They are designed for buyers with very little deposit who are looking to purchase property through Shared Ownership and Social Housing Schemes.
They will lend up to 95% of the equity share, for shared equity buyers. This is perfect for those contractors, freelancers and self employed professionals that are struggling to get their first home due to lack of deposit.
The great news is that they're also a contractor friendly bank (yes you did hear that right). Contractor incomes are assessed from a generous multiple of their annualised contract rate (up to 4 times income). This use of your contract rate alone avoids the need for submission of company accounts, which first time contractors typically don't have, and that will not in any case truly reflect your income.
Shared Ownership Mortgage schemes are used for part buy, part rent schemes commonly known as shared ownership. These types of mortgage scheme are popular with first-time buyers because they only need to find a fraction of the deposit and mortgage amount needed to buy a similar property on the open market.
Shared ownership is the most common way of purchasing affordable housing from a Housing Association or Registered Social Landlord (RSL). It allows you to purchase a share in a property, which can be anywhere between 25% and 75% with 50% being the usual average.
As when buying a property in the conventional way, you organise a mortgage to cover the cost of the percentage you are buying and then you pay a low rent on the outstanding part.
Full market valuation - £100,000
Equity share being purchased 75% - £75,000
Your Deposit - £3,750 (5% of £75,000)
The scheme also offers some excellent incentives, such as:
* £250 towards legal fees or
* Refund of valuation (up to £550) or
* A combination of £250 towards legal fees and refund of the valuation fee (up to £550)
It's important to note that these products can only be taken on a repayment only basis and a Product Fee is applicable.
Once you have purchased your share in a property, your investment doesn't have to stay at the same level. As your finances allow, you can buy further shares in your home, buying it outright if you want to. This method of house purchase is known as "staircasing".
Many of these shared ownership schemes, which often offer properties at a discount, are open to all comers through housing associations. Shared ownership mortgage schemes vary from lender to lender with some lending up to 95% loan to value on the purchased share.
If you are looking for a First Time Buyer mortgage and have very little deposit, Shared Ownership could provide the perfect solution. Why not contact Freelancer Financials to learn more about shared ownership or request a call back.
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Image:A very small house by jurek d