Purchasing a home is never easy, but with shared ownership mortgages, obtaining a home loan may be more reasonable. Shared Ownership is mostly for persons who want to own a home but cannot afford to buy on the open market. Thus, many lenders in the UK provide Shared Ownership mortgages to consumers seeking a more affordable method to get on the property ladder.
On the other hand, if you are one of the clients who is having difficulty obtaining shared ownership mortgages due to bad credit history, this post is for you. This post will teach you everything you need to know about shared ownership mortgages and the major lenders in the UK.
What is a Shared Ownership Mortgage
A mortgage is a sort of shared ownership. It differs from a residential mortgage in that you purchase a share rather than the entire property. You’ll pay a mortgage on your portion and rent on the remainder.
Saving for a large deposit can be difficult if you are a first-time buyer. This is when a shared ownership mortgage can come in handy. Housing associations provide this shared ownership, which is also known as ‘part-buy, part rent’ mortgages.
Furthermore, the shared ownership mortgage may allow you to own between 25% and 75% of a property with a housing association while paying rent on the remainder. To begin, all you need is a 5% deposit on the portion of the home you’re purchasing.
If you’re buying a house through a shared ownership arrangement, you’ll need a shared ownership mortgage. The scheme assists first-time purchasers or individuals with lower earnings in owning a home (or moving up the property ladder) by purchasing a portion of a property rather than the entire property. A shared ownership mortgage requires only a minimal investment, and buyers can raise their stake in the property over time.
Understanding How Shared Ownership Mortgages Work
If you’re unable to save a large enough deposit to get on the housing ladder, or if the numbers simply don’t match up when it comes to what you can afford, a clear grasp of how joint ownership mortgages could be a solution for you is essential. It provides an inexpensive method for first-time purchasers like you to purchase a property, which is why the scheme is also known as ‘part-rent, part-buy.’
Traditionally, buyers might purchase between 25% and 75% of a property, using a shared ownership mortgage to cover the difference. However, after regulatory changes to shared ownership in April 2021, the minimum share you can own is now only 10%. Although, if you can afford it, you will normally be encouraged to purchase a larger stake.
A housing association owns the remaining share of the property (which the buyer does not own). The housing association is then given rent to pay this sum. Rental rates are typically cheaper than the open market, averaging roughly 2.75 % of the property value per year.
To illustrate. If you buy 25% of a £200,000 house, it will cost you £50,000, and you will take out a mortgage on that amount. The remaining £150,000 would be owned by the housing association and would be rented out. At a 2.75 % interest rate, the rent would be £4,125 per year or £343.75 per month.
A deposit of as little as 5% or 10% of the share you’re purchasing is commonly required to obtain a shared ownership mortgage. So, if your stake is worth £50,000, you just need to pay down £2,500 to £5,000.
Shared Ownership Mortgages Bad Credit
It is difficult to buy a home in the UK, especially if you have a bad credit history or have declared bankruptcy in the past. Lenders are usually hesitant to lend to such customers because such circumstances pose a high risk to them.
Since most people are burdened by debts or have a bad credit history, the government recognized this issue and devised numerous plans to help them. Shared Ownership is one of these schemes.
People with bad credit can now make a small deposit in shared ownership mortgages, and those who cannot afford a large mortgage loan for a single house can get a mortgage loan for one share. This percentage is typically one-quarter, one-half, or three-quarters. The government housing institutes control the remaining stake. The consumer who takes out the loan subsequently pays rent to the government housing institutions on the shares that he or she does not own.
Furthermore, if you started with a 25% stake in the property and your financial situation improves, you can expand your stake to up to 50%, 70%, or even 100%, which means you can become the only owner of the property. The greater your stake in the property, the less you will have to pay in rent to government housing organizations.
The above-mentioned scheme is available for people in the UK who are purchasing property for the first time in their lives. Secondly, for people who previously owned property but do not own one now or cannot afford to buy right away. Finally, those who have already taken advantage of the government scheme of shared ownership and want to take advantage of another, or who earn less than £80,000 per year.
Can I Obtain Shared Ownership Mortgages with Bad Credit Score
People with a bad credit score frequently ask if they can obtain a shared ownership mortgage. True, terrible credit history does not imply a good reputation, but keep your hope intact. If you fall into this category, you’re in luck since we’ll examine shared ownership mortgage lenders in the UK later in this post.
Unfortunately, people with bad credit may have a more difficult time qualifying for shared ownership mortgages system. It’s just that lenders are wary of doing business with persons who have previously had debts, filed for bankruptcy, or have a poor credit history.
They are only concerned about the consumer’s ability to make timely payments. However, those with a poor credit history should not lose hope from applying for joint ownership mortgages. The chances are, lenders may need you to submit a larger deposit of up to 15% of the entire loan amount, or you may be required to make payments at a higher interest rate.
All you have to worry about now is proving to the lender or government entity offering the shared ownership scheme that you can afford the mortgage payments and that what happened with your credit standing in the past will not happen again in the future.
Additionally, it is preferable to obtain a comprehensive image of your credit score before applying for any mortgage loan. You should also keep an up-to-date copy of your credit report on hand to present to the lender.
You can also seek help from mortgage brokers, who can advise you on how to improve on your bad credit score and obtain a shared ownership mortgage. They would assist you in improving your credit standing and determining how to approach lenders who will give you simple home loan policies. Instead of offering expert guidance, they will charge you a small price, which you should be able to afford.
Shared Ownership Mortgages Lenders
Customers seeking a more reasonable method to get on the property ladder can find Shared Ownership mortgages from a variety of lenders. Many first-time buyers want to learn more about taking out a mortgage in order to share ownership of a home.
So, when it comes to determining which Shared Ownership mortgage lenders are the best to work with, the answer will depend on your specific needs and circumstances.
However, spending the time to become fully informed by consulting with a whole market broker will ensure that you have all of your bases covered when it comes to mortgage provider due diligence.
In the next part, we’ll provide you with a quick rundown of some of the most popular Shared Ownership lenders in the UK, along with the current terms of their mortgages. Before that, let’s quickly see the requirements of these mortgage lenders
Most lenders offering joint ownership mortgages will only approve a loan if you match the following requirements:
- Annual household income is less than £90,000.
- You are a first-time home purchaser.
- You’re having trouble locating a property to purchase on the open market.
In most cases, you’ll just need to purchase a quarter of the property. You can buy up to around 75% of the value of the property. Several lenders simply ask for a 5% deposit, while others would accept 0%. If and when the property becomes more affordable, you can purchase additional shares. “Staircasing” is the term for this procedure.
What lenders in the UK provide Shared Ownership mortgages?
Joint Ownership mortgages are available from mainstream institutions/lenders such as Barclays, Halifax, Lloyds TSB, and Santander. They are also available from some speciality lenders, as well as building societies and other forms of mortgage providers.
#1. Santander Mortgages
Santander provides Joint Ownership mortgages and has even released a typical new company range for prospective customers.
Furthermore, the scheme lenders with whom they engage are limited to those who are registered with the authorities indicated below:
- Scottish Housing Regulator
- In England, the Homes and Communities Agency
- The Welsh Assembly
- Northern Ireland Housing Executive
- Northern Ireland Co-Ownership Housing Association
If you take out a Shared Ownership mortgage with Santander, you won’t be able to get a loan for anything else until you own 100 % of the property.
#2. Halifax Mortgages
Halifax is one of the lenders offering a variety of government-backed mortgages, including Shared Ownership mortgages, which are frequently issued by registered social landlords or local governments. It does provide shared mortgage solutions for as little as 25% of the home’s worth, and you may amend the arrangement to buy more shares in the house later if you wish.
By consulting with a professional advisor, you can rapidly compare their rates to those given throughout the whole mortgage market.
#3. Lloyds Mortgages
Lloyds Bank provides Shared Ownership mortgages in collaboration with scheme lenders in the UK such as social landlords and local governments. With Lloyd’s bank mortgage, you can increase your mortgage by increasing the proportion of the property you want to buy. However, you will need to take out a first minimum mortgage of approximately 25% of the property worth.
#4. Barclays Mortgages
Barclays is among the UK lenders that provide Shared Ownership mortgages to first-time buyers. To be eligible, your combined income must be less than £80,000 if you reside outside of London. If you live in London it’d be less than £90,000
As with other mortgage products, there are a variety of eligibility requirements and limits for applicants, which vary from lender to lender. Speaking with a mortgage broker about Shared Ownership mortgages who can connect you with suitable lenders will save you time, trouble, and perhaps bad credit.
#5. Nationwide Mortgages
The nationwide UK offers Shared Ownership mortgages, which you can apply for in-branch, over the phone, or online. However, applying through a whole-of-market broker is recommended because they may be able to negotiate a better deal for you. Also, they can recommend an alternative lender who is a better fit for your needs and circumstances. Exclusive rates that are not available by going direct are frequently offered to the most expert brokers.
Before pursuing that application, it’s always a good idea to compare interest rates and terms and conditions with the rest of the market by chatting with an expert advisor.
#6. Leeds Building Society
Joint Ownership mortgages are also available from Leeds Building Society, and you can apply online or over the phone. Their online mortgage calculator will assist you in making the first selection.
Speak to a professional mortgage broker to find out which authorities or landlords the Leeds
Building Society Shared Ownership mortgage works with. They can show you how their rates and selection of partners compare to the wider market.
#7. HSBC Mortgage
With an HSBC Shared Ownership mortgage, you can purchase a portion of a house and pay a lower rent to a certified social landlord or local authority for the remainder.
To be eligible for HSBC shared mortgages, you must meet the following requirements:
- Be a first-time purchaser.
- Make plans to reside on the land.
- Have the right to dwell permanently in the UK,
- Plus no intention to rent out any parts of the property.
You may wish to speak with an expert advisor for more information on the HSBC criteria and how they compare to other lenders in the UK that offer Shared Ownership mortgages.
In addition to the Shared Ownership mortgages and lenders listed above, there are other ones in the UK we think you should know about to help you decide which one is the best fit for your needs and circumstances:
- Ulster Bank
- The Clydesdale Bank
- Newbury
- The Danske Bank
- Chelsea
- Yorkshire
- Kent Dependence
- Metro Finance
- Tesco, etc.
Shared Ownership Application
The application process for a Shared Ownership mortgage does not have to be difficult. You’ll know which suppliers are willing to provide you with a fair deal if you get expert assistance, and you’ll know you’re making a safe bet when it comes to getting a mortgage.
Enquire for more information about Shared Ownership mortgages and the lenders who provide them, and of course, a broker who would assist you.
What is the minimum salary for shared ownership?
The following are the general requirements for Shared Ownership: You must be over the age of 18. Your annual household income must be less than £80,000 outside of London. Your annual household income must be less than £90,000 in order to live in London.
Is it difficult to obtain a mortgage for shared ownership?
Yes, even if you have bad credit, you can receive a Shared Ownership mortgage. It will be more challenging than if you had excellent credit, but it is certainly doable. You’ll need to find a specialized mortgage lender who is willing to work with you.
Are mortgage rates higher in the case of co-ownership?
Fewer mortgage lenders will lend on residences with shared ownership. As a result, you’ll have fewer options and may end up spending more on interest and fees. It may take longer to sell a joint ownership property.
Can my boyfriend live with me in shared ownership?
Shared ownership properties don’t necessary have so many more restrictions than normal mortgages or lease agreements. Yes but you must ensure you inform your local council if you want your partner to be liable for the council tax and you must also inform your shared ownership provider
