Joint Shared Ownership

Can two or more people apply for a shared ownership mortgage jointly?

Absolutely. I probably see more single shared ownership applicants, but there are certainly no restrictions on two people buying with a mortgage on shared ownership.

The criteria, which we’ll talk about a little bit later, might shape who you do and don’t want with you on the mortgage application. There are also a couple of lenders that will accept more than two applicants.

Do all applicants need to meet the eligibility criteria individually?

Yes. With shared ownership there are two sets of different criteria to meet. There’s the lender’s criteria for the mortgage, and the housing associations also have their own criteria.

Affordability is a big part of it, so it’s always about making sure we’ve got all the details. Both clients need to meet the lender’s basic criteria and poor credit can have a huge impact. 

Most importantly, the mortgage application needs to match the housing association application. If two people are approved with the housing association, those same two people must be on the mortgage.

It may be that as we work through this, it’s not possible with one lender – and we can change the application details as we go down the line. In this case, we need to change the same details with the housing association to meet their requirements.

How is ownership divided between joint applicants? Do we split rent and mortgage payments 50-50 or can it be tailored?

It comes down to how that’s agreed between the applicants and their solicitors.

The lender’s requirement is simply that the mortgage is paid. There’s no specific requirement from a lender that 30% is paid by one applicant and 70% by the other, for example, or 50-50, or anything else.

As long as the clients jointly can afford that mortgage payment, it’s up to them as to whether one pays more – and perhaps the other pays the bills or for the shopping. How that’s managed is entirely up to you.

You might choose to structure an agreement with a solicitor to make sure everyone is happy, setting out how you own the property between you.

When I’m helping clients with a shared ownership application, I always assess that on a joint basis. All of the income into that household is combined, and the costs are paid out of that pot. If you want to restructure that jointly between you, you can.

Can we change the ownership percentages later on?

There are two sides to this question. If it’s about whether a client can buy more of the property in future, then yes, although there are some caveats. 

Or, the question might be whether you can change the ownership split. Perhaps you agreed to a 50-50 split with the solicitors at the beginning and want to change that. Again, yes, it’s possible, but that would need to be dealt with by the solicitors.

What happens if one party wants to sell or exit the agreement?

It depends on the reason. Perhaps it’s a relationship breakdown, in which case we can see whether a lender will allow just one person to take over the mortgage. They might be able to stay in the property and buy the other person out.

We would also need to meet the housing association’s requirements at that point. They will want to be comfortable that the increasing cost to the person remaining in the property won’t mean they struggle to afford it. 

That’s also the same from a lender’s perspective. They don’t want to push clients into an agreement that’s too expensive for their income.

We also need to look at whether the property’s still right for that client. Perhaps it’s been the family home, but is it still the right size and cost for the future?

Ultimately, you could agree to sell the property, keep it, or one person can buy the other out if it fits the relevant requirements.

How is affordability assessed?

If we’ve got two applicants on that application, that’s always tackled jointly. That’s true regardless of the income set-up. It gives us a lot of room because we take all the income and expenditure into account for both applicants. 

It could be employed or self-employed income, benefit income or a combination of all three. Alternatively, if one applicant isn’t working, but is named on the mortgage, we need to account for the two people on one salary.

The affordability assessments always take into account all the income and all the expenditure. A broker will always look at whether we need all the income to make the case fit. There are plenty of lenders in the shared ownership space and they all assess income in their own way, with different calculations. 

We may not need a lender that uses all of the income, if that ends up costing more. You might be charged more interest and higher payments than necessary. Instead, is there a simpler lender with a lower cost deal?

Do both applicants need to be employed or have income?

With shared ownership applications, we often see applicants for two people in standard PAYE employed roles. We also see plenty of clients in a combination of employed and self-employed jobs, and some lenders look at benefit-driven income as well.

So you don’t have to be employed – you don’t even need to be earning an income at all. Where clients aren’t working, we just need to factor in the additional cost of supporting two people.

What is the minimum deposit required for a joint shared ownership mortgage? 

Technically, I have lenders that would look at it with no deposit at all. However I don’t think I’ve ever got clients a mortgage in this scenario.

That’s because with a shared ownership percentage of a property, the deposit requirement is very low, especially if we’re borrowing a mortgage of 95% on that share.

There can be a big jump in interest costs between mortgages, and in my experience it tends to work out better for a client to find that 5% than take a no deposit shared ownership mortgage. 

The difference in those monthly repayments makes it well worth getting the money together for a deposit.

Which lenders offer joint shared ownership mortgages? Are there many?

Yes, there are quite a few. It’s not the full panel we would have for a traditional house purchase, but I’ve got a really good spread of lenders available.

We can cover all aspects within that space, depending on whether it’s a straightforward case with clean credit and plenty of affordability, or if we need to stretch affordability and borrow a little more than mainstream lenders would lend. 

It is a smaller space, with fewer lenders than standard – but there are still a lot of high street names. 

Should we buy as joint tenants or tenants in common?

That’s one for the solicitors to deal with. There’s a case for both, and it varies depending on the clients’ circumstances. You need to take legal advice to make that decision.

What legal agreement should we have in place for shared property ownership? 

Again, you need to speak to a legal specialist. Have a conversation with a good solicitor when the time comes. Everyone’s circumstances are different, and that needs to be addressed with a good legal advisor at that point in time.

Can we staircase together, and at different times? 

Staircasing is where a client looks to buy a bigger percentage of the property. The most common approach is to buy either a 25% or a 40% share of the property at the start. Then, after a period of time, when we look to remortgage perhaps you’ve saved up or have come into some money, and you can buy a further percentage of the property.

That comes with the benefit of reduced rent, as you own more of the property. If we’re doing it as part of a remortgage, it means slightly higher mortgage payments, but that’s often balanced by the lower rental cost.

It’s important to remember that shared ownership is an affordable housing strategy. It’s there to help people who haven’t got a deposit or their income won’t allow them to buy a property on the open market. 

The more of that property you purchase, the more the next buyer has to purchase. In the cases I’ve come across, if you own a 40% share, you must sell a 40% share – although this might vary depending on the housing association.

If you own 75% of a property, there’s a good chance that somebody who can afford 75% of a property plus the rent, can potentially afford 100% of a home somewhere else. Be mindful that staircasing up to own more of that property may reduce its saleability and the available options when you come to sell.

That’s why the norm is to buy 25% or 40% of a home. We do see the occasional 50-50 purchase, but anything over 50% is rare.

Have you got anything else to add, or have we covered all we can for now?

We’ve covered most of it. My recommendation for all shared ownership clients is to start having these conversations as early as possible.

It’s important to understand where you stand with mortgage affordability and the rent due on a property. If you’re buying a new build, you often have a lot of control of the share you purchase. It gives you flexibility. 

I’ve certainly had clients who can’t borrow enough to buy a 25% share, because of the way that the rental impacts the affordability – yet we can actually get them a mortgage for a 40% share. 

It can be a lot of work on my side, so I always like to have that conversation nice and early with a client and get all the details. Each property needs to be assessed individually to see what’s affordable. While one home might need a more expensive lender, another may fit more comfortably within your affordability, and cost you less to buy.

We can play around with the percentage you buy to get you the most suitable package. So engage a broker really early for shared ownership, because there’s a lot more to look at and it can be more complicated.

Key Takeaways:

• Joint shared ownership is allowed for two or more people, but all applicants must individually meet both the lender’s mortgage criteria and the housing association’s criteria.
• Affordability is assessed jointly, combining all income and expenditure for both applicants, regardless of whether one applicant is working.
• The division of mortgage and rent payments among joint applicants is flexible and is decided by the applicants and their solicitors, as the lender only requires that the mortgage is paid.
• Staircasing, or buying a bigger percentage of the property in the future, is possible and can reduce rent, but owning a higher percentage (e.g., over 50%) may reduce the property’s saleability.
• It is recommended to engage a broker early, as they can assess each property individually and adjust the percentage share you purchase to find the most affordable and suitable package.
  
  

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

The Financial Conduct Authority does not regulate most Buy to Let mortgages. 

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.