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Shared Ownership Mortgages With Bad Credit

Need Help Getting a Bad Credit Shared Ownership Mortgage?

Shared Ownership Mortgages With Bad Credit

When the government recognised the increasing difficulties for borrowers struggling to get a foot on the property ladder, they introduced a number of schemes designed to give potential home owners a much needed helping hand. There’s one scheme however, that has already been helping people for some time – the shared ownership scheme.

If you’re on the lookout for a property of your own but are concerned that limited funds and a bad credit rating could stand in your way, speak to Amber Mortgage Solutions today. Our team of experienced bad credit brokers can help to find a shared ownership mortgage that’s right for you.

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Speak to our specialist advisers today.

01702 619 221

Shared Ownership Mortgages Explained

So what is shared ownership? The shared ownership scheme allows people to buy a share in their home even if they cannot afford a mortgage on the entire value of the property.

The buyer purchases a share of the property – usually 25%, 50% or 75% – and the remaining balance is owned by a government-backed housing association or private investor. More often than not, the homeowner will then pay rent on this balance.

With shared ownership for bad credit, if your circumstances change and you can now afford more, then you can increase your share in the property. For example, if you start out with a 25% share then you can increase this to 50%, 75% or with some schemes, this can be increased to 100%, giving you full ownership. As your share in the property increases, the rent you pay to the housing association will decrease accordingly.

People seeking a shared ownership mortgage also need to be aware that only properties offered by participating government-backed housing associations, typically new builds, can be purchased under the scheme.

Who Can Apply For a Shared Ownership Mortgage?

Those who can apply for a mortgage under the shared ownership scheme include:

  • First-time buyers
  • People who have an existing mortgage under the shared ownership scheme and wish to move property
  • People who have previously been homeowners, but do not own a property now and cannot currently afford to buy one
  • People who earn less than £80,000 per annum (£90,000 for those living in London)

Whilst the criteria for shared ownership is considered very flexible in terms of lending high loan to values (LTV) to people with adverse credit, it is still important that you are able to demonstrate that you can afford your mortgage and rental payments, as well as put down the required deposit.

Here’s what our client’s have to say!

Do I Still Qualify For Shared Ownership With Bad Credit History?

Getting a bad credit history shared ownership mortgage can seem tricky. Negative records such as IVAs, CCJs, defaults or bankruptcy on your credit report can result in lenders regarding you as more of a risk, reducing your choice of mortgage deals.

Fortunately, whilst a history of adverse credit can restrict the number of lenders available to you, it doesn’t mean the end for your property ownership journey. There are specialist lenders out there who will be happy to consider your application and still offer you a competitive deal on a bad credit mortgage for shared ownership.

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Shared Ownership With Bad Credit

Someone with a clean credit report will typically only be expected to provide a small deposit of 5%. However, if you have a recent history of bad credit or serious adverse credit incidents, such as property repossession or a bankruptcy, then you might be asked to provide a deposit of 15% or more. It is also more likely that you’ll have to pay a higher rate of interest on your loan.

Higher rates of interest and a slightly larger deposit however, are a small price to pay if a shared ownership mortgage is currently your only way to becoming a home owner.

Affordability is a big factor when it comes to lenders approving any mortgage application. Because of this, you must be able to prove that you are capable of paying mortgage and rent on a property, on time.

For a better idea of what your credit history means for your application, the best first step you can take is to obtain copies of your credit report. You can do this for free from each of the UK’s biggest credit reference agencies, Callcredit, Experian and Equifax.

Finding Bad Credit Mortgage Lenders For Shared Ownership

Getting a bad credit shared ownership mortgage doesn’t have to be a struggle. At Amber Mortgage Solutions our specialist bad credit brokers take great pride in helping to secure our customers the best deals on the market to suit their needs.

Regardless of your credit score and history, our unlimited access to the market and exclusive rates means we’re able to find you an affordable bad credit shared ownership mortgage, alongside personalised mortgage advice.

Speak to your friendly mortgage advisor

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01702 619 221

Open: Monday - Friday 8:30am - 5:30pm

How Do I Know if I Have a Bad Credit Rating?

For some, they may have no real idea they have bad credit until they are declined a mortgage by a high street lender for the first time.

However, for others it may come as less of a surprise to learn that their credit history is far from perfect. You may be receiving letters from credit card companies, are aware of missed payments or are being visited by debt collectors.

The only way to know for sure what condition your credit history is in, is to secure a copy of your credit report.


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How to Access Your Credit Report

It is now easier than ever to obtain your own credit report and see for yourself how you might fare in getting a mortgage.

Once a mortgage application is submitted, the lender will access your credit file information to assess your suitability for a loan. So, if you’re concerned about having adverse or bad credit, we would encourage you to take action sooner rather than later, and obtain a copy of your credit report. This can be done for free, from a wide range of trusted online providers.

Need help getting your credit report? Contact us today and speak with a member of our friendly team for advice.

I Have a Bad Credit Rating – How Much Can I Borrow?

When looking at how much a person can borrow, the first thing many lenders will examine is your ability to afford the loan. This means they will need to look at your income – or income(s) if it’s a joint application – as well as your regular outgoings and other credit commitments.

In addition to looking at affordability, a lot of lenders will also consider your maximum income multiple. For example, 4x or 5x your income(s), depending on the lender.

With lenders now using such diverse methods to assess the extent to which you can afford a potential loan, the best way to prepare would be to discuss your situation with one of our professional advisors.

Having experience of working with bad credit lenders, we can guide you on your next steps to getting the mortgage you need.

Quick FAQs

Have a question about bad credit and shared ownership?

Take a look at our extensive FAQ section for the answers to some of our most commonly asked questions, below.

When you purchase a share of a property on a shared ownership scheme then you may be required to pay Stamp Duty.

Stamp Duty Land Tax is required to be paid on purchased properties over a set amount – currently over £125,000 – in England and Northern Ireland. This can be done either as a one-off payment based on the total market value of the property or you can choose to pay Stamp Duty in stages. If you do decide to pay in stages, you will only be required to make one payment towards this at the time of the first purchase, and then no further payments will need to be made until you own 80% share or more of the property.

With the shared ownership scheme you’re able to purchase properties owned by a government-backed, qualifying body.

Generally this can mean housing association and local authority homes. Shared ownership homes are also always leasehold.

The minimum share of a property that you can purchase on a shared ownership scheme is 25%. The maximum share that you can purchase is 75%. If you want to own more than this, then the next step would be to purchase the property outright.

Once you have purchased the minimum 25% share of a property, you can go on to purchase more shares in the property up to a maximum of 75% - this is called ‘staircasing.’

It is worth remembering that when purchasing more shares in a property, the cost will always be based on the property’s current valuation. So this may cost more or less than what you initially paid for your original share, depending on whether the property’s value has increased or decreased.

The amount of rent you pay will be calculated depending on the individual housing association or local authority you buy with, based on the percentage of the kept equity – usually 3%.

Consider this simple example - if you purchased a 50% share of a £200,000 property then the kept equity would be £100,000, the amount on which you would be paying rent. Based on a standard rent calculation of 3%, this would make the cost of annual rent £3,000.

If you decide to sell your share of a shared ownership property, then you will be subject to certain restrictions. Firstly, the co-owners or local authority or housing association, would have the right to buy your share directly. If not, they may have the right to find a buyer themselves.

Once the property has been valued, a contract of sale has to be signed and a solicitor found to oversee what is known as the ‘nomination period’, a two month time frame in which the local authority or housing association can try to find a buyer for your share of the property. If the property is successfully sold during this period, then you will receive all information before the sale proceeds.

However, if your co-owner is unable to find a buyer within the nomination period, then you are free to attempt to sell the property yourself either privately or with the help of an estate agent.

If no buyer is found, you may then be giving the option to buy out the shares of the property yourself, then go on to sell the entire property as its full owner. This type of purchase and sale can be referred to as ‘simultaneous staircasing’.

Contact us today! Our friendly advisors will be happy to talk you through the next steps available to you and help you on your way to obtaining the mortgage you need.

We’re here to help you, not judge you, so call us on 01702 619 221.