Can I get a shared ownership mortgage with bad credit?

How does shared ownership work?

Buying a shared ownership property is different to buying a home outright. The property will be part owned by you and part owned by a housing association. Put simply, shared ownership means that you are buying a share of a property. This is usually around 25-75%.  A housing association will own the remaining share. Each month you pay a combination of mortgage and rent.

Many people find that their combined mortgage and rent for their shared ownership property is less than the rent they are currently paying. You will have the option to purchase more of the property as your finances increase over time, meaning you could eventually own the property outright.  This is known as Staircasing.

Am I eligible for shared ownership?

The eligibility for shared ownership varies in counties across the UK.  Your combined household income must be less than £80,000 (in London, it’s less than £90,000).  It can be for used by first-time buyers. It is also for those who used to own a home but can’t afford one now. You can also use the scheme if you are downsizing to part buy part rent a retirement property.

Many of the homes are purpose built new build properties.  So there is no need for large renovation costs or repairs. You will honestly be pleasantly surprised by what is on offer.

How do I get a shared ownership mortgage?

More high street lenders are now offering mortgages for shared ownership properties.  Most offer similar rates to their standard mortgage products. The deposits required are usually around 5-10% of the property share you are buying. However, as you are not buying 100% of the property, the amount you need to save on a deposit will be less.

Think about it:

If the total property value is £150,000 and you are buying a 50% share, you need a mortgage for £75,000.

10% of £75,000 = £7,500 as opposed to 10% of £150,000 which is £15,000.  £7,500 is still a lot of money, but more achievable.

Don’t forget that there are other costs you need to consider when buying a property.  Your mortgage provider will request a valuation of the property to confirm that the home is worth the sale price.  This is normally between £500 – £1,000, sometimes more.

There are also legal costs which can be around £2,000. Finally, there can be stamp duty land tax (SDLT) to consider.

Where can I apply for a shared ownership mortgage?

We have teamed up with John Charcol* to offer you whole of market mortgage advice. As an independent mortgage broker, they have over 40 years’ experience in finding the best mortgage rates for every type of buyer.

Simply complete the below form or fill it in on our shared ownership mortgages page and one of John Charcol’s expert mortgage advisers will call you back for a free consultation.

Can I get a shared ownership mortgage with bad credit?

Having a poor credit history can make borrowing money more difficult.  When it comes to being approved for a mortgage, whether it is for shared ownership or buying a property outright, a bad credit rating will always make the mortgage application process harder.

As a rule, banks are more reluctant to lend you money if your track record of previous borrowing is poor. Things that can affect your credit rating are late credit card or loan repayments, county court judgments (CCJs) or regularly going over the agreed limits of your bank account or overdraft.

It is always worth reviewing your credit history before entering the mortgage process to avoid any unnecessary delays or surprises. You can do this by visiting a site such as Experian.

So, you’ve received your credit history and it’s not great. Can you apply for a shared ownership mortgage?

You may find that the ‘high street’ lenders are reluctant to offer you a shared ownership mortgage with bad credit. However, there are other providers that may consider you for a shared ownership mortgage. The rates for your shared ownership mortgage could be higher than if you had a good credit history, so be prepared. This is because the lender’s exposure to risk is higher. For whatever reason, your credit history shows that you have not always been able to manage your finances. Although this is often through circumstance and not through choice, you must understand that the lender needs to protect themselves.

As always with mortgages, it is important to understand that non-repayment in line with the terms of the mortgage can end up in the repossession of your home.

It may all sound a bit serious, and well it is really.  But don’t be put off by ‘no’. There are some helpful resources online such as the Money Advice Service.

In the meantime, you can always have a look to see what is available in your area.  It helps when saving to have a vision of what it is you are saving for! Good luck.

Please note: MovingSoon is not authorised to give financial advice; the information and opinions provided in these articles are not intended to be financial advice and should not be relied upon when making financial decisions. Please seek advice from a specialist mortgage provider.