Shared Ownership Bad Credit Mortgages
Shared Ownership Mortgage With Bad Credit
A Shared Ownership Mortgage is a government scheme that helps first time buyers or previous homeowners who are unable to buy currently. Shared ownership mortgages work by buying a portion of the property and paying a rent on the rest of the property. A buyer, for example, may initially opt to purchase 25% of the property with the remaining 75% is owned by the housing association or council.
To qualify for the shared ownership mortgage scheme your joint family income will need to be under £60,000 p/a and you will need to be either a first time buyer or in a position where you are unable to purchase a new home outright.
There exists a process called stair-casing that allows the purchase of further shares of your house until such stage as you have purchased the entire property. The agreed sale price is via the housing association and will be dependent upon market conditions. That is, if your property has increased in value since your initial ownership then you will need to pay more, and if the property has devalued then you will pay proportionally less for your increased percentage of the property.
Shared Ownership mortgages for people with bad credit
- Get your foot onto the property ladder
- It may be cheaper buying part of the property and paying rent on the remainder when compared to renting privately.
- You can staircase and purchase more of the property share over time.
- More security knowing that a landlord will not ask you to leave.
- If you wish to make significant changes to the property such as a new kitchen or extension, you will need to get permission first.
- If you were to sell the property you will have to seek advice from the housing association before putting it on the open market.
- If you want to staircase and purchase more of the property, the property will need to be revalued and the cost of the share may have increased.
Many of the high street lenders offer shared ownership mortgages and if you are declined by the high street lenders due to low credit score or bad credit, we have lenders that can still help you purchase your property.
What is a Shared Ownership Mortgage?
A shared ownership mortgage allows buyers to purchase a share in property – this can either be a new build or a resale property. The share on the property tends to be on quarter, one half or three-quarters, and the balance is owned by the Government-backed housing association. The homeowner will then pay the rent to the housing association for the share that they have not purchased.
For example, you could start with a 25% share in the property and your circumstances may change along the way, meaning that you can afford a bigger mortgage, so you will then be able to increase your stake at a later date to a 50% or 75% share of the property, or for some Shared Ownership schemes, up to 100% for full ownership. The rent that you pay on the property will decrease in line with the reduced amount of the property owned by the housing association, so it’s a great scheme for first time buyers who want to get onto the property ladder.
Would I be eligible for the scheme with bad credit?
Your eligibility for the Shared Ownership scheme will highly depend on your situation. The Government created the scheme to help people in some specific circumstances to buy a home, including first-time buyers, people who have an existing mortgage under the Shared Ownership scheme who wish to move, and people who have previously owned a property, but do not own one now, who cannot afford to take on a full mortgage outright.
If you fit the criteria for the scheme, then you are likely to be accepted for a Shared Ownership mortgage.
Can I get a Shared Ownership Mortgage with Bad Credit?
If you have a bad credit rating, perhaps because you have failed to stick to your credit agreement or paid the bare minimum on your credit card each month, this can make it harder to secure a Shared Ownership mortgage. Bad credit can affect your application, however with the help of The money Hub, we can help you to give yourself the best chance of having your application accepted.
As specialist brokers in the industry, we are able to help applicants with a bad credit history. Even if you have been turned down by building societies and high street banks in the past, it is still possible that you can secure a Shared Ownership mortgage. Our specialist panel of lenders will be able to assess your affordability and credit history, and provide you with relevant information on suitable products for you.
Your property ownership options
When you buy a property with other people, you need to choose how it is going to be owned – this is usually as joint tenants or as tenants in common. You can also enter into a joint mortgage with your parents where they act as guarantor.
This option might be suitable if you are married or in a long-term relationship with the person you are buying with. It means you will each:
- Have equal rights to the property.
- Can claim an equal share in any profit made if the home is sold.
- Will automatically inherit the property if the other person dies.
Tenants in common
This option might be suitable if you are teaming up with friends or family members to buy a home. It means you:
- Can each own a different share of the property
- Will not automatically inherit the property if the other tenants die
- Can choose who to leave your share to in your will
If you choose to be tenants in common, you should consider asking your solicitor to set up a deed of trust.
Buying with your family as guarantor
You can apply for a joint mortgage with members of your family. This option could enable you to afford a larger mortgage and access a wider range of mortgage deals. You will have full ownership of the property, and your family members will not be liable for Stamp Duty.
Both you and your family will be responsible for all mortgage repayments and charges, so you will all need to demonstrate that you can afford the repayments. Your parents will also need to show us that they have taken independent legal and tax advice, so they understand the risks involved.
If your circumstances change and you can afford the repayments on your own, you can remortgage and release your parents from the joint mortgage.
How much deposit do you need for a Shared Ownership mortgage?
You will need a mortgage to help buy the share of the property but much like the Governments Help to Buy scheme, you can get one with a smaller than average deposit. Instead of forking out a 10-20% deposit, shared ownership mortgages will usually only require 5% of the property value although some specialist lenders may provide a 100% mortgage of the share you are buying.
Is shared ownership better than renting?
Shared Ownership makes mortgages more accessible, even if you are on a lower wage. Your monthly repayments can often work out cheaper than if you had an outright mortgage. The monthly payments are also generally lower than if you were to rent privately and, unlike private renting, you have security on tenure.
Is there a minimum income for shared ownership?
There is no set minimum income allowance for Shared Ownership. If you have a large amount of cash to put down on a property this will simply make the mortgage payments more affordable.
How can bad credit shared ownership mortgages help?
If you have had bad credit registered in the past such as missed payments, defaults or County Court Judgements (CCJ’s) we have lenders that would still consider providing you with a mortgage. Typically this ‘bad credit’ will need to have been registered more than 12 months ago. For more information about shared ownership mortgages please complete the above form and an adviser will give you a call.
Contact the Shared Ownership mortgage experts today
If you are unable to get a Shared Ownership mortgage from high street lenders or building societies due to bad credit such as missed payments, defaults or County Court Judgements (CCJ’s), we have lenders who are willing to lend.
For mortgage advice on Shared Ownership mortgages, please complete the contact form and an adviser will give you a call to discuss further.
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Shared Ownership Bad Credit Mortgages
Product Name: Mortgages
Product Description: Shared Ownership Bad Credit Mortgages
Gary has been great from the start, very professional and friendly. this was my first commercial finance and he answered all of my questions no matter how small & explained everything very well, for me to understand the whole process. I would definitely recommend TMH & if needed use their services again.