Is shared ownership a good way to help my daughter buy her first home? David Hollingworth responds

My daughter currently lives in London and is hoping to get on the property ladder somewhere in and around the capital. Upon consideration, shared ownership seems like a possibility.

We live in Scotland and would like help with the deposit but don’t know anything about shared ownership.

We are also not familiar with the English system of purchasing property. Even though we tried to take a look at it online, we were still a little unsure about the logistics of it all and its pros and cons. KB

Scroll down to learn how to ask David for you Mortgage question

Mortgage Help: Our weekly Navigation into the Mortgage Maze column finds broker David Hollingsworth answering your questions

Mortgage Help: Our weekly Navigation into the Mortgage Maze column finds broker David Hollingsworth answering your questions

David Hollingsworth answers: Shared ownership is a well-established option aimed at buyers looking for an affordable solution to taking what is often the first step on the property ladder.

Your daughter will undoubtedly face higher house prices in London, so she is sensibly considering alternative options to help bring property within reach sooner than would otherwise happen.

It should not be confused with joint stock plans, which work very differently. Common shares were the mechanism behind the now-shuttered Help to Buy scheme in England.

On the other hand, shared ownership is a scheme that does what it says on the tin. It allows the purchase of a proportion of the property from the housing association, which will retain ownership of the remainder of the property.

> How to remortgage your home: A guide to finding the best deal

Increasing share

This initial share can be up to 10 percent in some cases, although there will be an evaluation on how large a portion can be purchased initially.

This will be funded by any deposit the buyer can put down and the remainder through the mortgage. Rent will then be paid to the housing association on the remaining share and will be charged at a lower rate than the open market rent.

Obviously this can help a struggling first-time buyer to at least get a foothold on the property ladder and will allow for more equity to be purchased as their situation changes. This can eventually lead to up to 100 percent ownership, which is known as a “staircase.”

Shared ownership has a number of benefits for buyers in giving them some exposure to property prices.

> What’s next for mortgage rates and should you fix them?

Shared ownership can help a struggling first-time buyer at least get a foothold on the property ladder, says David Hollingsworth.

Shared ownership can help a struggling first-time buyer at least get a foothold on the property ladder, says David Hollingsworth.

First-time buyers will feel like prices often evade them, making saving for a deposit more difficult when prices rise faster than they can save.

Prices may have fallen a little at the moment due to the market slowdown but they remain out of reach for many and if prices start to rise again, your daughter will have some market share.

Another big benefit is the security that shared ownership can provide. Rent can be expensive, but tenants may have to move if the landlord raises the rent or decides to sell.

Shared ownership offers greater security of tenure than renting, which will no doubt be attractive if your daughter can find the right property.

Eligibility requirements

There are eligibility requirements for shared ownership and the ability to purchase will need to meet these requirements as well as the availability of a suitable property.

The general requirement will be that income is less than £90,000 in London (£80,000 elsewhere) and that there is no ability to buy on the open market.

Advice, advice, advice

The property may be a new build or a resale of a previously owned home on a shared ownership basis.

If your daughter sees some properties she might be interested in, it makes sense to contact the housing association who will be able to talk you through the process.

The main differences between purchasing in England compared to Scotland will be the legal procedures as the purchase becomes binding at the point of exchange of contracts in England.

This will take longer than in Scotland, where the sale will be binding once correspondence has been completed.

Your daughter will need a solicitor or conveyancing agent, who will be able to talk you through the process and the timings that need to be met to tie everything together.

> This is Money’s mortgage affordability calculator

Eligibility requirements: The general requirement is that income is less than £90,000 in London (£80,000 elsewhere) and that there is no ability to buy on the open market

Eligibility requirements: The general requirement is that income is less than £90,000 in London (£80,000 elsewhere) and that there is no ability to buy on the open market

As well as speaking to the housing association to meet its requirements, your daughter will also need advice about a mortgage.

Although some lenders will not offer loans on a shared ownership basis, there are a large number of lenders who will, from high street lenders to smaller building societies.

Most will require a deposit to be placed on the share being purchased, although it is possible to secure up to 95 per cent or even 100 per cent of the purchase share.

There is a lot of information about shared ownership online. A basic overview is available here And more information specific to London including The property search tool can be found here.

These will be starting points but getting advice with your daughter from housing associations, a solicitor and in relation to the mortgage will help you understand more.

Get an answer to your mortgage question

David Hollingsworth is a mortgage expert at Money and a broker at L&C Mortgages – one of Britain’s leading specialists.

He’s ready to answer your home loan questions, whether you’re buying your first home, trying to remortgage amid price chaos, or looking to plan further ahead.

If you want to ask him a question about your mortgage, send an email to: [email protected] With the subject line: Mortgage Help

Please include as many details as possible in your question so they can respond in-depth.

David will do his best to respond to your message in an upcoming column, but he will not be able to respond to everyone or message readers individually. Nothing in his responses constitutes structured financial advice. Posted questions are sometimes edited for brevity or other reasons.

Navigate the mortgage maze

(Tags for translation) Daily Mail

Leave a Reply

Your email address will not be published. Required fields are marked *