Shared Ownership Mortgage Brokers | IMC Mortgage Brokers

What is a shared ownership mortgage?

A shared ownership mortgage is a government scheme that primarily focuses on helping people to get onto the property ladder.

With a shared ownership mortgage, typically between 25% and 75% of a property is bought from a housing association or housebuilder. This allows you to take out a smaller mortgage, usually with a lower deposit. You will then pay rent on the remaining part you do not own.

Over time, you have the option to buy the rented part and own a larger portion of the property.

Couple showing off the key to their new shared ownership home

Shared ownership makes homeownership a possibility for many; there are many different types.

Staircasing Mortgages

Right to Acquire Mortgages

Criteria for a shared ownership mortgage

In order to qualify for a shared ownership property, there are certain criteria that will need to be met. Below, we have highlighted requirements that must be met and some factors that will strongly help your chances of success.

Requirements

Your annual household income must be below £80,000 in England, or £90,000 if you live in London.
You can’t afford all of the deposit and mortgage payments for a home that meets your needs.
You must not own another home and if you do, you must be in the process of selling it.
You must be a first-time buyer or have previously owned a home, but can no longer afford one.

Supporting factors

Having a good credit score will show lenders that you are a less risky borrower.
Providing a larger-than-average deposit is another way to show lenders you aren’t a risky borrower, as the loan-to-value ratio will be lower.
Ensuring the amount you want to borrow is in accordance with your income will also show lenders that you can comfortably afford mortgage payments, again, mitigating risk.

At IMC Mortgage Brokers we are experts in assessing these factors to find you the most competitive and suitable product for your needs.

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Applying to the shared ownership scheme

Before exploring your mortgage options, you will first need to contact the relevant housing association and find out if the scheme is available and if you’re eligible. If it is available and you meet the requirements, you can then register for the shared ownership scheme in your area.

To register for the scheme, you can visit the Government website’s shared ownership section. If you live in London and are interested then you can visit the Home for Londoners section on the London Government website.

Applying for a shared ownership mortgage

Now you are registered, you can begin to look for homes offered by your chosen housing association. You may already have a property in mind that you discovered when you first contacted your chosen housing association about the scheme.

Once you have found a property, you can then start to assess your mortgage options. As there are only a select number of shared ownership mortgage lenders, it can be hard to do it on your own.

Instead, you may want to consult the support of a mortgage broker for your shared ownership needs, as they will know what lenders offer these mortgages. On top of this, they will be able to hand-pick lenders from this list who are suited to your circumstances.

Once you have found a suitable lender, you can begin to start the application process. Again, a mortgage broker will be able to support you every step of the journey.

What documents do you need to apply?

The most common documents you will need to provide to a lender can include but are not limited to:

Personal Information:

Proof of identity – usually a passport or driving licence.
Proof of address – some form of utility bill or council tax letter dated within the past 3 months.

Financial Information:

Bank statements to prove your deposit and your income
Proof of income (payslips or self-employment accounts)
Proof of state benefits (if applicable)

How are shared ownership mortgages different?

One of the main differences for those who take out a shared ownership mortgage is that the deposit required is only for the part that is to be borrowed.

For example, in a £200,000 property that you are looking for a 50% stake in, a 10% deposit required would be £10,000.

A `regular` 90% LTV mortgage to buy the property outright would be twice this amount at £20,000.

Another big difference between shared ownership schemes and other mortgages comes when you come to sell. If you have purchased the entire 100% of the property, you can sell it yourself.

However, the housing association usually has the right of refusal for the first 21 years after you have bought your property. If you don’t have full ownership of your property, the housing association will have the right to find their own buyer initially.

Person shaking hands after remortgaging their shared ownership property

Can I remortgage a shared ownership property?

Yes, you can remortgage a shared ownership property – the mortgage is very similar to a conventional mortgage. However, you will only be lent money against a percentage of the property rather than the whole property itself.

So, you can only remortgage against the share of the property you own. But this should not prevent you from remortgaging if you want to switch to a more favourable deal on the loan.

The only difference between a shared ownership mortgage and a standard mortgage is that shared ownership mortgages are only available via selected lenders. Therefore, your options will inevitably be more limited from the start.

It may be that you will not be able to access all shared ownership remortgage deals by yourself directly, as most specialist lenders only work through trusted intermediaries, so they know for sure that borrowers will be suitable for their products.

You may also need to check with the housing association or other authorised body with whom you share the ownership to see if you can remortgage. This will depend on their criteria and rules. These may vary from one area to the next, so checking your agreement is key.

What shared ownership mortgage rates are available?

As shared ownership mortgages are offered by a select number of lenders in the market, there are usually specific products priced differently from their standard mortgage products, although you don’t need to worry. These products will not be expensive or different to standard products.

As with all mortgages, the amount of your deposit available or the amount of equity you have in your shared ownership home (calculated as a percentage of the share you own) will determine which of the rates a lender has on offer are available to you.

On top of this, having a good credit score will also improve your chances of being offered a more competitive rate. This is because a lender will be taking on less risk, compared to if they were lending to someone with bad credit.

- How does shared ownership work when you sell?
If you look to sell your shared ownership property, the housing association has first refusal to buy the share of the property back.

They will then see if they can sell your share to someone else on the waiting list. If this is not possible, you may then be able to market your property on the open market.
- Can I get a shared ownership mortgage with bad credit?
People with bad credit might find it difficult to get a shared ownership mortgage. Mainstream lenders may be less willing to accept them due to negative credit history.

However, specialist lenders do offer options for those with bad credit. These lenders don’t always make themselves easily accessible to the general public, therefore it’s likely you will need to access them through a mortgage broker.

A couple of top tips to improve your chances of success if you have bad credit are:
- Provide a larger deposit. Something closer to 10-15% of your share is a good amount.
- Fixing your current credit will show a lender that you are now able to better manage your finances.
- Consult an expert mortgage broker, like us! Brokers will understand the nuances around these mortgages and know how to pair you with the most suitable lender for the best chance of success.
BAD CREDIT MORTGAGES
- Can I get a shared ownership Right to Buy mortgage?
Yes, this is possible. Under this initiative, tenants of new housing association properties will automatically have the right to purchase a share, even as small as 10%. This allows them to start on the property ladder and gradually increase their ownership over time.

The government aims to work with housing associations to expand this scheme to include existing tenants as well. This would enable more people to invest in their own homes.

You can apply to buy a share of your home if:
- it’s eligible for the Right to Shared Ownership scheme – you will need to check this with your landlord
- it’s your only or main residence
- you’ve lived there for a minimum of 1 year
- you’ve been a tenant of social or affordable housing for at least 3 years – you’ll need to check with your current or previous landlords if you’re not sure
- Do I pay stamp duty on a shared ownership property?
Stamp Duty Land Tax (SDLT) is a tax imposed on property purchases.

When you buy a share in a Shared Ownership property, there are two options you can choose in order to pay the tax.

You can firstly opt to either make a one-off stamp duty payment based on the total market value of the property (this is known as making a “market value election”)

The second option is to pay any Stamp Duty due in stages. If you choose to pay in stages, you have to pay anything due on the first purchase of a property share, but don’t have to pay further Stamp Duty until you own more than an 80% share of the property.
- What type of shared ownership property can I buy?
The Shared Ownership scheme allows buyers to purchase shares of either new-build or existing properties that are owned by an approved qualifying body.

For the most part this means local authority and housing association homes. Although, it can also apply to properties owned by other bodies such as a housing action trust, a development corporation, or the Commission for the New Towns.

Another thing to keep in mind is that shared ownership properties are always leasehold.
- What is the minimum and maximum share I can purchase?
The shared ownership minimum share requirement is usually 25% of the property’s value. And the shared ownership maximum share is 75%, If you want to own a share of more than 75%, you must buy the property outright.
- Can I purchase more shares at a later date?
Yes, you can buy extra shares in the property up to 100% of the property value – this is known as “staircasing”. Although, keep in mind, certain lenders may limit your ownership to 80% of the property value.

If you want to own a share of more than 75%, you must buy the property outright. Most housing associations and local authorities require a minimum 25% share purchase when staircasing, although some may allow smaller purchases such as 20% or 10% shares.

Be aware that the cost of purchasing more shares in the property will be based on a new market valuation of the property at that date. That means it may cost more or less than you paid for your first share, depending on whether the property has increased or decreased in value.
- When can I buy more shares?
There are no time restrictions imposed by the Government under the scheme. However, individual housing associations or local authorities may impose time restrictions or other staircasing restrictions in their lease conditions.
- How is shared ownership rent calculated?
The exact rent calculation varies depending on the individual housing association or local authority.

However, it is in many cases based on a percentage of the retained equity – typically around 3%.

For example, if you bought a 50% share of a £200,000 property, the retained equity would be £100,000 – this is the share of the property on which you would pay rent. Assuming a typical rental calculation of 3%, the annual rent would be £3,000, which equals £250 per month.

If you look to sell your shared ownership property, the housing association has first refusal to buy the share of the property back.

They will then see if they can sell your share to someone else on the waiting list. If this is not possible, you may then be able to market your property on the open market.

People with bad credit might find it difficult to get a shared ownership mortgage. Mainstream lenders may be less willing to accept them due to negative credit history.

However, specialist lenders do offer options for those with bad credit. These lenders don’t always make themselves easily accessible to the general public, therefore it’s likely you will need to access them through a mortgage broker.

A couple of top tips to improve your chances of success if you have bad credit are:

Provide a larger deposit. Something closer to 10-15% of your share is a good amount.
Fixing your current credit will show a lender that you are now able to better manage your finances.
Consult an expert mortgage broker, like us! Brokers will understand the nuances around these mortgages and know how to pair you with the most suitable lender for the best chance of success.

BAD CREDIT MORTGAGES

Yes, this is possible. Under this initiative, tenants of new housing association properties will automatically have the right to purchase a share, even as small as 10%. This allows them to start on the property ladder and gradually increase their ownership over time.

The government aims to work with housing associations to expand this scheme to include existing tenants as well. This would enable more people to invest in their own homes.

You can apply to buy a share of your home if:

it’s eligible for the Right to Shared Ownership scheme – you will need to check this with your landlord
it’s your only or main residence
you’ve lived there for a minimum of 1 year
you’ve been a tenant of social or affordable housing for at least 3 years – you’ll need to check with your current or previous landlords if you’re not sure

Stamp Duty Land Tax (SDLT) is a tax imposed on property purchases.

When you buy a share in a Shared Ownership property, there are two options you can choose in order to pay the tax.

You can firstly opt to either make a one-off stamp duty payment based on the total market value of the property (this is known as making a “market value election”)

The second option is to pay any Stamp Duty due in stages. If you choose to pay in stages, you have to pay anything due on the first purchase of a property share, but don’t have to pay further Stamp Duty until you own more than an 80% share of the property.

The Shared Ownership scheme allows buyers to purchase shares of either new-build or existing properties that are owned by an approved qualifying body.

For the most part this means local authority and housing association homes. Although, it can also apply to properties owned by other bodies such as a housing action trust, a development corporation, or the Commission for the New Towns.

Another thing to keep in mind is that shared ownership properties are always leasehold.

The shared ownership minimum share requirement is usually 25% of the property’s value. And the shared ownership maximum share is 75%, If you want to own a share of more than 75%, you must buy the property outright.

Yes, you can buy extra shares in the property up to 100% of the property value – this is known as “staircasing”. Although, keep in mind, certain lenders may limit your ownership to 80% of the property value.

If you want to own a share of more than 75%, you must buy the property outright. Most housing associations and local authorities require a minimum 25% share purchase when staircasing, although some may allow smaller purchases such as 20% or 10% shares.

Be aware that the cost of purchasing more shares in the property will be based on a new market valuation of the property at that date. That means it may cost more or less than you paid for your first share, depending on whether the property has increased or decreased in value.

There are no time restrictions imposed by the Government under the scheme. However, individual housing associations or local authorities may impose time restrictions or other staircasing restrictions in their lease conditions.

The exact rent calculation varies depending on the individual housing association or local authority.

However, it is in many cases based on a percentage of the retained equity – typically around 3%.

For example, if you bought a 50% share of a £200,000 property, the retained equity would be £100,000 – this is the share of the property on which you would pay rent. Assuming a typical rental calculation of 3%, the annual rent would be £3,000, which equals £250 per month.

Shared Ownership Mortgage Scheme

What is a shared ownership mortgage?