How do shared ownership mortgages work?

Shared ownership mortgages work like this:

  1. Buying a Share: You choose a property in a shared ownership scheme and buy a share of it, usually between 25% and 75%. You can use savings or a mortgage to do this. Please note: The housing association will expect you to purchase the maximum share that you can afford which may not necessarily be the share you had in mind to buy.
  2. Renting the Rest: You pay rent to the housing association or developer for the share of the property you don’t own. This rent is usually lower than what you’d pay on the open market and helps cover the property’s costs.
  3. Monthly Mortgage Payments: On top of rent & service charges you will make monthly mortgage payments for the share you own. These payments depend on your mortgage interest rate and the value of your share.
  4. Increasing Ownership: As time goes on, you can buy more shares of the property through a process called “staircasing.” This lets you gradually own more of the property until you reach 100% ownership for the property.
  5. Getting a Valuation: Each time you look to staircase and buy more shares, the property gets valued to determine the price of the extra share. You will have to pay for this valuation and any legal fees and will need to purchase the new shares at the current market value, which in most cases will be more costly than the original shares you had purchased.
  6. Selling Your Share: If you want to sell your shared ownership property, you must offer it to the housing association or developer first. If they don’t want it, you can sell it on the open market.

Shared ownership mortgages help you get onto the property ladder with a smaller deposit and lower monthly costs. But it’s important to think about the overall cost which include the mortgage payments, rent, and service charges, as well as potential maintenance costs before going for a shared ownership deal.

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