A Guide to Shared Ownership Mortgages with Bad Credit in the UK

Shared ownership mortgages are those that allow you to purchase a specific percentage of the property. This percentage can be between 25% and 75%. You pay rent for the remaining portion. Over time, you can buy the remaining portion of the property, which is called staircasing.

Shared ownership has some key features:

• This mortgage has a lower deposit requirement compared to full ownership.
• Its monthly cost includes rent along with mortgage payments.
• It is available to people with lower incomes and first-time borrowers.
• You can gradually increase ownership according to your financial capacity.

A shared ownership mortgage is a very good way to purchase property. With this, the borrower does not have to pay the mortgage for the entire property at once. Also, with time, he can buy the whole property gradually by improving his credit score and financial situation. This makes things easier. It fulfils the dream of buying a house for people with lower incomes.

 Usually, shared ownership mortgage with bad credit sounds like an impossible task. However, by following the right financial strategy, you can take a mortgage and purchase the desired share of the property.

Let’s know how you can fulfil your dream of purchasing property by taking out a mortgage with a poor credit rating.

Shared ownership mortgage with bad credit – Not new in the market

Shared ownership mortgage is now easily available to bad credit borrowers. Thanks to the new-aged policies of the direct lending industry. However, you can depend more on direct lenders to get a mortgage with bad credit.

Direct lenders have flexible and borrower-friendly loan policies.

You can purchase property through a mortgage, irrespective of your credit score situation. You need to develop a strong repayment capacity to get approval on a mortgage with poor credit.

Therefore, asking what credit score you need for shared ownership is not of much use. As long as you can prove a payback capacity, you can get funds.

However, due to poor credit ratings, you have to pay a higher rate of interest. However, due to personalised deals, your repayments are affordable.

How to get a shared ownership mortgage hassle-free?

Now you don’t need to ask can you get shared ownership with bad credit? You know that bad credit mortgages are available now.

Here are some tips through which you can get bad credit mortgages with a poor credit situation.

• Check your credit report – It is very important to check your credit report from time to time, especially in bad credit situations. Your credit report is an essential factor when you are applying for a mortgage. Sometimes, due to mistakes, credit reference agencies mention the wrong details in your financial records.

As a result, your credit score degrades rapidly. It is essential to check your report to ensure that there are no errors in it. In case of any mistake, you can apply for a mortgage by getting it corrected timely.

This improves your credit rating and helps you present yourself as an authentic loan applicant.

• Improve affordability – Taking a shared ownership mortgage, which, too, comes with a bad credit situation, can be a big challenge. But if you manage your finances wisely in time, it becomes an easy task. For this, it is first necessary that you improve your affordability.

That can happen only when you have a strong repayment capacity. Stop unnecessary expenses completely. Do not become a slave to your lifestyle habits. Spend on necessary things. Expensive clothes, expensive cars, furniture, and fashion products, avoid buying all of these. Whatever spare income you have adds to your payback capacity.

• Manage debts – A bad credit situation is the result of pending obligations. Hence, you must work on debt management. Make timely payments on your other debts. Downsize your other loans or debts through refinance or debt consolidation.

This increases your capacity to repay your mortgage. Earlier, you were making multiple payments. After consolidation, you can pay only one loan instalment at a lower interest rate.

According to your capacity or financial conditions, you can choose to refinance as well to reduce the interest rate on all your debts. In simple words, use whatever method you find correct and relevant to reduce other debts. This helps you take a larger mortgage, which enables you to purchase a larger share of properties.

• Accumulate a bigger deposit – Your overall credit situation makes you a risky borrower for mortgage lenders. But if you manage to save a good deposit amount, it gives them a feeling of security. By doing so, you can get approval for a bigger loan amount. In this way, it is easier to buy a larger share of the property.

The deposit is usually 5% to 10% of the property value.  But if you pay up to 15% to 20% of the amount as a deposit, it is smooth to get a mortgage on flexible terms.

• Stay away from new credit – Now, when you are about to apply for a mortgage, you must avoid unnecessary hard credit footprints on your credit file. Avoid taking a new loan before applying for a mortgage.

If there are credit search footprints for other loans on your credit report, then it makes you sound credit-hungry. At the same time, the mortgage lender also gets to know that you are taking other new loans along with the mortgage.

In such a case, your repayment capacity becomes weak. There are already some obligations in your financial life, and you are also taking out a mortgage. At the same time, you are also applying for another new loan.

With so many obligations, the lender may have doubts about whether you will be able to pay the mortgage repayments on time or not. Therefore, avoid applying for any new loan as early as possible. By doing this, you can keep the application process smooth.

• Don’t apply to multiple lenders – Whenever you apply for a mortgage, apply to only one lender. If you apply for a mortgage from various lenders, multiple search footprints will be created on your credit report. This further lowers your credit rating. It can directly impact your mortgage approval chances. Therefore, you must do proper research before sending the application.

Research will help you choose the best lender for yourself. Shortlist the lenders matching your financial conditions and also receive loan quotes from them through a soft cheque. This gives an idea of ​​how much your monthly payment would be and the interest rate with that lender. Through this organized approach, you can choose the best lender for yourself and apply for it directly.

Conclusion

Share ownership is easily available to people with bad credit if you follow responsible behaviour in your finances. In the case of share ownership, you do not have to purchase the entire property at once. Therefore, despite having a poor credit rating, you can strengthen your repayment capacity with a little effort.

Secured loans for people with bad credit history in the UK are affordable anyway. This is because every loan solution comes with a personalised deal, especially direct lending. Most loan procedures are online and maintained transparently. Mortgage amount, interest rate and repayment plan are approved every time according to the individual’s repayment capacity.

Transparency is maintained due to online verification. You cannot hide any information or financial details. Otherwise, it may affect your chances of application approval. If you are planning to apply for a shared ownership mortgage, work on the suggestions given above. This makes your property purchase very easy.

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