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Shared Ownership Mortgages

dickson3748 by dickson3748

Getting Started with Shared Ownership Mortgages

A step-by-step guide to buying a shared ownership home!

With rental rates climbing rapidly and deposits out of the reach of more and more people, a shared ownership mortgage could be an ideal solution for those trying to get on the housing ladder.

Agreement in principle

Assuming that you qualify in terms of general eligibility and affordability, which you should be able to check with the housing association selling the property, you will then need to show that you can obtain a mortgage. You do this by obtaining a 'decision in principle' which is a non-binding commitment from a mortgage lender that they will lend you a specified sum for a mortgage loan. If you have started looking at properties in earnest, or have found one that you like we can do this for you.

Application

Once you have obtained a decision in principle in your favour, you will need to wait for the housing association to formally offer you a shared ownership property. This formal offer may require you to pay a reservation fee and is normally set out in a document called a 'memorandum of sale' which confirms the share for sale, rent payable etc. When the property has formally been offered to you we will then submit a full mortgage application.

Instruct a solicitor

Once you have been formally offered a property and are ready to apply in full, you will need to appoint a solicitor, though ideally you would instruct them not to undertake any work for which non-refundable fees will be billed until the application is well underway (e.g. after you receive a positive valuation of the property). The solicitor is responsible for important aspects of the property purchase, known as 'conveyancing'.

Valuation and mortgage offer

Once your full application is submitted to the lender, they will commence checking all the paperwork and will instruct a valuation of the property that you intend to purchase. This is an important step because many shared ownership properties are brand new and lenders tend to be tougher in the way that they value new properties. If the property is down-valued, you will have to contact your housing association to see if they are prepared to negotiate. If the valuation passes, once all your paperwork is approved by the lender you will receive a formal mortgage 'Offer'. At this point you should give some consideration to arranging insurance to protect yourself and the property that you intend to purchase.

Completing the purchase!

With a full mortgage Offer from a lender, it is then down to the solicitors to undertake the remaining legal stages of the purchase which should result - at some point - in you receiving the keys to your new shared ownership home.

Shared Ownership Considerations

Any problems you experience will largely depend on the terms of the shared ownership scheme you use, which is why we advises that you read terms and conditions thoroughly before going ahead. However, below are some of the more general problems that might occur:


  • There may be limited or no properties available for shared ownership in your preferred area.

  • You may not qualify to participate in a shared ownership scheme.

  • You still have the responsibilities of a homeowner but the home does not belong only to you.

  • As you do not fully own the property you may have to ask for permission from the housing association regarding redecoration or home improvement.

  • Valuer's fees are payable should you wish to increase your share of the property.

  • There may be selling restrictions.

  • In rural areas, housing associations may restrict your ability to buy further shares or may retain the right to buy back the property when you sell.

  • Even if you own your home outright, you may still have to pay some service costs to the housing association.



If you purchase the housing association share, this could leave you with high repayments at the end of the loan period. You should carefully consider the length of the repayment period for both your first share and then the housing association share of the property.

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dickson3748

Hi everybody! My name is Sam, and I'm a freelance journalist specialising in personal finance. This is hopefully my first Squidoo lens of many!

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