Mortgage Information - Shared Ownership

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Shared Ownership Mortgages

The mortgages available on shared ownership are somewhat limited as some lenders feel that shared ownership is more risky than more traditional loans.

This is probably due to the fact that these schemes were originally available to help financially insecure members of society.

The fact that a third party i.e. the Housing Association has to be brought into the legal framework might also make them slightly wary. However, as house prices have risen, a much larger cross section of the general public are looking at shared ownership as a means of getter on the property ladder and therefore, some lenders will now offer 100% mortgages on shared ownership schemes.

You will need to select a mortgage that is not only suitable to your type of purchase, but also one that fits in with your financial position. Repayment mortgages are the most straightforward way of repaying your loan. With this type of mortgage you make regular monthly repayments so that at the end of the mortgage term (usually 25 years) the debt and interest is totally repaid.

Variable rate mortgages offer interest rates that will vary according to the base rate set by the Bank of England. If base rates vary i.e. rise or fall, the lender will generally alter their lending rates accordingly. Before entering into a variable rate mortgage you will need to consider whether rates are likely to change in the foreseeable future.

Fixed rate mortgages offer an interest rate that will remain static for a specific period of time. This could be as little as a year or up to ten years although generally speaking the average term is about 4 - 5 years. Some fixed rate mortgages revert to the standard variable rate at the end of the fixed term.

Discounted rate mortgages offer the standard variable rate less a fixed percentage discount. Again this is usually for a specific time and at the end of the term the borrower reverts to the standard variable rate.

As a person looking for a mortgage for a shared ownership, you may find that the discounts usually available to first time buyers do not apply.

If you want to take out a mortgage and you are on income support a lender would need to consider your application very carefully. Generally speaking a lender will usually only lend to someone in regular employment, who would be able to meet his or her monthly mortgage repayments.

If you are on income support, you will need to approach your local Department for Work and Pensions office (DWP), formerly the DSS, to see whether they would be prepared to repay mortgage interest payments through income support. A lender will not usually approve a mortgage until they are received confirmation from the DWP that the repayments will be met. Contact your local DWP for more details.