Shared Ownership for a First Mortgage

A person who finds it difficult to make an outright purchase of a home can avail of various shared ownership schemes in the real estate market. Shared ownership offers a technique to individuals by which they can partly own a property and partly rent it. There are schemes sanctioned by the government and private operators, as well. Housing associations or societies make available these schemes.

The Concept

A homebuyer makes an application to a housing association to avail of a shared ownership scheme in the association. The society requires the buyer to take out a mortgage to purchase between 25% and 75% of the market worth of the home. He pays rent on the residual stake of the property to the housing association, which owns that share. The rent can be around 3% of the value owned by the society. The homeowner attains a lease on the property for a specified term, which is usually 99 years. In addition, the homeowner will have to make payments for a service charge for the home every month.

Taking out a Mortgage

You may find it difficult to get a mortgage package for a shared ownership scheme. The association may recommend a lender dealing in mortgages for shared ownership. The lender may not offer the full amount of your stake in the home and constrain you to put a deposit of 20% of your share. In fact, the greater the amount of deposit you put down for the home, the better is the mortgage deal.

Buying Extra Shares in the Property

An option called stair casing allows you to enhance your equity in your home in shared ownership schemes. The society will engage the services of a property appraisal firm to perform an evaluation of the home. You will have to pay for the appraisal. The price of adding to your share will depend upon the worth of the home judged by the assessment. You will need to fix up a mortgage for the additional share.

Disposing of the Property

You can sell your property any time. If your housing association owns a share of the property, it has the privilege to find a new buyer for the home. If you availed of a discount while buying the property, you will have to reimburse the discount, should you sell the property within five years.

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