Shared Ownership is the mortgage scheme where you pay rent on the share of the equity you do not own. Shared Equity is when you purchase a share of the property i.e. 85% and the other share i.e. 15% is retained by the builder and/or Government and the main difference is that you do not pay rent on this share.

A share to buy mortgage is when two or more friends or families members are buying a property together. What happens is that no one owns the property outright you all have a share in it. The main difference is that you are sharing the ownership of the property with other private individuals rather than a housing association or builder.

This is still a form of shared equity but as I mentioned earlier, it is held by private individuals and not the Government.

How do you define a shared ownership mortgage?

These types of schemes work very well for buyers who are investing in their first property. You part own a property and part rent it. There is an added advantage that you only need a deposit for the percentage you are buying.

Calculating the rent

Your mortgage broker will help to assess what you can afford and this is based on what housing association calculations, this really is about affordability!

One of my clients I recently helped had their rent assesses as 2.75% of the share owned by the housing association. The rent was calculated as 211.25 pounds per month.

Do shared equity or shared ownership mortgages use the same products?

Lenders will vary, some will consider shared ownership or shared equity and some will not. My best recommendation is to suggest you find out what is available for your situation before looking for your new home.

Do my earnings affect whether I can get a shared ownership mortgage?

Please use care before you take the plunge. I have examples where clients have paid non refundable mortgage booking fees only to realise later on that they earned too much. Work with a good broker who knows what can and can’t be done.

How much deposit I would need?

The deposit you need is based on the part of the property you purchase, not on the total purchase price. The amount of deposit required can vary. Shared ownership mortgage schemes vary from lender to lender with some lending up to 95% of loan to value on the share you purchase.

Lets suppose you wanted to buy a 50% share in a property valued at 210,000 pounds. The lender wanted a deposit of 5%, in this case you would need 5250 pounds as your deposit. A 25% share of the property at 52,500 pounds, would mean a 5% deposit of 2625 pounds.

Are these types of mortgages easy to obtain?

No simple answer here, you will be assessed against the lenders criteria, if you are a good fit you will get a mortgage and if you aren’t you wont. At any rate your mortgage broker should be able to advise you.

Lenders don’t unfortunately have common requirements, they are normally very individual to each lender. Getting a loan can sometimes be fairly straightforward whereas at other times it is not.

We have a legal requirement to include the following statement:- Your home may be at risk if you do not keep up repayments on your mortgage.

This is the first in a series of home and mortgage related articles which I hope will help you.

Looking to find the best deal on shared ownership mortgages, then visit www.vibrantventures.co.uk to find the best advice on shared equity mortgages for you.