Helping a Single Parent Buy a Shared Ownership Home

Mortgage Case Study

Helping a Single Parent Explore a Route Onto the Property Ladder

Mortgage Adviser Ricia Gibb from Wiltshire Mortgages helped a single client explore shared ownership after she had previously been told by other brokers that her affordability would not support a mortgage.

For this client, owning a home was something she really wanted to achieve. She was renting with her young child, working part time and receiving Universal Credit, including the housing element, alongside other benefits.

Shared ownership offered a potential way to make home ownership more achievable, and the client was happy to purchase a 25% share of a property.

Having already been told by other brokers that the affordability did not work, she needed advice that looked carefully at her circumstances rather than simply focusing on her employment income.

The journey to shared ownership

Understanding the client's circumstances Ricia took the time to understand the client's income, benefits, current rental position and what she wanted to achieve through a shared ownership purchase.

Looking at the affordability The affordability was considered alongside the rent payable on the share of the property the client would not own and any applicable service charges.

Researching lender criteria Ricia researched lenders whose criteria may allow the housing element of Universal Credit to be considered when assessing affordability.

Confirming the benefits position The client also contacted Universal Credit directly, who confirmed that she would still be entitled to claim the housing element towards the rent on the shared ownership property, subject to the relevant rules and her circumstances.

Exploring a way forward With the housing element taken into account under the relevant lender's criteria, the affordability position was sufficient to support an application for a 25% shared ownership purchase.

The challenge: making the affordability work

Shared ownership can involve a few additional affordability considerations. As well as the proposed mortgage payment, lenders need to consider the rent payable on the proportion of the property the client does not own, together with any applicable service charges.

For this client, the picture was further complicated by her part-time employment and Universal Credit income. Other brokers had already concluded that the affordability did not work.

That understandably made the prospect of buying a home feel more difficult.

Why lender criteria mattered

Lenders can take different approaches to the income they will consider when assessing affordability. In some circumstances, a lender may accept the housing element of Universal Credit, subject to its individual criteria.

Where this is the case, the amount received towards housing costs may potentially be considered against the expected rent for the new property, subject to the lender's assessment.

Understanding which lenders may be able to consider this income was therefore an important part of exploring whether the client's plans could be achievable.

Finding a way forward

Rather than looking only at the client's part-time employment income, Ricia considered the wider financial picture and researched how different lenders might assess her circumstances.

This included looking at lenders that may accept the housing element of Universal Credit for affordability purposes, allowing the potential mortgage application to reflect more of the income available to the client.

The client also contacted Universal Credit directly to confirm that she would remain entitled to the housing element towards the rent associated with the shared ownership property. This gave her greater clarity around how the arrangement could work alongside her plans to buy.

For the client, having her circumstances looked at in detail meant she could explore an option that she had previously thought might not be possible.

What made the difference?

Whole financial picture The client's employment income, Universal Credit and other benefits were considered together, subject to the relevant lender criteria.

Specialist lender criteria Research identified lenders that may be able to accept the housing element of Universal Credit when assessing affordability.

Shared ownership considered The rent on the unowned share and applicable property service charges were included in the affordability considerations.

Benefits position confirmed The client checked directly with Universal Credit to understand whether the housing element could continue towards the shared ownership rent.

This is one example of why speaking to a mortgage adviser who understands different affordability scenarios can be useful, particularly where benefits or shared ownership are involved.

Supporting the application

For Ricia, the important thing was taking the time to understand what the client was trying to achieve and then exploring how her circumstances could be assessed by different lenders.

Reviewing the client's individual financial circumstances
Considering her employment income and benefits
Assessing the affordability of the proposed shared ownership purchase
Researching lenders that may accept the housing element of Universal Credit
Considering the rent payable on the unowned share and applicable service charges
Encouraging the client to confirm her Universal Credit position directly
Helping the client explore the possibility of purchasing a 25% shared ownership share

The key takeaway

Being told that a mortgage is not affordable can understandably feel like a setback, particularly when buying a home is an important goal.

However, lenders do not all assess income in exactly the same way. This can be particularly relevant where benefits, shared ownership or other less straightforward income circumstances are involved.

In this case, taking the time to understand the client's circumstances and research the relevant lender criteria allowed her to explore a route towards shared ownership that she had previously been told was not affordable.

When shared ownership affordability is challenging

Shared ownership can provide one potential route towards home ownership, but affordability can be more involved than with a standard purchase. The proposed mortgage, rent on the unowned share and any applicable service charges all need to be considered.

If you receive Universal Credit, the way your housing element may be treated can also depend on the lender's individual criteria and your circumstances.

If you are considering shared ownership and are unsure how your circumstances may be assessed, speaking to a mortgage adviser early in the process can help you understand what options may be available to you.

Could shared ownership be worth exploring?

If you're renting, receiving benefits or have previously been told that your income would not support a mortgage, it may be worth understanding how different lenders could assess your circumstances.

Shared ownership comes with its own affordability considerations, so getting the right information early can help you understand what may be achievable based on your individual circumstances.

Speak to the HHH Mortgages team to discuss your circumstances and explore the mortgage options that may be available to you.

Important Information

This case study is based on an individual client scenario and is provided for illustrative purposes only. It should not be taken as an indication that the same outcome will be available to another client. Mortgage availability, lender criteria and affordability will vary according to individual circumstances.

Any mortgage application is subject to the lender's criteria, assessment and approval. Your home may be repossessed if you do not keep up repayments on your mortgage.

House & Holiday Home Mortgages Ltd is an Appointed Representative of Mortgage Intelligence Limited, which is authorised and regulated by the Financial Conduct Authority, in respect of mortgage, insurance and consumer credit mediation activities only.