Published On: Wed, Sep 18th, 2019

Shared Ownership properties: Mortgage expert on the 3 key financial considerations to make | Personal Finance | Finance

Getting on the housing ladder can seem like a challenge for many. Rather than getting a mortgage for an entire home, some first-time buyers may instead opt to purchase via Shared Ownership. This scheme allows buyers to purchase a share of between 25 per cent and 75 per cent, and then pay rent on the remaining share. While it may not appeal to everyone, it’s also important to check the general eligibility requirements too.

This is something which a mortgage expert has highlighted as something to consider.

Dilpreet Bhagrath, Mortgage Expert at Trussle, explained that a person’s combined annual household income must be less than £80,000 if they’re buying outside of London and less than £90,000 within London.

They must also be a first-time buyer, or in the process of selling your home.

The criteria extends to anyone they’re buying the home with.

In addition to having a good credit history, a person must demonstrate they’re able to afford the costs associated with a Shared Ownership home, by proving they’re not in mortgage or rent arrears.

Ms Bhagrath also said that calculating monthly payments was worthwhile.

“With a Shared Ownership mortgage, it’s really important to create a budget planner for your mortgage payments, rental costs on the share of the home you don’t own, the service charge, as well as any other regular monthly outgoings,” she said.

The mortgage expert suggested that by budgeting wisely, buyers could consider “staircasing” later on – allowing them to build equity in the property until they own 100 per cent of it.

Buying a home with a friend or partner is something many may consider.

That said, Ms Bhagrath advised it is “crucial” to talk about future plans before making the commitment to a mortgage together – as the borrowers are responsible for the full mortgage amount.

Ms Bhagrath, said of Shared Ownership: “Shared Ownership can offer a route into home ownership more quickly than buying a home outright.

“It also might enable buyers to purchase a home they wouldn’t have been able to afford otherwise, such as in a location closer to work or family.

“While there are still rental payments due on the share of the property you don’t own, it’s possible to build equity in the property until you own one hundred per cent of the home, known as staircasing.

“However, it’s really important to budget for the mortgage payments, rent of the share you don’t own, and the service charge.

“This might make saving to purchase additional shares of the property challenging.

“If you’re considering purchasing more equity in the property, the housing association will need to complete a valuation.

“The additional share price will be based on this valuation, rather than the value of the property when it was initially bought.

“There are also legal costs involved with the remortgage to purchase additional shares, and you should seek legal advice when it comes to your Stamp Duty Land Tax.

“There’s no time limit on staircasing, which gives you the flexibility to increase your equity in your home at a time that’s right for you.”

READ MORE: Stamp Duty Land Tax: Who is a first-time buyer? Can couples qualify for SDLT relief?

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Shared Ownership properties: Mortgage expert on the 3 key financial considerations to make | Personal Finance | Finance