SHARED OWNERSHIP MORTGAGE

If you would like to own your own home, but cannot afford to buy on the open market and cannot or do not want to own your home with other individuals then shared ownership mortgages could be worth looking at.

You will have sole occupancy and will not have to share your home with anyone else.

Shared ownership means you buy a share of a property, say 50%, from an organisation such as a Housing Association and the association retains the rest of the ownership of the property, in this case the other 50%. As part of the deal you will have to pay rent to the Housing Association for the part of the property that it still owns.

If you take out a mortgage to purchase all or part of your share of the property then you will also have monthly mortgage repayments to take care of.

If for instance as in the example above you bought a 50% share in a flat with a purchase price of £100,000 then you would own half of the property valued at £50,000. If you put down a deposit of £10,000 then you would need a mortgage of £40,000 to complete the purchase.

Then each month you would have to pay rent on half of the property to the association plus make a repayment to your mortgage lender on the £40,000 you borrowed.

As time goes by and you find you have more money you can purchase additional shares to increase your ownership of the property. The price you pay for each share will depend on the property’s market value at the time of each purchase. You can continue to do this until you own you home outright and no longer have to pay rent.

The organisations that are allowed to participate in these ‘part buy part rent’ schemes must be a Registered Social Landlord (RSL) and in most cases will be a Housing Association.

Before you can apply for a shared ownership mortgage you must get basic approval from the association so that they can make sure you fit their selection criteria.

Remember shared ownership can really help you as it is a low cost way to own your home and will help you get on the property ladder now instead of much later. Your share of the property can be 25%, 50% or 75% with a mortgage and it is a very cost effective method of owning part of a house, flat, apartment or bungalow. With the credit crunch biting and property prices still high this could be your best way to start in property ownership.