Shared Ownership mortgages with Bad Credit

Obtaining a Shared Ownership mortgage with bad credit might appear to be an uphill struggle, but when you know how to approach it, it needn’t be a difficult task. At Just Mortgage Brokers, we focus on finding ways to make applying for a mortgage much easier for you – the advisors in our specialist bad credit team understand the market inside out and know exactly which lenders to turn to find the right deals to suit both your financial needs and your credit rating.

With access to over 12,000 mortgage products, including exclusive deals and rates you won’t find available on the high street, we’ll be able to identify the right mortgage deal for you, regardless of your credit history and score. Furthermore, to give you the best chance of securing a Shared Ownership mortgage, we can help you to frame your mortgage application in the most favourable light, and provide you with additional personalised specialist mortgage advice that relates directly to your circumstances.

We’ve had years of experience working with a wide range of people, including first time buyers, and recognise that a Shared Ownership mortgage can be the best option for people with limited funds plus the additional burden of a bad credit rating. The world of mortgages, while still having its rules, is far more dynamic than it once was, and recognises that people and their fortunes change over time. Just because you’ve suffered from financial problems in the past, it doesn’t mean that you should be labelled as such forever.

So, if you have a history of bad credit and are looking to obtain a Shared Ownership mortgage, speak to Just Mortgage Brokers today for free initial advice and no-obligation quotes from our team of experienced bad credit brokers.

The level of deposit expected for a Shared Ownership property is no different to that for the lowest limit on a standard mortgage – 5%, in most cases. But the added bonus to this is that you will only be looking at 5% of the value of the share of the property you are looking to buy, so it will be a considerably lesser sum than if you were trying to buy the property outright.

You may think that, as the Shared Ownership scheme is aimed at people on lower incomes, applicants would be viewed as a higher risk, but this is not generally the case. However, as with any other mortgage, especially if you have an blemishes on your credit record, the larger the deposit you can supply, the better the terms or interest rate you are likely to get. So, the deposit you as an individual might need for an affordable mortgage on a particular Shared Ownership property might vary according to your circumstances. Please check with us to find out what kind of deal you are likely to get – you might get a pleasant surprise!

For the property itself, under the Shared Ownership scheme the property can be new-build or already existing, and owned by an approved qualifying body. This is usually a local authority or Housing Association, but can also include other bodies such as a housing action trust, development corporation, the Northern Ireland Housing Executive, or the Commission for New Towns. Shared Ownership properties are always bought on a leasehold basis.

For you to meet the criteria to purchase a Shared Ownership property, your household income will need to be under £80,000 (£90,000 in London), you will need to be a first time buyer, or currently renting from a housing association, or a previous home-owner who can’t afford to buy in your current situation. You will also need to prove you are not in mortgage or rent arrears.

You might also need to check with the Housing Association if they are willing to offer shared ownership of the property to someone with bad credit events on their record. Not all will object, but some will, and, as with a mortgage, much may depend on the nature of the adverse credit event, the amount of time since it occurred, and the steps you have taken to keep a clean credit history since.

As with any mortgage, lenders will have their own individual criteria for applicants, and will make assessments to satisfy themselves that you are on a firm financial footing, with a regular income, and ensure that the mortgage and rent payments will be within your financial means. Some lenders have criteria that mean they won’t lend to people looking for a Shared Ownership property, so you may need to deal with a specialist lender.

There are no government-imposed time restrictions on buying additional shares in the property, but individual local housing associations may include time restrictions in their lease conditions.

Unfortunately, the answer to this is yes – if you buy some or all of a property under a shared ownership scheme run by an approved government body (such as a Housing Association), then you will still have to pay Stamp Duty Land Tax on the value your purchase over £125,000 (at time of writing) in England and Northern Ireland. Different taxation laws apply in Scotland and Wales.

For example, if your share of the property is valued at £150,000, you will pay £500 Stamp Duty (0% on £125,000 + 2% on £25,000 = £500).

However, if you buy a property on a shared ownership basis, you can choose to make the Stamp Duty payment as a one-off, based on the total market value of the property (known as making a “market value election”), or you can pay the Stamp Duty due in instalments. Paying the one-off fee under market value election means you will not need to pay any more tax after this, even if you buy an additional share of the property.

If you choose to pay in instalments, you will need to pay what is due on your first share purchase of the property, but won’t need to pay any more Stamp Duty until your share rises above 80% – at this point you may have to pay extra Stamp Duty Tax on previous shares if they are ‘linked’ to later shares.