Can't Get On The Property Ladder? Then Look No Further Than A Shared Mortgage

How are people still getting onto the property ladder I hear you ask? Gone are the days when you could get a 95 or 100% mortgage, and incomes have been dropping during the recent financial turmoil - so how can you get into property as an investment with a low income?

Well this is where shared ownership mortgages come in. It's when you buy half of a property, and another organisation, usually a housing association, will buy the other half.

For example, you may buy half of a £200,000 property by taking out a mortgage for £100,000. A housing association or other company buys the other half of the property. Whilst you may only own half of the property initially, it is still a great way of getting onto the housing ladder.

There is a catch of course; it has to be worthwhile for the housing association or company, so they will charge a rent for their side of the property. Usually this is a very low amount anyway, or what would be the point in entering into a shared scheme where the aim was to help low earners get on the property ladder in the first place?

Lenders are often happy to lend on a shared ownership basis. This is because they are only lending a small proportion of the value of the property; even if it is a high proportion of the part you are buying. However, you may still have to shop around as lenders have reduced their lending amounts since the 'credit crunch' in 2008.

It is possible to purchase your property incrementally through a 'staircase' option. This option means that you can purchase more of the property from the housing association later on. Check with your scheme provider if this option is available as it is not standard in all deals, but well worth taking up if it is

As banks and building societies demand ever higher deposits to secure the best mortgage rates, it is no surprise there has been growth in the shared mortgages sector. As has already been mentioned, a shared mortgage is more likely to be approved, but it is still wise to research what is available and shop around to get the best deal possible.

Perhaps the best place to start when considering a deal of this nature is to speak with a financial adviser or mortgage broker. These are the kinds of experts who know the shared mortgage market and know which lenders actually offer them and under what conditions. A broker or advisor may charge a fee but this is ultimately worth it in the long run if it connects you to the best deal for you.

Whilst shared ownership deals are great for many people, remember that there are disadvantages. For example, as you are not the sole owner of your home, you may need permission should you wish to alter your home in any way. Redecoration, a new bathroom or an extension may need the permission of the party that owns the other share.

The shared mortgage is a great way of accumulating some wealth through property if you are a low wage earner or a single person without much capital to invest. It is preferable to renting as that merely finances your landlord.


------

Timothy Frodsham writes for Just Commercial Mortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.