When applying for a mortgage there are often many twists and turns in the road as well as potential stumbling blocks, especially in recent years with the economic turbulence and the banking crisis causing lenders to be stricter than ever in their lending criteria. This can make attaining a mortgage difficult for a lot of people but for applicants who have been previously bankrupt, had missed debt payments, or those with a poor credit history, it can be near impossible. However, for those who are eligible, shared ownership mortgage could be the ideal solution to getting you on the property ladder.
How Does the Shared Ownership Scheme Work?
Also sometimes referred to as ‘part-rent, part-buy’, a shared ownership mortgage allows you to buy a share of the property and pay rent on the rest which means a smaller, more affordable mortgage and a lower deposit.
It allows you to begin with, to purchase between 25% and 75% of the property, which requires a mortgage, whilst you pay rent on the remaining amount to the housing association. Larger shares can then be purchased at a later date until you gain 100% ownership of the property.
Although this may not seem cost-effective at first, many find their combined monthly payments to be less, or not much more than when they are paying rent alone. It also allows an opportunity for those with adverse credit who are first time buyers or those looking to get back on the property ladder, a chance to own their own property.
Who Is Eligible For a Shared Ownership Mortgage?
Eligibility criteria for shared Ownership Mortgages vary across the UK but it is typically suited for those who meet the following requirements;
- First-time buyers.
- Those who previously owned property but no longer do and are unable to afford a mortgage on full property.
- Those looking to move who already have a mortgage under the shared ownership scheme.
- People with an annual household income of less than £80,000 (£90,000 in London).
- Those looking to downsize to a part-buy, part-rent retirement property.
- People with a deposit of around 5-10% of the equity share you are buying.
- Buyers with enough money to cover costs such as legal fees, stamp duty, etc.
- Those who plan to live in the property and not rent out any part of it
- With the permanent right to live in the UK.
Is a Shared Ownership Mortgage Still Possible If I Have Bad Credit?
Having an adverse credit history can greatly affect the chances of being accepted for a mortgage as lenders determine the potential buyer too high risk. Although this does limit the potential mortgage options, there are specialist lenders who are able to assist clients with a poor credit history.
If you have concerns about your credit score or bad items on your credit record that could hinder your chances of a mortgage, it is always highly advisable to seek advice from a professional mortgage broker who has experience with shared ownership bad credit mortgages. They will have relationships in place with specialist lenders to be able to talk you through your options and help find the right deal for your circumstances.
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