A Guide on Shared Ownership Remortgages
Going for a shared ownership remortgage can be a great way to increase your share in a property or find a better mortgage deal. Read on to find out how!
A shared ownership property is one where you own a portion of the property with the remainder being owned by a third party such as a housing association. This gives people a way of getting on the property ladder without commiting to the full purchase. The property may be valued at £200,000 but you chose to purchase 50% for £100,000 & pay rent on the other portion. You can then over the years purchase the remainder of the 50% either all at once or in portions as & when funds become available. This may be made possible by remortgaging as the property value & your wages increase.
Read on to find out more!
What is a shared ownership remortgage?
As mentioned, on a shared ownership scheme you purchase a percentage of a property ranging from 25% to 75%. The remainder is owned by the developer or housing association & you pay them a rent for their portion. The aim is that, over time you gradually purchase additional percentages in your property until you end up owning 100%. This is a process known as staircasing.
If, using our previous example of purchasing 50% of a property valued at £200,000. To increase your ownersip to 75% you need to purchase a further 25% of the property. Assuming the property value hasn't increased this will cost you £50,000 (25% of £200,000). Therefore, if you are now able to afford a mortgage for £150,000 you could remortgage for this amount, redeem your original £100,000 mortgage & pay the remaining £50,000 to the housing association or builder.
What we recommend is that you speak to your lender before you attempt this! This is because your lender may offer you funds to increase your share in the property. For this to happen your lender is probably going to run a valuation assessment to check that there is enough equity on the property as well as an affordability assessment. This will be crucial for the lender to assess whether you’re a responsible borrower and if you’ll be able to afford the additional shares for a long period of time.
Why should I remortgage on a shared ownership property?
As we’ve said, the main and most popular reason that anyone is going to remortgage on a shared ownership property is to enhance his or her shares. This is because if the property increases in price then you’ll be the person making the biggest gain out of this.
Increasing your share in the property should also reduce the amount of rent you are paying. It's like a set of scales, as your equity increases the rent decreases.
How we can help you at Mortgages Online
We know that getting your head around things like shared ownership mortgages and remortgages can be a little tricky. But don’t be embarrassed or worried, this is where we step in! At Mortgages Online we have a team of experts who are on hand to help answer any queries that you might have about the current property market. Our services are completely free to use!
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