Buying a house is simply expensive. Every year the real estate market witnesses a quick rise. It increases the cost of the residential properties and mortgage. However , according to HomeOwnersAlliance, “ The Bank of England interest rates halt at 4.5% in March 2025. It is expected to fall to 4% this year.”
Thus, this could be an ideal year to purchase a home. Low-income individuals or those with bad credit may seek shared mortgage quotes. It is also known as part part-rent and part-buy scheme. You can buy around 25-75% of the property and pay rent on the rest. Later, you can buy the remaining share when you can afford to.
Generally, shared ownership is allowed only for new-build homes and existing properties. The blog discusses getting a shared mortgage with bad credit score. If seeking one for your needs, read ahead.
What does a Shared Ownership Mortgage mean?
Shared mortgage ownership is a financial facility for tenants to own their homes. It allows the renters to buy a percentage of the property instead of the whole property. One can do this while paying rent on the existing rental space. Renters can decide the percentage they want to buy through the mortgage.
The remaining one stays with the housing association. It is an ideal way for first-time owners to own a home. Individuals with limited savings may consider this approach. Here is how the shared mortgage ownership works:
- Buy a share of the desired property (25%-75%) using mortgage
- Pay mortgage on the share you own
- Pay rent to the housing authority on the share they own
- Buy more share in the property using staircasing. It increases your ownership percentage
- Pay mortgage payments, rent and maintenance and other fees to own the property later
Who may get a shared mortgage with bad credit and no deposit?
Individuals with a bad credit history struggle to qualify for shared mortgages. It is because the pending bills reveal the borrower’s inability to make mortgage payments. It also reveals that the borrower may not be able to manage the maintenance, rent, and mortgage payments given other liabilities.
Thus, individual loan providers charge deposited money. Providing a higher deposit may help you qualify for the mortgage. Identify the share you hold and the property cost accordingly. Ask how much of a deposit you need to pay.
If you don’t pay any deposit, the loan-to-value ratio will be 100%. This is because the mortgage covers 80% of the share and 20% of the rental payments. It does not affect the mortgage size. You may get a mortgage for bad credit with no deposit requirements under some conditions. Although it may vary, the basics stay the same. Here are some conditions where you may get a mortgage without a deposit with bad credit:
- Provide a guarantor
A guarantor-based mortgage application increases the chances of qualifying. If you have someone like a mom, dad, brother, or wife who may help you by guaranteeing the payments, you may not need to provide a guarantor. Choose the person rightly, as a mortgage is a long-term agreement. The person would be liable to pay if you cannot.
- Improved credit rating
Individuals with low pending bills, settled CCJ, no long credit card bills, or pending rent may qualify. It is because these aspects, along with improved income, increase your affordability. It reveals that you can manage a mortgage and maintenance now. Your credit reveals that flexibility. So, you may get a shared mortgage with bad credit and no deposit requirements.
- Choose 100% LTV shared ownership mortgages
Some loan providers offer 100% LTV on shared mortgages. It is ideal for individuals with low income, no deposit, or bad credit scores. 100% LTV means you want to borrow 100% of the property you want to buy. However, the calculation of the share is based on the value of the share you purchase. It is not calculated on the entire property. It thus eliminates the need for a mortgage.
How to get a shared ownership mortgage with bad credit?
Yes, you may get a shared mortgage despite bad credit issues. However, it is difficult to get one against a person with a good credit rating. Your options may be limited. Check the individuals catering to individuals with bad credit only. It increases the chances of qualifying then.
However, you must apply through a Shared Mortgage Scheme. It will help you understand the eligibility and other criteria well. Here are further strategies to get a shared mortgage with bad credit scores:
- Check the eligibility criteria
To get a shared home ownership mortgage, you must meet two criteria. The first one is the lenders, and the second is the government scheme. Here is the basic overview of who may get a shared ownership mortgage:
| Eligibility criteria to get a shared ownership mortgage from lenders (bad credit) | Eligibility criteria to get a shared ownership mortgage from the Shared Ownership Scheme |
| Individuals with CCJ, pending payments, or missed payments may qualify. However, one with bankruptcy and insolvency may not. | Your household income does not exceed £80000 or £90000 in London. |
| If you have debts older than 6 or 7 years, without heavy recent debts, you may qualify. | You need to be a first-time buyer, a former homeowner who cannot buy a home now, or an ex-homeowner who must leave their house due to a change in circumstances. |
| You can provide 5-10% of the property share you want to buy as a deposit on the mortgage. | The minimum age to apply for Shared mortgage is 18 years. |
- Pay off some bills and CCJ dues
It is important to analyse the dues or payments that you have pending to clear. It is because getting a shared mortgage is not easy without doing so. Firstly, paying off the debts reduces the burden over credit utilization. It helps you qualify for the mortgage easily.
Secondly, you may spot low interest rates despite a bad credit profile. Thus, begin with what you can pay. Generally, it is ideal to clear the heavy debt or high-interest debt first. Doing so will improve your credit score.
- Contact a reliable broker
If seeking shared mortgage for the first -time, things may get confusing for you. Understanding the basic aspects like- LTV, interest costs, deposit needs and eligibility may prove overwhelming. Here you may check brokers for bad credit mortgage for shared ownership requirements.
Compare the quotes and fetch the most affordable one. The experts may help you provide the right lender depending on your situation, the percentage of the property you want to own, and the lifestyle expenses. The person may help you understand the amount, rent, and maintenance that you must pay alongside the loan payments. You may also get assistance regarding the best ways to secure cheap quotes in a bad credit situation.
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- Understand the pros and cons
Yes, knowing the pros and cons of shared ownership is important. Check whether it is ideal for you. Here is the split:
| Pros of Shared ownership mortgage | Cons of shared ownership mortgage |
| Make smaller monthly payment in comparison to buying the whole property on mortgage | You must pay additional costs like- ground rent, maintenance alongside mortgage payments |
| You don’t need to provide much deposit if you buy the whole property on mortgage | You may not be able to make major change to the house unless you own it fully |
| You can staircase and buy a higher portion when you can | If you want to buy a higher portion than it may cost higher than what you pay initially |
| Grants a hope to first-time individuals to buy property without having a big lump sum | If you want to sell the share, you need permission from the owner |
- Understand your liabilities and get quote
After knowing the eligibility criteria and pros and cons, check the fees and costs you must bear. As mentioned above, you may be liable for rent and maintenance costs. Analyse your income, savings, and liabilities. Check whether you can manage such extra costs. Individuals with stable and decent incomes may consider shared mortgage ownership.
You just need to split and set direct debits for the payments. Enquire the maintenance and rental charges and compare properties. Beware of spam and hidden fees while searching.
Bottom line
If getting a shared mortgage with bad credit score, the blog may help. Identify the eligibility criteria and the nature of payments. Check whether it is the correct way to buy home according to your finances and lifestyle. If confused, contact experts to understand your choices better.
Compare the loan quotes, maintenance and rent costs. Identify the proportion of the property you can buy comfortably. Would you like to staircase in future? If yes, then choose your property portion to buy accordingly.
