Shared ownership offers an affordable way to buy a home. It enables you to buy a share of a property and pay rent at a discounted rate on the remaining share.
There’s a smaller deposit requirement compared with buying a home outside of the scheme. This is because it’s based on the value of the share you’re buying rather than the full property value so it’s much easier to save a deposit. The mortgage you take out is also only based on the share you want to buy, rather than the full value of the property. This makes it easier to pass a lender’s affordability checks.
But what if you’re still struggling to afford to buy a home, even via this scheme? Can you combine this scheme with another method to help cover your deposit or pass the affordability checks? For example, can you get a guarantor mortgage with shared ownership?
Can you get a guarantor mortgage with shared ownership?
Whilst you can, technically, be approved for a guarantor mortgage when buying a shared ownership home, it can be extremely challenging. Buying a shared ownership home is done on an owner-occupier basis, which means that all named parties are expected to live in the property. This is the opposite of a guarantor arrangement.
With a guarantor mortgage, the person agreeing to act as your guarantor signs a legal agreement to cover your mortgage repayments if you’re unable to make them. They are not, however, named on the deeds and have no legal rights over your property.
As such, very few lenders or housing providers agree to the combination of a guarantor mortgage for a shared ownership property.
Alternatives to help with shared ownership
This doesn’t mean that there aren’t other ways for you to get help with buying a shared ownership home.
- Use a gifted deposit. A gifted deposit is a lump sum that’s given to you, usually by a close relative, to be used as some or all of your deposit. It has to be given as a true gift rather than a loan that you’re expected to repay.
- Take out a joint mortgage. You can make a joint application to buy a shared ownership home. For example, you may want to buy a home as a couple or to buy a home to live in with a family member or a friend. You need to meet the shared ownership eligibility criteria to qualify, such as your combined incomes not exceeding £80,000 (or £90,000 in London).
- Save in a Lifetime Individual Savings Account (LISA). To help you save a bigger deposit for your first home, consider paying into a LISA. This is a government-backed tax-free savings account, with the government adding a 25% bonus to your contributions. The maximum contribution you can make each year is £4,000, which means you can benefit from a £1,000 bonus.
Explore your mortgage options
Our mortgage brokers are here to advise you on all of the options available to you. Whether you prefer to buy a shared ownership home or one that’s outside of the scheme, they can help you take the next step with your mortgage. Just give us a call on 01322 907 000 to discover your options and begin your mortgage journey.