Shared Ownership Mortgages
by Rachelle
Like so many other specialized mortgage programs, shared ownership mortgages are now far less common and more difficult to obtain than just a few years ago. Shared ownership mortgages are often called part buy, part rent programs. Typically you mortgage a share of the property from a housing association then also pay rent on the part of the property you do not own.
Part Buy, Part Rent Advantages
This can make property more affordable as a shared ownership mortgage often only requires you buy and mortgage 25 to 50 percent of the property value. Shared ownership mortgages are also sometimes called fractional ownership loans as you own a fraction of the property.
If you can’t possibly qualify for a full mortgage on your own just yet, a mortgage on only 25 to 50 percent of the property value may be your best path to becoming a homeowner.
Shared Ownership Schemes
Shared Ownership Mortgages
Shared ownership properties derive from programs designed to help people afford vacation homes or shared ownership of properties such as boats. Eventually shared ownership houses became a possibility as lenders and brokers saw them as a reasonable way to share the burden of a mortgage for first time home buyers. This scheme can be among the most flexible mortgages. You can even still take a 125 home equity loan against the portion you own to make upgrades and increase the property value.
Staircasing Shared Ownership Mortgages
One of the drawbacks of shared ownership mortgages is that if the value of the property increases, you gain less equity because you will only own a fraction of the entire property.
However, some shared ownership mortgage lenders may help you setup a scheme called staircasing. A shared ownership staircasing mortgage allows you to “staircase” your ownership. This means you buy additional portions of the property during the lifetime of your ownership, slowly increasing your ownership until you become the full owner.
Be sure to seek advice from someone like a shared ownership mortgage broker before you commit to a staircasing program. Much will depend on the housing association, cooperative or investors involved in your shared ownership proposition, but you need a broker making sure you’re fairly represented in the agreement in principle.
Not A 0 Down Home Loan
Do not, however, expect 0 down home loans to be compatible with a shared ownership mortgage. Housing associations desire serious investors capable of maintaining their part of the homes equity. Being able to afford a down payment helps you ensure that you can keep up your end of the bargain.
I include these programs on my site because people seeking 0 down home loans are often the same sort who might consider shared ownership mortgages for their savings advantages.
I encourage people considering these loans, however, to seek such loans that allow staircasing. Part of property ownership is developing equity as an investment. Staircasing ensures that as you are more capable of affording a greater mortgage, you can increase your equity in your home. Take the time to find the cheapest shared ownership mortgages and work with a reputable broker.