A
local housing association may potentially offer to a
borrower a part-owned property on a shared
ownership
basis. This is where the borrower will raise a mortgage
on a percentage of the mortgage and pay the remainder
as rent to the housing association.
Generally
these schemes are aimed at a first time buyers. Some
lenders may potentially except shares lower than 50%
and with an impaired credit history. The borrower generally
will take out a mortgage which is 100% of the share.
The lender will calculate the mortgage, other loans
and the rental charges for income affordability. It
is not possible to get extra on top of the 100% of the
share for consolidation or furnishing.
The
share generally 50% will then will able to be increased
by increment amounts say 25% steps at a time called
staircasing, until if desired the borrower will own
the property out right. This a great way to get people
on lower incomes on the housing ladder. For example
key workers whom cannot afford the high prices in the
London area.
If
the property is sold the borrower may potentially receive
a percentage of the increase in equity according to
their share of the property. Also if the property has
now increased in value the borrower can if the local
housing association permits to remortgage and free up
the equity in their share.
