And as the cost of living continues to rise, that means increased demand in shared ownership mortgages. Brokers have an important role to play in increasing that consumer awareness and educating buyers.
Calculating the benefits of shared ownership mortgages
As the homebuyer is only buying a share of the property, the mortgage covers the share they will own, while they pay rent on the remaining portion. Deposits can also be as low as five per cent for a shared ownership mortgage, but we recommend to buyers that it’s always advisable to pay a larger share of that deposit if they are able to, as this will increase the lending options and rates available.
While this does mean a slightly large lump sum up front, it is still a lot less than a residential mortgage and works out cheaper over time if you’re able to access lower interest rates.
With the average rent now at around £1,000 a month, we find that the mortgage and the rent will be less than what they were paying as a tenant. Plus, it’s more beneficial in the long run as they will own part of the property by the end.
Assessing credit histories
Brokers should be able to recommend the best product for the customer, based on their circumstances and their credit score.
Many consumers are unaware of their credit score, but it’s the most important tool in order to get access to the best interest rates. Although many online mortgage calculators will show you the best rates, these aren’t available to all customers, particularly in the case of complex credit. So brokers should advise of the importance of raising the credit rating or being aware of the options available.
Climbing the mortgage staircase
Once the buyer has their mortgage and are in the property for a few years, they may think about purchasing a bigger share. Here, brokers can advise buyers how to staircase their share of the property when the time comes.
Staircasing is the process of increasing the share of the property in stages, or ‘stairs’. It’s important for consumers to understand that the next step up the staircase usually only occurs when their income or savings grow. A broker can assist with advice here, as in some cases it may be more beneficial for the customer to remortgage rather than increasing the level of their existing finance.
The shared ownership path
Shared ownership allows first-time buyers to get on the property ladder and gain long-term stability without overstretching their finances.
With more awareness of the mortgage products available, brokers are a vital tool in helping those consumers find the right financing to get them on the shared ownership path.
