The concept of the shared ownership mortgage has been around for a while, primarily for public sector workers such as teachers or NHS staff who could not afford the average house price of £200,000 in the South of England. However, due to the massive increase in house prices in the last few years, first time buyers such as maybe yourself, have found it increasingly difficult to get on the property ladder, which is why the Chancellor Gordon Brown has announced plans to help.
What is a shared equity mortgage?
Basically it will work along these lines. You as the property buyer will put up between 50-75% of the price of the property. The rest of the equity will be split between the Government and the mortgage lender, who become co-owners in the property. You would have to pay a small ‘rent’ of around 3% on the part you don’t own.
You can increase your stake in the property as and when your financial circumstances improve. If you decide to sell any gains would be split between yourself and your co-owners.
What are the benefits of a shared equity mortgage?
* As a first time buyer it allows you to get a foot on the property ladder, where previously it would have been too costly.
* The repayments would be a lot lower than on a full ownership mortgage. Repayments on a £200,000 home would be between £300-400 less a month.
* The scheme could also be less risky. If the price of your property declines, it is likely the Government’s stake would bear the brunt of the loss.
* The shared ownership mortgage is likely to stimulate new house building, which should increase the amount of properties available to the first time buyer.