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Challenges of Shared Ownership Mortgage


The Challenges of Shared Ownership Mortgage and Different ways to Repay the Capital

Repaying a mortgage is usually challenging. Over the years, lots of financial changes occur which might positively or negatively affect the individual’s ability to repay. However, there are several ways to repay which might make the whole process easier.

Repayment mortgage–In this payment method, a flat amount is paid to the lender at the end of each month, which covers the interest for that month on the outstanding loan, in addition to a repayment of part of the capital. The flat amount is usually calculated so that the whole of the loan will have been repaid by the end of the mortgage term.

Interest-only mortgage –In this repayment method, the payments to the lender cover the interest only and no capital is repaid, thus by the end of the mortgage term, the full amount of the loan is still outstanding.

Endowment mortgage–Here, the capital is planned to be repaid at the end of the mortgage term from the maturity value of one or more endowment policies.

An investment backed mortgage–This is also an interest only mortgage where the capital is planned to be repaid at the end of the mortgage term from the proceeds of an ISA or other investment plan. This is also known as ISA mortgages.

Pension mortgage: Here, the tax-free cash lump sum from a personal pension scheme is used to repay an interest-only mortgage at retirement.

The challenges of shared ownership

  1. There are maintenance charges

Maintenance charges are usually charged on shared ownership mortgages and can increase in the future. Although the monthly mortgage repayments, added to the rent will still make shared ownership cheaper when compared to buying the property outright. Do well to find out how you will be expected to pay for more significant parts of the maintenance. Bear in mind that although you own a share of the property, you will still be responsible for paying a percentage of the full maintenance and repair costs.

  1. No renting is allowed

There is also the likelihood that there will be restrictions on your ability to rent the property out and in most of the cases sub-letting is not allowed.

  1. Buying up increased shares in your property come with extra fees

There are several costs associated with shared ownership mortgages such as the Legal expenses (you will require a solicitor), Valuation fee, this will arise as your independent mortgage advisor willask a surveyor to confirm the current market value of the property. Stamp duty which you can pay in stages or make one-off payment in advance based on market value of the property. Although this may not be applicable to your circumstances. You will also pay Mortgage fees if you are applying to change lenders to access better interest rates or buy extra shares. you will need to pay You will also pay any penalty your existing lender may charge you because you are terminating your mortgage with them.

  1. There are restrictions on what you can do

There are restrictions within your lease and you might be required to ask for the housing provider’s permission in writing before you make any structural changes to your home or even redecorate it.

  1. Risk of negative equity

This is because. If house prices fall, you may fall into negative equity and also lose money if you try to move after some years and this is because new properties include an extra premium on the sale price thus, their value depreciate as soon as you move in.  Buying is more beneficial if you intend to stay there for a number of years. To avoid this,make sure you get the exact property you want to avoid having to move out after a short period.

6.Problems with selling your share when moving home

Selling the property is usually not easy because the housing provider is usually required to have the right to buy back the property before it is marketed to another person.  If the provider fails to find a buyer after a period of time, you are free to market your share of the property through an estate agent or yourself, but you will be required to find a buyer who fulfils the housing providers eligibility criteria for shared ownership and your pool of potential buyers may be decreased because not all banks provide shared ownership friendly mortgages to people.[/vc_column_text][/vc_column][/vc_row][vc_row el_class=”seo-link-sec hide”][vc_column][vc_empty_space height=”50px”][vc_column_text][slick-slider category=”28″ design=”design-5″ speed=”2000″][/vc_column_text][/vc_column][/vc_row][vc_row el_class=”call-out-sec stretch-sec” css=”.vc_custom_1568018042545{background: rgba(0,0,0,0.88) url( !important;background-position: center !important;background-repeat: no-repeat !important;background-size: cover !important;*background-color: rgb(0,0,0) !important;}”][vc_column][vc_column_text]

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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