Shared Ownership Mortgage Guide and FAQs

There is no minimum income to qualify for a mortgage, however your income will need to be sufficient to show that you can maintain the costs associated with the property in question, based on an affordability calculator used by the lender.

The calculations used by mortgage lenders are not all the same and therefore different lenders may offer different loan amounts based on the same salary.

If you pay off the mortgage on your owned share, you will just pay rent on the remaining 75% as well as any relevant service charges.

On the other hand, you can choose to buy more shares in your home through a process known as ‘staircasing’. If you go on to purchase 100% of the property, you become the outright owner and will no longer pay any rent, just your remaining mortgage.

Different lenders have different rules on this, although most would need you to provide three months’ payslips to ensure you can sustain the relevant housing costs. If you need to obtain a mortgage, you might need to wait three to six months before you are able to apply for a mortgage.

A very few lenders will accept based on a signed contract, some will accept just after you have started with your new employer, some will want to wait until you have received your first payslip, and some will want to know you are out of probation.

Being on a fixed term contract will not affect your financial checks, but it may reduce the number of lenders that you can access for your mortgage. This would depend on how many contracts you have had, whether they have been renewed, and what industry you are in.

This will depend on how long you have been earning this income and what proportion of your income is made up of overtime. Different lenders will also have different rules on overtime and many may ask for up to a year’s proof.

There are various criteria taken into consideration when applying for a mortgage which means there’s a few reasons why an application may be rejected.

If you are working with a mortgage broker or financial advisor, it is their job to look into your situation in enough detail to ensure that they’re placing you with a lender that will accept your application.

Any unusual factors in your situation will most likely reduce the number of lenders that would accept your application, which may mean you don’t have access to the very best rate. However, no matter how well the advisor has done their job, the most common stage that a lender will decline is when the credit score is completed.

The deposit for a Shared Ownership property is usually around 5-10% of the share that you’re purchasing, however in some instances a larger amount can improve the likelihood of being accepted, while some lenders may see a bigger deposit as proof to the financial commitment.

The deposit required will also depend on your individual circumstances – for example, if you’re in temporary work, have visa restrictions, have a lot of financial commitments, poor credit history, etc.

Your housing provider has to carry out an eligibility assessment based on the Homes and Communities Agency affordability calculations and this assessment will determine the deposit amount they require before they offer you a property. On some occasions, this deposit may also be higher than the minimum mortgage lender requirements.

While poor credit history doesn’t rule out the possibility of buying a home, you would need to be able to take out a mortgage on a Shared Ownership property. If yours or your partner’s credit history stops you from doing this, then you would not be able to proceed.

Stability of address isn’t important in regards to whether you can get a mortgage, but it could make a difference to your credit score. For that reason it is very important to make sure that all of your accounts and credit are in your current address, as well as your driving licence.

You should also be on the electoral role at your current address, and having your name on the council tax is also helpful.

County Court Judgements would not mean you were necessarily declined by all lenders, but it is likely that you’ll be required to pay a higher rate of interest.

A Debt Relief Order is a way of dealing with your debts if you can’t afford to pay them, whereby you don’t have to pay certain kinds of debt for a specified period (usually 12 months). At the end of the DRO period, the debts included in it will be written off (or ‘discharged’) and you won’t have to pay them.

Unfortunately, a DRO is classed by credit reference agencies in the same light as bankruptcy and will stay on your credit file for six years.

If you have a DRO and are looking to purchase a home, we would recommend seeking financial advice to get a better understand of the options available to you.

Most mortgage lenders will accept a single mortgage applicant for a joint purchase. Lenders will require that the person not on the mortgage application signs an agreement that they will not oppose an application for repossession, should the mortgage fall in arrears.

In assessing affordability they will take no account of the joint purchaser’s income or any financial contribution that they may make. It is possible that the mortgage lender will reduce the amount of loan on the basis that the applicant for the mortgage is financially supporting the joint purchaser.

Only those who are purchasing the home can be on the mortgage application, and all applicants must live at the property as their main residence.

If a family member wants to help you buy a home, but won’t be purchasing the property with you, they may wish to offer money towards your deposit by way of a non-repayable gift.

Generally speaking, you can have up to four people on a mortgage deed. However, the affordability calculations will currently be based on the income of a maximum of two applicants.

An Agreement in Principle (AIP) is an agreement from a mortgage lender that they will lend you the mortgage amount requested, subject to satisfactory proof of income and valuation of the property.

Before issuing an Agreement in Principle the lender will carry out a credit check and subject your application to their internal credit scoring. An Agreement in Principle is the first part of the process of applying for a mortgage, and the agreement is not binding for either yourself or the lender.

A mortgage broker’s role is to arrange a suitable mortgage for you. This will involve taking details about your personal and financial situation and using that information to find a mortgage lender(s) where you meet the relevant criteria and affordability requirements for the property that you wish to buy.

The broker will be able to answer any questions you have and advise you on suitable mortgage products. They will assist you with the necessary paperwork so that a mortgage application can be submitted and will then do everything possible to help progress your application.

Once you have found a property that you’d like to buy, the relevant housing association will invite you to attend a financial assessment; a calculator provided by the Homes and Communities Agency will be used to assess what share in the property you can afford to purchase.

Once completed, you’ll know the share that you’ll be buying and therefore the monthly rent payable at outset, and can start to think about your mortgage options. If you are using a mortgage broker, you should contact them at this stage to start looking into suitable mortgage options.