Shared Ownership mortgages – the best rates and lenders

Discover everything you need to know about shared ownership mortgages, including how you go about getting one
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  • To date, over one million people have made an enquiry on the Share to Buy website. Thousands of properties which can be purchased with Shared Ownership mortgages are currently listed on the site from the UK’s largest housing providers. With ever-increasing property prices in the UK- it’s hardly surprising.

    If you have looked into Help to Buy options and want to buy a percentage of a home, you’ll need to secure a Shared Ownership mortgage. Shared Ownership is a great scheme for those struggling to afford to buy on the open market due to lack of a deposit.

    ‘Saving up a 5 per cent deposit for a full 100 per cent of a house price can be too much for some people,’ says Nicola Schutrups, Managing Director at The Mortgage Hut.

    ‘But, if you’re buying 25 per cent share of a house, you only need five per cent of that 25 per cent to make up your deposit. So, it can be more like £2,000-£3,000 deposit, which is a much more achievable amount,’ Nicola says.

    Shared Ownership mortgages – the best rates and lenders

    Read on to find out what Shared Ownership Mortgages are, how they differ from other types of mortgages and where to find the best rates and deals.

    Image credit: Future PLC/ Robert Sanderson

    What is a Shared Ownership mortgage?

    It’s specifically designed for someone buying a Shared Ownership property. ‘A Shared Ownership mortgage differs to a residential mortgage as, instead of buying the whole property, you’re only buying a portion of the property,’ says Brian Murphy, Head of Lending at Mortgage Advice Bureau.

    ‘Therefore, you will only pay mortgage repayments on the share you own and will pay rent on the remaining part of the property to the housing association that owns the rest of the home.’

    Typically, buyers purchase between 25 per cent to 75 per cent of a property, and take out a Shared Ownership mortgage to cover this amount. The rules changed in April 2021, so the minimum share is now just 10 per cent. However, if you can buy a larger share it’s advisable to do so.

    How do I find the best Shared Ownership mortgage?

    It’s quite a specialist product which will have its adapted specialist rates and criteria. Therefore, not all mortgage lenders provide Shared Ownership mortgages.

    ‘You can try and find a mortgage yourself however, as Shared Ownership is a specialist scheme, I would recommend getting a mortgage broker who has experience in this particular product,’ says Chelsea Kennedy, Specialist Property Mortgage Advisor at Pure Property Finance.

    ‘They can liaise with the new-build site directly and assist with the housing association forms’ she says.

    You might also find that the housing provider you are buying through offers to help as well. ‘At St Arthur Homes we have financial experts to provide support and advice to our buyers. This ensures they understand the whole process and which mortgage product is best for their circumstances,’ says Louise Mills, Sales Marketing Director at St Arthur Homes.

    grey living rooom with window shutters colourful rug and grey sofa and armchairs around coffee table

    Image credit: Robert Sanderson

    How can I apply for a Shared Ownership mortgage?

    The application process is exactly like a standard mortgage application. ‘You’ll need to apply directly to your lender or via a mortgage broker,’ says Brian. ‘They’ll ask for detailed documentation such as proof of identity and income. Then, also evidence of your right to live in the UK, and details required for a credit check,’ he says.

    You will need to be able to prove that you can afford the deposit, too. You typically only need a deposit of five or ten per cent of the share that you are buying.

    So, if your share was worth £40,000, you’d only need to put down between £2,000 and £4,000.

    What is a Shared Ownership Leasehold?

    The leasehold agreement will need to be considered too. ‘Your lease sets out everything, for instance, the amount of share you’ve bought, how long you can keep the house for (usually 125 years), how much your monthly rental payments are, as well as your responsibilities while living there,’ says Brian. ‘Make sure you take the time to thoroughly read the lease and ask your solicitor any questions you have,’ he says.

    What costs need to be considered?

    ‘You’re actually buying only part of a house. Although, you’ll still have all the associated costs that come with buying a property,’ says Brian. ‘This includes mortgage arrangement fees, survey costs, and charges from your solicitor.’

    What are the best mortgage comparison websites?

    Some of the online mortgage finder tools you can use to find the best lender to suit your needs are:

    ‘There are a few comparison sites out there. But, they aren’t always the best route to use as there are several different factors to consider when looking at affordability,’ says Nicola.

    Shared ownership house in kent 3d render

    Image credit: West Kent Housing Association

    ‘You’ve got the price of the full property, then you’ve got the price of the share that you’re buying, which then works out how much rent is left on the remaining share.

    There will also be a service charge added to the ground rent. It’s quite a complicated calculation compared to a regular mortgage, where affordability is based on just roughly four-and-a-half times your annual income.’

    Where do I find the best rates and deals?

    Not all mortgage providers offer Shared Ownership mortgages. So, you will need to do your research and shop around for the best deal.

    ‘Speaking to a mortgage adviser will help you identify potential lenders that would suit your circumstances,’ says Brian. Nicola agrees: ‘They’ll have access to a wider range of lenders and rates to help find the best deal for you,’ she says.

     

    *Ideal Home and Go Compare are part of Future plc.

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