Shared ownership mortgages

The huge rise in property values in recent years and more recently restrictions in lending caused by the credit crunch has resulted in many people struggling to get on the property ladder.

To combat this, subsidised housing schemes such as shared ownership have become more and more widespread. Shared home ownership schemes - a part buy, part subsidised rent arrangement - differ but generally can help ‘key’ workers, the lower paid, and also those people earning too much to be a priority for social rented housing but too little to easily buy or rent on the open market. Schemes are operated throughout Britain by registered social landlords (RSLs), most commonly housing associations or trusts.

Participants purchase a share in the property and pay rent on the remaining equity owned by the housing association or trust. Instead of paying a large mortgage for the whole property, generally a much smaller mortgage is payable on the share owned, which, when combined with the subsidised rent for the remaining share, means a substantially cheaper monthly payment than if the property were purchased outright. Many lenders are happy to provide mortgages for shared ownership.

Buyers can purchase more property equity later on, which is known as ‘staircasing’. Eligibility varies from scheme to scheme, and particular groups such as council tenants or key workers may be prioritised. Some schemes are open to anyone fitting specific financial criteria, while others require that the applicant live locally to qualify.

Many developments are mixed, having both properties purchased and rented via subsidised housing schemes and those sold at the full market price. Increasingly, properties are in the most desirable areas because such developments only receive planning permission by including affordable housing schemes.

To apply for shared ownership schemes, you can register on a local council housing list or obtain application forms from housing associations themselves. Local councils have details of local housing associations and www.direct.gov.uk has information on different schemes and housing associations. Mortgage comparision websites can indicate many of the best shared ownership mortgages, shared ownership mortgage lenders detail lending criteria on their websites, and housing associations offering shared ownership schemes can give advice on shared ownership mortgages too.

By Ben West