Shared Ownership Part 2

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Shared Ownership Part 2, Shared Ownership Part 2, Montgomery Financial

Shared Ownership (Part 2)

Charles Breen explains a little bit more about shared ownership and getting a mortgage on this type of property.

What happens if the value of my house changes with a shared ownership mortgage?  

If the value of your property increases, the value of your percentage increases – so you will take advantage of that. But it also means that if you were to buy out the remaining shares,  that becomes more expensive. 

They say a rising tide raises all boats – your share increases in value, but so does the housing association’s share.

What if someone has bad credit and they want a shared ownership mortgage?

It’s the exact same as any standard mortgage. There are lenders for every situation. If you’ve got bad credit, all it means is you will end up using a more bespoke lender. It’s a bit more difficult, but it’s a strong possibility. 

If you have satisfied BBJs from a year or two ago and your credit score is really low, it’s still possible to get a shared ownership mortgage. It can be done, you’ll just pay a bit more on your interest rate. But if it gets you the property you want, it’s all worth it.

How do I sell my shared ownership home?

Normally you have to approach the housing association that owns the other share. They get first refusal. They’ll get a surveyor out to get it valued at the correct price and then try to market the property themselves.

They start with their internal database of people, and if they struggle with that they will release it out to estate agents. From there it’s the exact same as a standard sale. Someone puts in an offer in, it gets accepted then the legals start.

Can someone make home improvements on their shared ownership home?

You can do decorative improvements. You can change a kitchen, you can decorate a bathroom or living room etc. You wouldn’t be able to put a full-blown extension on or do structural work to the property, but you can do small cosmetic improvements.

How does the remortgaging process work with shared ownership?

It’s the same as a standard remortgage. You’d go to a broker for advice on products and we’d work out the affordability. We would recommend a lender, and a product to meet your plans. 

The only thing is you’re limited from perhaps a hundred different lenders to 15 or 20 that offer shared ownership mortgages. 

How does stamp duty work for shared ownership properties?

It’s just like normal stamp duty. You only pay it if you go over the threshold, and your liability for stamp duty is only based on your percentage share. 

So if you’re buying 40% of a house worth £200,000, your share is only £80,000. You would be below the stamp duty threshold so you wouldn’t have to pay it. 

Because you can’t buy a shared ownership home when you own any other properties, the additional stamp duty isn’t applicable either..

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We want to keep that relationship with you up until your mortgage completes in 20, 25 or maybe 35 years. It’s not just a one-off transaction. It’s a long-term relationship, where we watch the market to get you the most positive products out there and try to save you money.

Are there any other fees when it comes to a shared ownership mortgage?

Not really. The legals for purchasing via shared ownership are slightly more because it’s a leasehold. Solicitors charge around £150 more for a leasehold purchase. Otherwise it’s the same as a standard mortgage.

What are the alternatives to shared ownership mortgages?

You could buy a standard property, if you meet affordability, but that’s often more difficult. You could look at a Joint Borrower Sole Proprietor (JBSP) mortgage, where a family member would be able to join you on the mortgage but won’t be the deeds of the property. That can help boost affordability. 

A JBSP mortgage is also called a guarantor mortgages sometimes. That’s the most realistic alternative for someone who’s looking at shared ownership. 

How do I apply for shared ownership? What are the steps involved?

First it all comes down to affordability. So the first step is to contact your mortgage advisor and we will run you through affordability and get you a Decision in Principle. You’re then all ready to begin house hunting. You would then look on various platforms like Rightmove and register with various housing associations to find your property. You view it, put in an offer in and then we take care of the rest.

How does someone apply for a shared ownership scheme?

The scheme is set up by the housing association, so what you do have to do is register with housing associations. They’ll put you on their mailing list and notify you about the different properties. Get in early to be notified, because they market properties to their mailing lists before they’ll put them on Rightmove etc. 

There’s no real scheme as such, shared ownership is a method of buying a house at a discount, because you’re only buying a percentage of the property rather than full market value.

What else do we need to know about shared ownership mortgages?

Do your homework first. Work out your affordability by speaking to a mortgage advisor. It is not a case of going online and using a bank’s mortgage calculator. What also affects your borrowing capacity is the rent you’re going to pay – which most people don’t take into consideration. 

You need to get registered with the housing associations and see it as a wonderful platform to get started on the housing ladder. Take advantage of it while it’s around because it’s a brilliant scheme.


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