership mortgage and pay rent on the remaining to the housing association or property developer who owns the building.

To be eligible for a shared ownership mortgage you will need to be eligible for the shared ownership scheme.

In most cases, after you have lived in the home for a minimum period of time (as stated in your agreement) you can then purchase more shares of the property(usually in 10% increments) using a shared ownership mortgage or staircasing mortgage.

This will allow you to own more of the property and pay less rent consequently.

The process of increasing your ownership in a shared ownership property is called “staircasing” and is usually only allowed 3 times on a shared ownership property.

It’s always a good idea to consult legal assistance before attempting to staircase so you fully understand your rights and can plan acordingly.

When you buy a shared ownership property initially you will need a shared ownership mortgage for the proportion of the property you buy.

In most cases You will need a 5% mortgage deposit rather than the 20% required for typical mortgages.

As shared ownership mortgages are a bit of a speciality you should use a mortgage broker with some idea and experience of processing shared ownership mortgages.

Staircasing will usually depend on the lease agreement you have with your property developer or housing association.

A staircase mortgage is the mortgage you take when you want to buy more of your property after your initial shared ownership mortgage.

• Shared owners may purchase the entire property with a maximum of 4 steps including the initial purchase. This means you can only staircase on a maximum of 3 occasions to acquire the whole property.

• The valuation carried out on a property will be valid for 3 months and must be carried out by a RICS(Royal Institute of Chartered Surveyors) personnel approved by the property developer or housing association. The report must also be accompanied by two comparable property valuations.

• Any additional equity purchase must be at the current market value of the property when purchased.

• The shared owner must pay any rent or service charge owed during and up until completion of the staircase.

• The valuation costs, legal fees and any mortgage fees including those brought about as a result of the developer or housing association disputing the valuation report will be the responsibility of the shared owner.

• The conditions surrounding the staircasing will depend on the terms of the lease.

• The leaseholder is required to buy a further share of a minimum of 10% and in multiples of at least 5% above this percentage except in the third and final share which would take the shared owner’s equity up to 100%.

Staircasing allows first-time buyers to get on the property ladder and then purchase their home in increments as their income rises.

The rent being paid whilst on a shared ownership is subsidised(& much lower than rental rates) and therefore creates an interesting alternative in comparison to just renting outright.

• Shared ownership allows you to become a 100% owner there allowing you to benefit on any house price increases.

• By staircasing you reduce the amount of rent you have to pay.

• If you own your property outright you can sell your property at any time and to anyone rather to those who need to be approved and registered for the scheme.

• If you sell your home you will get to take a higher proportion of any increase in its value

How do I get an application form?

Your landlord will send you the application form which you will fill and return to them.

Pay the valuation fee after which your landlord will send a RICS surveyor to your home to inspect the property and provide a valuation with comparable properties.(valuation lasts for 3 months)

Once the purchase is complete your landlord will send you your new costs

What happens to my current mortgage?

If you have a current mortgage you can simply ask for a further advance or you can get a new mortgage with a new a remortgage.

Yes, a solicitor will be needed to assess your new lease.

Will home improvements made to my home by me increase the valuation when I staircase?

Any improvements you make will not be taken into account for the valuation.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.You can also contact the debt charity “Step Change” if you are in debt and need help.