Published 26 Aug 2014
Shared Ownership Mortgage Products Explained
When choosing a mortgage it is crucial to seek independent professional advice from an experienced mortgage adviser, who can discuss the various options available taking into account details of the property as well as personal circumstances. This is why we’ve asked one of our panel Mortgage Advisers, De Havilland Group Limited, to explain the mortgage products available to Shared Ownership purchasers.
Not all mortgage providers offer loans for Shared Ownership
Only certain lenders offer Shared Ownership mortgages and this will depend upon the level of deposit available, whether the property is New Build or a Resale property, a house or a flat and even the type of construction including the number of floors and whether there is the presence of commercial premises in the development.
Choose capital repayments
It is a requirement that the mortgage should be on a capital repayment basis, which means the amount borrowed is being repaid over the term of the loan but the individual then has the option to choose whether they are going to have a fixed or tracker rate, the length of time that rate will apply and the term over which they are going to repay the mortgage.
Fixed rate mortgages
Fixed rate mortgages are currently proving to be very popular because interest rates are historically very low and are expected to start rising fairly soon. The fixed rate is perfect for those who like to know exactly how much they are going to pay over a given period of time enabling them to budget their finances. Most lenders give the option of fixing the interest rate for 2, 3 or 5 years. Often people are looking for their mortgage adviser to make a specific recommendation of the best period but this can be difficult to do as unfortunately we don’t have a “crystal ball” and it depends upon what an individual feels most comfortable with and what their future intentions might be.
Tracker rate mortgages
Tracker rates are also available which could either be linked to the Bank of England Base Rate, which is currently 0.5%*, or to the lender’s own variable rate. Typically these products are available over 2 or 3 years and occasionally for the lifetime of the mortgage. They only tend to be available if the applicant is putting down a larger deposit and aren’t proving to be that popular due to the fact that interest rates are almost certainly going to rise shortly and therefore don’t offer the guaranteed payment for a period of time that the fixed rate does.
At the end of the fixed or tracker period it is possible to choose another product with your existing lender or switch your mortgage to a different lender so it is important to seek independent advice again at this time.
*Correct at date of publication