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Author: Carl Shave-Director
Updated on January 30th, 2024

Shared Ownership Mortgages with Bad Credit

The banking crisis at the end of the last decade caused all banks and lenders to become far more cautious in their lending practices. Since then, it has been more challenging to get a mortgage as banks are now far less willing to offer loans to people unless you meet some quite strict criteria.

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Recognising that many people were facing difficulty getting accepted for mortgages or finding the finances to afford getting on the property ladder, the government introduced a range of schemes aimed at reducing these problems. Shared Ownership has been around for some time now, and could be a way to get a stake in your own home, and invest for the future.

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Shared Ownership Mortgages

The Shared Ownership Scheme is a government initiative to enable people who might not be able to afford the full mortgage on a property to instead own a percentage of it. If they have enough for the deposit, potential homeowners could purchase 25%, 50% or 75% of the property in question, with the balance owned by a local housing association. You would then make mortgage payments on the home loan covering your portion of the house, while paying rent on the rest to the co-owner.

There is some flexibility in the percentage of the property available for you to own. If your circumstances change such that a higher mortgage becomes affordable, you could increase your stake from 25% to 50% or 75% (or even 100% for full ownership in some cases), so more of your money will go into your home, and your rent will come down in proportion.

Read Our Shared Ownership Guide

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Fill out our quick and easy Bad Credit calculator below. We only require a few details to see how much you may be able to borrow.


Can I get a Shared Ownership mortgage?

The criteria for applying for a Shared Ownership mortgage is relatively simple, and the process has been designed to make it as straightforward as possible for those who need it most, while protecting it against fraudulent applicants. 

The Government’s Shared Ownership scheme is open to people who have found it difficult to raise a deposit and buy a house as prices have risen in recent years, generally fitting one of the following specific circumstances: 

  • First-time buyers
  • Those who already have a mortgage under the Shared Ownership scheme and who want to move
  • People who previously owned a property but do not own one now, and who don’t have the means to take on a full mortgage outright
  • Households with a combined annual income of less than £80,000 (or £90,000 in London), whether or not they fit into one of the above categories

If your circumstances match any of the above, then you should be eligible for a Shared Ownership mortgage, whereby you are able to purchase a portion of your home rather than the whole property – typically 25%, 50% or 75% – and thus only need to supply a deposit of the same relative size. The local authority will then own the balancing portion, and you will have the option in future to ‘staircase’ your way to full ownership by buying additional percentages.

Can I get Shared Ownership with Bad Credit?

“Can I still qualify for a Shared Ownership mortgage if I have bad credit?”

Getting access to a Shared Ownership mortgage can indeed be a lot more challenging for people with adverse credit events on their records, compared to those with a clean history of borrowing. As the scheme is already designed for those who are disadvantaged or face difficulties in raising the money to fund a deposit, lenders who get involved with Shared Ownership are likely to view you as too high a lending risk, especially if you have adverse credit events on your credit record such as default notes, missed loan repayments, County Court Judgments (CCJs), Debt Management Plans (DMPs) or a bankruptcy.

This said, the market has shifted somewhat in recent years, with some lenders showing more flexibility towards applicants with one or two items of bad credit to their name, and a number of smaller specialist lenders entering the market to cater to the gap left by most of the mainstream providers. Having a bad credit history might rule out some sections of the lending market across the board, but you will still have options, especially amongst the specialist lenders helping people with a blemished financial record. 

Some lenders who are willing to handle Shared Ownership mortgages may have less restrictive criteria than others, and will understand that people’s circumstances can change. Which one might be suitable for you will depend largely on your own situation – the nature of your bad credit, the circumstances under which it arose, how long ago it happened and what you’ve done to repair your borrowing history since it took place will all have a bearing on whether a certain lender will be willing to consider your application. 

To find out more about your options for a Shared Ownership mortgage if you have bad credit items on your records, get in touch with our team today to arrange an initial consultation – it’ll be completely free of charge, and comes with no obligation, but you’ll get the information you need to consider before taking the next step to applying for a mortgage.

Shared Ownership mortgage with Bad Credit

The main hurdle to securing a mortgage is often finding the deposit. Someone applying for a mortgage with a good credit history will typically need to find 5% of the property’s value (although a no-deposit mortgage is occasionally possible!).

If your credit history shows some recent blemishes like missed card payments or adverse credit events like a repossession, a CCJ, an IVA or a bankruptcy, then it’s likely you will be asked for a deposit of 15% or more. A lender will also probably charge you a higher rate of interest on the loan.

However, when the events happened will affect how severe these factors will be (the older the better), and many lenders will take into consideration the current state of your financial affairs and how you have handled credit since the issues occurred.

The most important factor is current affordability and if you can demonstrate that you would be able to keep up with payments on a mortgage and the rent in a shared ownership arrangement.

You might find it a good idea to see exactly where you stand in terms of your credit rating, and to find out if all information held on you is correct, by requesting copies of your credit reports from the three main UK credit reference agencies – TransUnion, Equifax and Experian. You might find some errors which you can get corrected, and improve your chances when looking for a mortgage.

Getting a Shared Ownership Mortgage with Adverse Credit

If you’re perceived as being a higher lending risk, then it can seem difficult to get a mortgage for a Shared Ownership scheme. However, we can find ways to make it much easier for you.

Our expert team at The Mortgage Centres includes specialist adverse credit advisers and brokers with an in-depth knowledge of the bad credit mortgage market, and access to deals and rates that you will not find on the high street. We’ll even help you complete the application and give you personalised mortgage advice that relates directly to your circumstances.

We’ve had years of experience of helping a wide range of clients, including first-time buyers, find a mortgage deal that both suits their situation and enables them to get on the path of homeownership again, whatever their credit history.

Where Shared Ownership is the best option for people with limited funds as well as a less-than-perfect credit rating, we make it our mission to get people a mortgage. Call us today to arrange a free initial consultation and a no-obligation quote.

Shared Ownership with Bad Credit FAQs

  • What is Shared Ownership?
  • How does Shared Ownership work when you sell?
  • What types of Shared Ownership properties can I purchase?
  • What is the minimum Shared Ownership share I can purchase?
  • What is the maximum Shared Ownership share I can purchase?
  • Can I purchase more shares in my Shared Ownership at a later date?
  • Are there any time limits when I can buy more shares in my Shared Ownership property?
  • How much will it cost to buy more shares in a Shared Ownership property?
  • Can I get a Shared Ownership mortgage with bad credit?

This is a government scheme allowing you to buy a percentage share of a property, for which most will need to get a mortgage for. You then pay rent to the other owner on the remaining share. Sometimes referred to as ‘part buy, part rent’ schemes, they are typically run by housing associations or local authorities. You are likely to have the option to buy some or all of the remaining share at a later date.

If you want to sell your Shared Ownership property, then the local authority or housing association will have first refusal to buy your share back. There are likely to be other people on a waiting list they will see if they can sell your share to, but if this isn’t possible, you should then be able to offer your property for sale on the open market.

Under the Shared Ownership scheme you are able to purchase a share of new-build or existing properties that are owned by an approved qualifying body – usually the local authority or a housing association, but it can also mean properties owned by other bodies such as a housing action trust, a development corporation, the Northern Ireland Housing Executive, or the Commission for the New Towns. Shared Ownership properties are always leasehold.

The minimum share you can purchase in a Shared Ownership scheme from an approved qualifying body, like a local authority or a housing association, is 25%.

The maximum share you can purchase under a government Shared Ownership scheme from an approved qualifying body, like a local authority or a housing association, is 75%. If you want to own a great portion of the property than this, then you must buy it outright.

Yes, you are able to do this – shared ownership properties are usually sold in increments of 25%, so you could own 25%, 50% or 75% (known as ‘staircasing’), although some authorities are now allowing smaller purchases of 10% or 20%. If you want to own more than 75% of the property, you will have to buy it outright.

Remember that the price of more shares in the property will be based on the current market value, so additional shares may be more expensive or cheaper than your first share, depending on if the property’s value has decreased or increased.

Currently, no – under the Shared Ownership scheme, the government imposes no time restrictions on buying more shares in your property. This said, individual local authorities or housing associations may impose time restrictions or other staircasing restraints in their lease conditions.

It will be up to the individual housing association or local authority to work out the exact annual rent calculation, but it is often based on a percentage of the share they own (or ‘retained equity’), and is usually around 3%.

For instance, if you owned a 75% share of a property worth £200,000, the co-owners retained equity would be 25%, or £50,000, and this is the share of the property on which you would pay rent. Assuming they will charge 3% annually, rent for the year would be £1,500, which equals £125 per month.

Yes – as with any kind of mortgage, it can be possible to get a mortgage with bad credt events on your credit reports. A specialist lender will take into consideration your entire circumstances, conduct an affordability assessment and look at your current financial status and more recent credit history in order to make a decision.

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