Shared Ownership: Do I Need a Mortgage if I Can Buy the Share Outright?

Karenthomas

I'm a little confused about how shared ownership works. So I have a fair amount of savings - enough to afford the 25% share outright. Would I need a mortgage if I can buy the share outright? Also, how is the rent calculated? And how do you pay for a bigger share? Do you need a mortgage to be able to do that?

Thanks

ricky_v

If you can buy 25% of the property then no, you don't need a mortgage, you just use your savings to pay the seller.

Also, how is the rent calculated?

From the top of my head, it's 3% a year on the 75% of the total property's value (in your case). E.g total property value is £100,000, 75% of that is £75,000, 3% is £2250/yr or £187.50/month. Check the paperwork though, your solicitor will be able to advise.

And how do you pay for a bigger share? Do you need a mortgage to be able to do that?

You can pay for a bigger share without a mortgage if you have enough money. If you don't have enough money and you want to buy a bigger share then you'll need a mortgage. A mortgage is only mandatory to purchase property if you cannot afford it outright. A mortgage is only a loan secured to your property to purchase said property, nothing more and nothing less.

kingstreet

You would need permission from the HA to purchase without a mortgage.

Piggywinkle

I'd only advise people to go for Shared Ownership if they would never be able to afford their own property through traditional means. If you have enough savings to pay off 25% of an SO house, then I think you'd be better off going down the route of buying a traditional freehold house, using your money as a deposit in return for a favourable interest rate on your mortgage.

There are lots of downsides to Shared Ownership properties (a quick search on these forums would unearth a few), and quite frankly, I wouldn't advise anyone to touch them with a barge pole unless they lived in London, in which case they may never own.

But I don't have the full facts of your case, so take my advice with a pinch of salt! Any other info should be available from the sellers, be it a Housing Association of private house building company.

Karenthomas

Thank you very much for your response. I really appreciate it

Karenthomas

Piggywinkle wrote: »

... I wouldn't advise anyone to touch them with a barge pole unless they lived in London, in which case they may never own.

Yes I live on the outskirts of London

Thank you