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Emilia Hunt, Metro Finance (2)

Shared Ownership Advice from a Mortgage Expert

Posted 03 February 2022

Guest Blog: Shared Ownership advice from a mortgage expert

We sat down with Shared Ownership mortgage expert and Sales Director for Metro Finance, Emilia Hunt, to discuss saving for a deposit, applying for a mortgage and how you can make the most out of the shared ownership scheme.


Starting your journey on the property ladder? Keep reading, this article is for you! 

The Beauty of Shared Ownership  

The beauty of shared ownership is that the average house price nowadays is £256,000, which is often too out of reach for most people - both in terms of affordability, the income needed to buy at such high prices and the deposit requirement; 5% deposit against that full property value is £12,800. 

Shared ownership offers flexibility in the knowledge that you are only buying a share of the property, making it far more affordable. For example, 25% share of the same property means your income could be around £24,000, compared to if you are buying that property outright, you would need an income of around £55,000... Not to mention the deposit requirement could reduce to £3200.  

What are mortgage lenders looking for?  

Start gathering your paperwork early so you are prepared. If you are employed, you will need to have your payslips, self-employed will either need accounts or tax overviews and calculations. If possible, have a copy of an in-date passport or driving licence, registered to your current address. 

Some lenders ask to review last 3 months bank statements. An ideal buyer will have no bounced direct debits, no excessive gambling and not going beyond their overdraft limit. However, do not panic when life does not treat us well, there are still lenders who do not require ‘perfect’. 

Lenders review your overall profile against their own criteria, which will differ depending on who you’re applying with. Always speak to a mortgage advisor who can find the lender who best suits your circumstances.  

Is there a wide variety of Shared Ownership Mortgages?  

There are now 27 active shared ownership lenders, 15 of which offer 95% products! It’s an increasingly popular way to buy a property.  

Most of the high street big names offer Shared Ownership and a whole host of regional Building Societies are active. At any one time there is a choice of roughly 300 different Shared Ownership mortgage products, meaning there is an abundance of choice to suit all circumstances.  

Are there property price limits with the Shared Ownership Scheme? 

There’s no upper price limit in terms of shared ownership, it will just depend on what is available within your area. Shared Ownership is a significantly bigger scheme nowadays, it is just growing and growing, particularly with the exit of the help to buy equity loan scheme; as a company we have seen a 55% growth in the Shared Ownership mortgage compared to 2020/21.  
 
If you are within the income bracket, earning less than £80,000 (£90,000 in London), there is no limit to the size of the property, it’s just down to whatever is suitable for you. We regularly see multiple buyers for one property, which means it can sometimes get a little frantic, but it also means a very strong market when it comes to re-sell.

What happens if your mortgage offer runs out due to new build delays?  

If your property is not due to be finished by the time the offer expires, don’t panic. It is not a problem, but it may be that you either need to extend the mortgage offer or in some situations reapply to the lender. Occasionally new build developments can be delayed slightly; something lenders will be used to. It is normally a straightforward process and nothing to worry about but do always discuss with your mortgage advisor and solicitor.  

How would you staircase? 

After a period in your property, you may find you’re in a position to buy some more shares. You have a couple of options: If you have the physical cash funds available you can do it this way, additional borrowing with your current mortgage lender, or opting for a different mortgage lender to borrow additional funds. The benefit of staircasing is, the more shares you own in your home, the less rent you will pay. Speak to a mortgage advisor if you think you can staircase, they can run through each possibility with you before you start paying for valuations on your property. 

What fees are associated with buying? 

Fees can vary for each person. You will always have solicitor costs as they need to deal with the legal side, and of course moving costs. Your mortgage lender will always want to do a valuation on the property as well, which may come at a cost to you. We normally suggest having £2000- £3000 in total. The last thing you want it to be caught short at the end of the process, though your mortgage adviser will be on hand to ensure you understand all costs at the beginning. 

Can you sell a shared ownership property? 

There is a really big and ever-growing market for re-sales, with Leeds Building Society recently seeing a 16% increase in re-sale transactions. If you are looking at selling your property, there is a definite market there for you regardless of the share you are selling on. 

 

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Page last reviewed 03/02/2022
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