What deposit do I need for a Shared Ownership home?
First of all – what exactly is a deposit? Generally, ‘deposit’ refers to the amount of cash a customer puts down when buying a house. If you buy a house for £100,000 and put down a £10,000 deposit this is a 10% deposit and the mortgage described as being 90% ‘loan to value’.
Since the credit crunch, mortgage lenders have tended to offer preferential rates for customers with larger deposits. The great news about Shared Ownership, and the key to its appeal, is that it is usually still possible to buy with a relatively small deposit. This is because you can often put down as little as 5% and this is only in relation to your share.
To give some context, lets say that we have an apartment available on a part buy part rent development in London, E1W. The apartment in question is for sale at £520,000 so to buy it outright you would need close to £100,000 to cover stamp duty and deposit. With Shared Ownership, you can purchase a 25% share for £130,000 and put down a 5% deposit of just £6,500 and stamp duty may not be payable (check with your solicitor; deposit etc subject to mortgage availability).
Even with Shared Ownership, it still helps to put down a larger deposit but the good news is that with our Shared Ownership property website, you can adjust the deposit amount for each property and see how this potentially effects your mortgage payments.
The bottom line is that you do generally need a deposit these days to buy a property – 100% mortgages are more or less gone – but the Shared Ownership scheme typically requires a much lower deposit than buying traditionally. Hence, the scheme is referred to as ‘affordable’ housing.