Published 5 September 2019 · Last reviewed 5 September 2019 · Older article — see current rates
Can you buy a property without a deposit?
Yes, you can buy a property in the UK to live in without a deposit. I am an independent professional Mortgage Broker and before I launch into the solution you must be willing to put aside pre-conceptions and vanity as for some people this option is ruled out before it hits the block.
Shared ownership has an unwanted stigmga and to me it’s difficult to favom why. The scheme predates the government acclaimed Help to Buy scheme and is still going strong.
Not unlike Help to Buy the property type is typically ‘new build’, the interior can often be ‘bespoked,’ to your individual taste, and if in the right location could prove a greater starter home for first time buyers.
It is possible that those who debunk the Shared ownership scheme feel that the property is not theirs. It is true that a proportion of the property is owned by the housing association but the same could be believed at the Help to Buy Scheme with the governments co-ownership. In fact, if you pulled your head out of the sand most properties are jointly owned by mortgage lenders if you think about it. And co-ownership does not stop you and your mates having a bbq in the garden when the World Cup is on!
Shared Ownership allows you to buy a percentage of a property. The segment typically starts at twenty-five per cent. However, it is normally possible to buy a seventy-five share at the outset which would replicate the Help to Buy proportion. The remaining share sits with the Housing Association and a levy in the form of “rent” is made for the privilege. This rental payment starts at inception.
You can at your convenience buy the remaining shares at a future date. The exact terms will be in the individual contract and again its normally in minimum percentage chunks until the property is fully owned. This is called “staircasing”. You can also sell the property before it’s owned outright and the proceeds are divvied up pro-rata.
Where I see the value as a Mortgage Broker is a 100% mortgage is available on your share. So if the property is worth £400,000, and you buy a 25% share for £100,000 the mortgage lender can lend the full £100,000 i.e. no deposit.
Like all mortgage,s this would be subject to status checks with the slight addition that the rent payment would need to be considered as a commitment in the affordability assessment.
Let’s face it saving 5% as would be necessary on a conventional mortgage or indeed a Help to Buy one on top of stamp duty and legal fees and that’s not easy for most first time buyers, many of whom are saddled with student debts before they start. Strike a chord?
It’s often a case of simply “getting on the ladder” and having a place to call home. It makes life more bearable and certain particularly if you have started a family or relocated for a job.
So keep an open mind.
My last point is to seek independent Mortgage Advice. It’s easy to agree to take the Mortgage Broker linked with the housing association but they may have a hidden agenda, to say; help to push the property price up once they have reviewed your finances. It’s simply not worth the chance to steer clear of tied-advice.
Niche Advice can arrange 100% mortgages for Shared Ownership customers and is fully independent.