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Shared Ownership Mortgages: What are they and where are they available?
What is a shared ownership mortgage?
There are many different kinds of mortgages available to home buyers, and you may come across this special type of financial product while you're searching. Shared ownership mortgages are complicated, but they can be very useful for a specific type of borrower.
First off, these mortgages are generally available in the UK only. If you're an American, these really don't seem to be available to you. It can be very difficult to figure that out if you're searching the internet.
The basic idea of a shared ownership mortgage is that you are partially own and partially rent a property. This can be good for home buyers that don't have enough money to finance a full property. In addition to your regular monthly mortgage payment (for your share of the property) you will also pay the lender or the government a rental payment (for their share). If you choose to sell the property, they will share in the proceeds of the sale.
While you are in the house, you are generally given a 99 year window in which you can buy shares from the lender or government, thereby increasing your equity in the property.
Because this helps home buyers purchase a more expensive house than they could ordinarily afford, it is very difficult to secure these loans. There is a lot of competition and not much supply.
There are several places that you can look if you are a UK citizen and you're interested in learning more about this product. The Housing Corporation is a government agency that will help you find developers that take part in shared ownership mortgage schemes. Again, because of the popularity of these products, there is a good chance that you'll have to queue up to get your hands on one.
Typically, a first time home buyer will take a share between 25 and 50% of the total equity in the house.
Shared Ownership Mortgage Video
The video above quickly discusses how shared ownership works in the UK.