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Shared ownership is now a popular way to buy your first home. Because you only buy a share of the property, and pay rent on the rest, the property becomes more affordable. Joint ownership (buying with a friend) and shared ownership can sometimes be combined.

If you need to take out a mortgage to enable you to buy a share of a property, you’ll need to know how much you can borrow and what is the most suitable mortgage for your circumstances.

What is shared ownership?

Shared ownership is where you buy part of a property and rent the rest from a landlord, usually a Registered Social Landlord (RSL). Many RSLs are housing associations or housing trusts and the properties have usually either been renovated or built by them. The schemes are usually funded by the Government.

Some RSLs offer non-government-funded schemes, which run along the same lines, as do some private developers and building societies.

Shared ownership is especially suited to people on lower incomes who cannot afford to buy a home of their own at current market prices

To be eligible for some schemes (not all) you must be able to prove that you have a ‘housing need’ and are unable to afford to buy a property in any other way. The landlords running the schemes will consider what money you have coming in, and whether you have children, for example, which will affect your housing need. There are relatively few properties available for shared ownership and the demand is high, so be prepared to wait for a property to become available.

Under a shared-ownership scheme, you buy a share of a home with a mortgage or savings, normally around 25 per cent to 75 per cent, and you pay a subsidised rent to the housing association on the part you don’t own.

You may be able to buy extra share in the property, often in 10 per cent tranches. As you increase the share that you own, your rental payments will decrease.

Some people recommend that you should buy further shares in the property as soon as you can comfortably afford to do so, in order to maximise on any increase in the property market.

Buying additional shares is sometimes known as ’staircasing’. If you choose to do it, you may be able to buy shares incrementally until you own your home outright.

You will need to carefully consider the implications of buying the local authority share, as this could leave you with high repayments at the end of the loan period. You also need to think about the length of the repayment period.

If you decide to buy a further share, you will first need to tell the social landlord. The detailed procedure for this is contained in your lease. Your landlord will get the property valued and let you know the cost of the further share. Not all schemes allow you to buy further shares, and there may be restrictions on resale, especially in rural areas (see below).

You will have to pay the valuer’s fee yourself and should be given three months to arrange a mortgage and complete the purchase of the further share.

Prices of properties will vary according to location. You still have the rights and the responsibilities of home ownership, even though you will not own the property outright.

You can sell the property at any time but must you must tell the social landlord, in writing that you wish to move. You can either sell the part that you own, or - if you can afford to - you can buy the remaining share and then sell the property outright. You will benefit from any increase in the value of the property according to the share you own, but you will equally be affected by any fall in values.

If you want to make improvements to the property you are buying, you will need to ask for written permission from your social landlord. Although the landlord will make sure that the structure of your house is sound, it will be up to you to get any repairs done and decorate it both inside and out. If you are buying a flat then the internal decoration is your responsibility but the management fee you pay will go towards the general upkeep of the building, for which the social landlord is responsible.

If you do not own the property outright, clauses in the lease may enable the social landlord to nominate prospective buyers and to restrict the sale price to an independent valuer’s valuation. The reason for this is that the landlord wishes the property to remain available to people who are interested in shared ownership. Ask your social landlord whether either of these - or any similar clauses - are included in your lease.

In some rural areas, the social landlord may restrict your ability to buy further shares in your home or reserve the right to buy back the property at full market value. These arrangements are intended to provide a means of keeping low-cost housing available for rural communities. The social landlord will tell you if the home you want to buy is in an area where these restrictions apply.

It is possible to buy a property through shared ownership as joint owners. Up to four people can buy together but you will each have to apply individually and meet the eligibility criteria jointly.

Some banks and building societies are happy to lend on shared ownership properties and some may lend you up to 100 per cent of the share you are buying.

If you are buying a property that’s part of a block you will probably be charged an annual management fee.

The first step towards shared ownership is to contact your local authority, a housing association or a social or private developer.

The larger local authorities have offices dealing specifically with housing applications. Smaller local authorities usually have an officer designated to deal with housing issues in their area. Addresses and phone numbers of local authorities are listed in the State Service Section towards the front of the telephone directory.

To find out which RSLs cover the area in which you would like to buy, contact one of the offices below. For a more detailed list, visit the Housing Corporation website, where you can also find a search mechanism for housing associations participating in shared ownership.

You may be invited to meet to discuss your application further. The next stage is to look at the property available and agree a price and the proportion of the share you want to buy.

When this has been agreed you should then approach a mortgage company. The Housing Corporation at www.housingcorp.gov.uk offers helpful guidance on things to consider when buying through a shared ownership scheme.

Questions to ask your local shared ownership operator (builder/developer/RSL, Housing Association) when considering shared ownership include:

This is a type of ’stepping stone’ mortgage where you are able to simultaneously rent and own a home. A Shared Ownership Mortgage enables qualifying applicants to buy a share in a property, usually part or fully funded by a mortgage, and pay rent to a housing association on the rest. The rent is normally a percentage of the value of the share of the property owned by the housing association and is kept as low as possible. Eventually you will then have the right to buy the housing association’s share of the property. As a result of this special type of mortgage you are potentially able to buy a bigger property than you would normally be able to afford.

If you are a potential first-time buyer who is considering the options available for buying your first home you may have come across the Shared Ownership Mortgage as a viable path towards realising your first house ambitions. So, what pitfalls should you avoid and what benefits could you reap when it comes to the Shared Ownership Mortgage?

Evaluating the disadvantages and advantages of any potential future project is always a necessity before deciding to proceed. Given that a house is usually the most expensive thing that you will ever purchase, it goes without saying that it is imperative that you carefully weigh up the options before you.

FirstRungNow is an organisation which strives hard to help you with those tough first-timer decisions and so we highly recommend that you have a look over some of the benefits and pitfalls a Shared Ownership Mortgage may bring you.

· It helps you get that all-important first foot on the property ladder.

· It enables you to buy a bigger house than you could normally afford.

· Your combined rent and mortgage repayment may be less than if you had opted for a standard mortgage.

· There is little or no deposit.

· You are entitled to tax relief on your mortgage.

· It exempts you from Stamp Duty payment.

· It acts as an investment allowing you to receive a share of the increase in the value of the property, should you decide to sell.

· You save money on maintenance and redecorating as the landlord is responsible for the property’s structure and the property is normally newly built or refurbished.

The problems experienced will largely depend on the terms of the Shared Ownership Mortgage scheme you decide to undertake, which is it is reccomended that you thoroughly read through the Terms and Conditions before you agree to a certain scheme. However, some of the more general problems may include:

– in terms of the type of property available for Shared Ownership and number of properties in the desired area.

– You may not qualify to participate in a Shared Ownership Scheme.

You do not fully own the property and, as such, may have to request permission from the housing associations regarding redecoration or home improvement.

These are applicable should you wish to increase your property share.

Make sure you know if there are any selling resitrictions associated with the property and also what help the RSL can offer you in this respect.

The rising house prices have caused a great deal of concern for most of us. Even the Government has introduced comprehensive Shared Ownership Mortgage schemes as a means of combating the run-away house prices. For many first-time buyers thinking about taking out their first mortgage, rising house prices are making them nervous about even looking into buying their first houses. In fact, it might not be as daunting as it first seems. So, what do you really need to know about getting your first mortgage?

There is a solution to most things in life and getting your first mortgage is no exception. If you are prepared to do a little research and ask for advice you will find that even as a first-time buyer, there will be a mortgage to suit your personal needs. Recent surveys suggest that more and more first-time buyers are using the Internet to do this initial research, so why not follow their lead? Initially you should be researching:

It is then essential that you sit down and work out how much money you have for the deposit and how much you will be able to afford to spend on your mortgage repayment each month. You should also consider whether you might qualify for a Shared Ownership Mortgage.

Armed with these pieces of information you should then seek the advice of an independent mortgage adviser.  Here are a few guidelines for how to tackle this initial meeting:

The main thing is to be up-front and honest. Remember; a good, professional mortgage adviser will do their utmost to find the best deal out there for you.

– ensure that you fully research everything, from where are the best areas to buy, to exactly how much you can afford to spend on your house. You are spending a lot of money and therefore it is worth making sure that you have the maximum information possible about every aspect of the process.

– ensure that you talk to as many friends and family members as possible and get lots of advice from them - you can learn a lot from other people’s experiences. Also seek professional advice along the way – whether it be from an estate agent or an Independent Financial Adviser (IFA). These professionals are employed to help you, so you might as well use them.

– In every part of the buying process, make sure that you shop around for everything; finding the house, finding the estate agent, seeking mortgage advice, the solicitor etc.

– Over the course of your house-hunt you will view many properties and if you view more than one a day you will find yourself in the position of confusing all the houses. Therefore, it is best if you print out a viewing checklist and keep a record of each and every house you visit.

– No matter what part of the house-buying process you are in, you need to continually ask questions. These questions can range from questioning yourself about your reasons for moving and how much you can afford to spend to questioning the professionals, such as mortgage advisers, and the house-owners. Whatever part of the buying process you are in you must ask the maximum questions possible. This is the only way to make sure that you make 100 per cent informed decisions.

A Shared Ownership Mortgage enables you to buy a share in a property and pay rent to a housing association on the remaining share. It’s specifically aimed at people who may be finding it difficult to get their first foot on the property ladder.

The gap between the housing supply and demand has been identified as the possible cause for the severe increase in house prices. In order to lower house-price inflation and make it more sustainable, the Government has proposed making more houses available. The Shared Ownership Mortgage is a valid alternative for first-time buyers who need a little help to get their foot on the first rung of the ladder.

Surveys suggest that the number of first-time buyers is at an all-time low and this is thought to be because average house prices are now five times the average income. In fact, buying a home in a standard way is unaffordable for most first-time buyers. The Shared Ownership Mortgage may provide the only option for many first-timers buying their first property in today’s current climate.