Co-Ownership Mortgage NI
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The information contained within was correct at the time of publication but is subject to change. Podcast recorded on 28/09/23.
Co-Ownership Mortgage (Part 1)
Diarmuid Phoenix explains how a Co-Ownership mortgage works and what to consider.
What is the Co-Ownership scheme?
The Co-Ownership scheme is similar to shared ownership in England, but it’s specific to Northern Ireland. It’s a not-for-profit organisation that helps people become homeowners who wouldn’t otherwise be able to, in terms of getting a deposit or borrowing enough money to get the homes they need.
There are three main options that they offer. The first one is the main ownership option, where you start by filling in a calculator on the Co-Ownership website to determine the value of a property you could purchase through the scheme.
Once you’ve chosen your home, you can buy 50% of it through a mortgage, and the rest is owned by Co-Ownership, and you pay rent on that share. The goal is to eventually buy the property back from Co-Ownership – either in parts over time. This process is known as staircasing. Or you potentially buy the remaining 50% during your next mortgage review if your affordability allows.
The second option is ownership for over 55s, which is essentially the same but with slightly different criteria. It’s mainly for people who want to buy a new home but can’t afford to do so in one go.
The third option is Rent-to-Own, which is suitable for people who have the affordability but have had credit issues. In this case, the property is purchased by Co-Ownership and rented to the customer for up to three years, after which they can buy it directly from Co-Ownership.
What type of property can I look for under the Co-Ownership scheme?
Funnily enough, I was asked that question yesterday by a client who had the impression that there were only specific properties available. In actual fact, it’s any property in Northern Ireland, as long as it’s under £190,000 in value and in good condition.
Who is eligible for a Co-Ownership mortgage in Northern Ireland?
There’s a list of criteria. Basically, anyone over the age of 18 living in the UK can apply. You should not currently own any other property or land elsewhere, and the property must be your main residence, not used for business purposes.
If you’re a married couple, cohabiting couple, or civil partnership, you must apply together. Adequate right to reside in Northern Ireland is required. No recent payday loans or home credit within the last twelve months are allowed. Debt relief orders, bankruptcies, etc., must be satisfactorily completed at least six years before applying.
It’s similar for a normal mortgage in that sense – with any of those ‘black marks’ on your credit file there’s a six year time frame before they are removed. Credit history is reviewed through credit reference agencies like Experian and Equifax, as well as services like checkmyfile.com. They assess your credit history to ensure there are no issues just as with a regular mortgage.
Is there an age limit for Co-Ownership in Northern Ireland?
No, as long as you meet the relative mortgage lender’s age limitations, which can vary from lender to lender.
How much deposit do you need for Co-Ownership or a Co-Ownership mortgage in Northern Ireland?
One attractive aspect of Co-Ownership is that one lender, Danske Bank, accepts applications with no deposit. Other lenders apply similar deposit criteria to standard mortgages, with a minimum deposit requirement of 5%.
We usually recommend that if clients have some money for a deposit, they consider putting down a minimum of 5%, as this not only avoids tapping into their emergency funds but also opens up more lender options.
While Danske Bank may offer good options for those without a deposit, having some deposit can open up your choices of lenders.
What are the costs involved in Co-Ownership?
For Co-Ownership, there’s an initial assessment fee of £100, which is paid to assess whether you meet the criteria. Upon a full application, there’s a £500 fee.
Additionally, there are solicitors’ fees, similar to those you would have for a regular mortgage. The specific fees may vary depending on the lender you are placed with, so it’s essential to consider potential fees associated with your chosen lender.
If someone has bad credit, how does that affect applying for a mortgage under the Co-Ownership scheme?
A full credit assessment is carried out to determine affordability. Credit reference agencies like Experian and Equifax are used to check credit history, including credit cards, loans, amounts of debt, missed payments, and more.
The credit history shows how you’ve managed to credit up to that point. It will all be considered as part of the decision of whether or not you qualify. So it’s a good idea to get a copy of your credit file and get us to have a look at it for you.
We obviously have the experience to know whether or not you would qualify – and also if there’s any fine tuning you can do to address any issues that might prevent you from getting a mortgage.
How long does the Co-Ownership mortgage process take in Northern Ireland?
From the initial decision in principle to the full mortgage offer, it usually takes about three weeks. However, the overall process, including solicitors and other factors, can take between three to six months before you get the keys to your new home.
Is Co-Ownership generally a good idea?
Yes, it’s a great idea because it gives people the chance to purchase a home they may not have been able to afford due to financial circumstances.
It might suit somebody who’s been married and now separated, or a single income family that wants to buy a home for their family. Affordability often just isn’t there for one person – but with Co-Ownership they’re able to do just that.
Once their affordability and income has increased they’ll be able to buy that house outright, step by step.
It’s also helpful for people who don’t have deposits. Obviously, with the cost of living crisis it can be challenging to save for a deposit – and Co-Ownership can help overcome that.
How does the Co-Ownership application process work?
First, you need to check that you meet the criteria. Then comes the most exciting part of the whole thing – house hunting. So once you find a house we submit a decision to principle along with supporting documents. If that goes through without any issues, the valuation is carried out.
Once all the information is provided, the offer is issued. Then it’s onto the timeframes we mentioned earlier.
How can a mortgage broker like Mint Mortgages and Protection help someone looking into the Co-Ownership scheme?
We can guide you through the entire process, complete applications on your behalf, and liaise with Co-Ownership directly. We have experience dealing with agencies like estate agents and solicitors, making it easier for our clients as we can take all that off your hands.
We provide support even after the mortgage offer is issued, helping clients until they get the keys to their new home.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The information contained within was correct at the time of publication but is subject to change.
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The information contained within was correct at the time of publication but is subject to change. Podcast recorded on 10/10/23.
Co-ownership Mortgage NI – Part 2
Continuing the conversation about a Co-ownership mortgage with Diarmuid Phoenix.
How does a Co-ownership mortgage work?
With a Co-ownership mortgage you’re effectively buying a house in Northern Ireland together with a company called Co-ownership. It’s similar to the shared ownership scheme in England.
You take out a mortgage, usually for 50% of the property and then you pay rent to Co- ownership, who will effectively own the other 50%. It’s not always 50-50, but it’s often set up in that way at the beginning. The idea is that you eventually purchase the remainder when it’s affordable to do so.
Can I apply for a Co-ownership mortgage as a First Time Buyer?
They’re perfect for this. First Time Buyers may not have the affordability to purchase the home they desire initially, but they still want to get on the property ladder. This often applies to families with single incomes or individuals who just don’t have quite enough income to buy a decent property for themselves. This is a way to get them started.
What are the advantages of getting a Co-ownership mortgage in Northern Ireland? What are the potential disadvantages?
The big advantage is that people who wouldn’t normally be able to purchase their first home can get on the property ladder. It’s great for single income families. There’s also a lender, Danske Bank, that allows people to buy through Co-ownership with no deposit required.
I would suggest that if you do have a deposit, put one down, but that is one of the major advantages of Co-ownership
One of the disadvantages is that you’re limited on the value of the property that you can purchase, with £190,000 as the maximum value. The property also needs to be in good condition. Any work required usually has to be funded by the vendor.
If you’re trying to buy a particular house where the seller has been asked to do some additional work and it’s not something they want to do, that can throw a spanner in the works – that property purchase could fall through.
Owning a percentage of the property rather than all of it, and part of it being owned by another entity could be viewed as a disadvantage in some ways. Also, not every lender does Co-ownership mortgages, and while there could be some lenders offering really good rates, they might not be in the market for Co-ownership, which is obviously a disadvantage to some people.
What documents do I need to provide when applying for a Co-ownership mortgage?
If you’re employed, you’ll need three months’ payslips. If you’re self-employed you’ll need two years’ tax calculations and overviews. You will also need three months bank statements for all accounts you’re using.
Say, for example, you have money coming into your main bank account, but you also use a separate bank account to pay bills, you’ll need details of all those. If you’re self-employed you will need business bank statements. You’ll also need typically proof of deposit, photo ID like a passport or driving licence and proof of address.
What is the maximum loan amount available for a Co-ownership mortgage?
The maximum amount possible will be £95,000, based on a 0% deposit mortgage. If you’re putting a deposit down, you’ll be borrowing less than that. With the maximum purchase price at £190,000 and ownership at 50%, £95,000 is the maximum mortgage that you can get through Co-ownership.
What is the interest rate for Co-ownership mortgages?
This will depend on whether or not you’re going for the zero deposit product. That will obviously have slightly higher rates for the higher risk that the lender is taking on.
If you’re putting down a 5% deposit, the rates will be similar to those of a standard 95% Loan to Value mortgage product. They’re very much in line with the rates for normal mortgages, but if you’re not putting the deposit down, the rate’s going to be higher.
What happens if I want to sell my share of the property in a Co-ownership mortgage?
This will depend on the value of the house when you’re selling it. Co-ownership will carry out an equity valuation at the time of the sale, and you’ll need to repay them either based on the sale price or the equity valuation – whichever is higher.
Can I make additional payments towards my Co-ownership mortgage to increase my share of the property?
You can make over payments like any mortgage – but that’s not going to increase your share of the property. That must be done through other means, one of which is staircasing. You can also take out a bigger mortgage to buy the share out fully.
Is it possible to staircase up and increase my ownership share in the future?
Yes, you can increase your share incrementally by buying smaller percentages – the minimum is 5%. You can borrow the additional amount on the mortgage when you could afford to – this is called staircasing.
The other option is that when you’re remortgaging the property and you come to the end of your deal, you buy it back all in one go if it’s affordable to do so.
How does remortgaging work for the Co-ownership mortgage?
When you come to the end of your fixed rate deal, like with any mortgage, you simply remortgage for the full amount that you have left on your current mortgage, plus the Co-ownership equity value. They will do an equity valuation on the property – that’s the amount that you need to pay them to buy them out completely.
Can I rent out my share of the property in a Co-ownership mortgage?
It’s possible, but you need to apply for Consent to Let to both Co-ownership and the mortgage lender. Otherwise you could end up being guilty of ‘scheme abuse’ – and that is against the law and punishable accordingly.
So it’s very important that before you allow anyone to rent out any part of your property that it’s discussed fully and applied for through those channels.
What happens if the property increases or decreases in value?
This falls again under the equity valuation which Co-ownership carry out when you’re either planning to buy them out, or you’re selling the property.
If your property has increased in value, Co-ownership would be entitled to their share of any increase. And similarly if it decreases in value, both the borrower and Co-ownership will have to take a hit on the loss, unfortunately.
Are there any restrictions on the type of property that can be purchased with a co-ownership mortgage?
It must be under the value of or under the value of under £190,000 and it must be in good condition. Some work is allowed to be done, but it can’t cost any more than £5,000 – otherwise it won’t qualify.
One-bedroom properties are not permitted, and neither are properties without central heating. The same goes for homes of unconventional construction, for example, prefab properties – but you don’t see too many of those these days. It has to be a traditional construction to qualify under the Co-ownership scheme.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The information contained within was correct at the time of publication but is subject to change.
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