Shared Ownership Mortgage Eligibility

CharlieJ15420

Hi All,
I'm currently looking in to purchasing a 2 bed flat in SW London using the shared ownership mortgage scheme and had a couple of eligibility questions.
1. Do mortgage lenders assess your affordability just for the mortgage you are taking out or do they also look at affordability for the mortgage + rent as well?
2. I know there is a max salary cap of 90k in London, however is there a minimum salary cap you need to be able to purchase a property? Reason I ask is because I would have a friend live with me who would help contribute to monthly costs which would mean I would easily be able to afford the monthly payments, however it may not look like I could with just my salary considered. I didn't know what the minimum salary (if any) criteria was for housing associations to let you buy the property.
Thank you in advance!

Chavy89

CharlieJ15420 said:

Hi All,
I'm currently looking in to purchasing a 2 bed flat in SW London using the shared ownership mortgage scheme and had a couple of eligibility questions.
1. Do mortgage lenders assess your affordability just for the mortgage you are taking out or do they also look at affordability for the mortgage + rent as well?
2. I know there is a max salary cap of 90k in London, however is there a minimum salary cap you need to be able to purchase a property? Reason I ask is because I would have a friend live with me who would help contribute to monthly costs which would mean I would easily be able to afford the monthly payments, however it may not look like I could with just my salary considered. I didn't know what the minimum salary (if any) criteria was for housing associations to let you buy the property.
Thank you in advance!

first answer they look at cost of mortgage and rent together 
second they only look at your income alone i dont tihink theres a min 

CharlieJ15420

In that case I'm slightly confused how the shared ownership is more affordable? I thought one of the benefits was people on lower incomes could get a lesser mortgage but could slowly purchase a higher value property. How is this the case if the bank looks at both the monthly mortgage repayment affordability PLUS the rent you would pay?

[Deleted User]

In answer to your second question, you still have to be able to afford the mortgage in the part you are buying and they say pay a “subsidised” rent on the part you dont own. 

A few people who buy shared ownership claim Universal Credit and UC pay the rental element so from that perspective its quite affordable. 

I was looking at shared ownership for my son and I agree, the mortgage and rent ( rent about 3% of non owned bit) was more than if one paid a mortgage on whole lot with rates about 2%. 

However shared ownership is definitely more affordable that renting in the open market. 

Best thing to do is show an interest and you get spoken to by their financial assessors ( no searches just running the figures ) and they will advise if you can afford it. We did this with my son. We did have to register first with HTB 

amandacat

When they assess how much you can borrow, they take the rent element into account as if it’s an outgoing in the same way they would like any other outgoing eg. a loan repayment. 
This is to make sure you can afford the mortgage repayment. It is still more affordable, my first house was shared ownership, a house of its value would’ve been about £800 month at the time if it was all on a mortgage. Shared ownership meant my mortgage was just over £300 and the rent part just under £200. 5 years later I was in a better financial position, had built some equity and was able to staircase to 100% ownership. I don’t think I ever would’ve got on the housing ladder without SO. 

poppy10_2

CharlieJ15420 said:

In that case I'm slightly confused how the shared ownership is more affordable? 

That's why shared ownership/shared equity is generally a scam

kingstreet

There is a Government shared ownership calculator as there is for HTB Equity Loan. You will need to satisfy that as well as lender mortgage affordability.

Caz3121

CharlieJ15420 said:

In that case I'm slightly confused how the shared ownership is more affordable? 

you have the benefit of a lower purchase price so less deposit
5% deposit on a £200k property £10k....buy 25% for a 5% deposit of £2.5k...it is sometimes the only way someone can get on the ladder

adindas

poppy10_2 said:

CharlieJ15420 said:

In that case I'm slightly confused how the shared ownership is more affordable? 

That's why shared ownership/shared equity is generally a scam

In many cases, Shared Ownership properties are normally higher than the comparable properties available in the general housing market. You could do your own deskwork by comparing it on Zoopla or RIghtmove. SO if you could effort properties in general market avoid shared ownership.

[Deleted User]

I know some of the housing associations add a lot of charges on (mine wanted to charge £50+VAT as I had a mortgage, £50+VAT for reading/approving the mortgage, £400+VAT for doing something else!!).

Legals also cost more on shared ownership cases.

I'd say it's generally worth it as it you get a bigger/more expensive property than you'd otherwise be able to afford -  so you potentially 'skip' a step on the ladder (although a lot of FTBs are doing that anyway these days!) which is great if you have kids or are looking to stay somewhere for a while. For example, I could afford a decent 2 bed on the open market, but not a new build. With S/O, I could look at 3 bed new builds easily.

If you're easily passing affordability for a 'normal' property then I wouldn't bother with S/O as it's more hassle when you come to sell (buyer has to be vetted by housing association etc.).

Affordability is a bit of a pain, but the Government calculator is harsher than lenders calculators. Government calculator may use income a lender may not though - e.g. if you can try to get your assessor to put in overtime, allowances, DLA/PIP/Universal Credit etc. - Your eventual mortgage lender may not take DLA/PIP or similar and will almost certainly take a different income assessment approach!

Andyjflet

The rent is subsidised and taken into consideration, this combined would be less than the equivalent full mortgage value of the whole property.