Shared Ownership Process
Mortgage Brokers for First Time Buyers
Mortgage Chain are a specialist Mortgage Broker for First Time Buyers and help many First Time Buyers with understanding the Shared Ownership Process.
Shared Ownership is better than renting!
Shared ownership is where you purchase a percentage of a property and rent the remainder from the housing Association. Typically you would buy a share starting at 25%. 35 and 50% are also common starting points, with the idea of purchasing the remaining shares later on down the line.
Shared Ownership is also commonly used as a stepping stone onto owning properties outright, later on, as it is considered better than renting outright.
So do I qualify ? That is the most common question I get, also a lot of people will go to the affordability calculators to see how much they can borrow, without putting in the rent from the housing Association an associated service charge costs and annual ground rent.
I have worked out a calculation which works out in the majority of cases.
So let’s say you were looking to purchase a shared ownership property which full value was £200,000.
If you take 12.5 % of the full purchase price, that is what your salary pretty much needs to be to qualify for the affordability.
e.g. £200,000 purchase price = £25,000 salary (approx) – now in some instances I’ve seen it work out to as little as 10% of the full purchase price and then in other examples where the Housing Association calculation is more strict occasionally 15% would be the marker.
How Much is the Rent ?
A calculation to use – £200,000 Purchase price and let’s say you were purchasing 30%, which would work out at £60,000.
That means you’re renting the remaining £140,000 from the housing Association which is the remaining 70%.
If you take that £140,000 and times that figure by 2.75% you’ll find that equals £3,850 and divide that by 12 you’re looking at £320 pounds per month for the rent .
Again, sometimes this can be a bit higher, so a good marker is if you use 3% overall that should cover any other costs such as ground rent and service charges.
Lastly make sure later on down the line always you are able to purchase 100% of the share at a later date. This is known as staorcasing to 100%. If the Housing Association does not permit a100% purchase, do not buy the property as you will find it hard to get a mortgage.
Are you struggling to buy a Property Outright ? Let me know!
Mortgage Broker for First Time Buyers