The tough financial climate and the squeeze on people’s wages has forced many of us to be inventive when it comes to financing mortgages. There are many new approaches to putting down a deposit and paying all the additional costs that go with home ownership.
Well this is where shared ownership mortgages come in. It’s when you buy half of a property, and another organisation, usually a housing association, will buy the other half.
The benefits of a shared ownership mortgage can potentially be huge. A decrease of 50 per cent in the size of mortgage required can make home ownership available to people who would never have been able to afford it otherwise, and prevents people with modest incomes having to be too borrow more than they can afford to repay. Whilst this does mean that you only own half of the property too, it is a way of getting started on the property ladder and is a lot better than owning 100% of nothing.
As well as making the repayments to your mortgage, you will also typically have to pay rent to the association that owns the other part of the property. This makes owning the other part of the property worthwhile for the housing association or company. The rent is typically quite low, however, as the point of shared ownership is that it is aimed at you if you aren’t a high earner or can’t afford a mortgage for the total property value.
Most lenders are more lenient where shared ownership mortgages are concerned, because they do in fact have the security of the funding from the housing association or other party, so in some cases they will actually lend you the full amount of your share of the property depending on the value. They will however, also factor in the rental costs into their budgeting which may reduce the amount they will lend.
Usually in order for a shared ownership to be worth doing for the other investor, you will pay rent on the other share of the property that you do not own. The rental costs are usually quite low, but nevertheless you will need to budget this in to any financial planning that you do in relation to your mortgage costs.
Unless you have a large deposit available, it can be tough to buy a property in the current market. So, it is no surprise that shared ownership schemes have grown in popularity over recent years. And, there are some good deals in the market if you are prepared to research what is available.
Finding shared ownership deals can sometimes be tricky and so speaking to a qualified mortgage broker or financial advisor may be advisable. Brokers have a good knowledge of the mortgage market and may be able to find several shared ownership deals for you. However, bear in mind that you may have to pay a fee for their services.
If you aren’t the sole owner of a property, then it is always worth noting that if you wish to make changes to your home you will need permission from the other party. Many home owners like to add value to their property by extending it or building features such as conservatories, this will need consent from the other owner first.
Shared ownership schemes have helped many people buy their first home. Rather than paying rent which doesn’t benefit you, owning a share in your home means you can benefit from increases in its value and from getting on the property ladder.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.
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