Shared ownership mortgages

Could shared ownership be the key to unlocking your own front door?

If you’re looking to buy with a small deposit, the scheme could help you find an affordable mortgage. Start off buying just a ‘share’ of a property and – over time – you can add to what you own until it’s entirely yours.  

It might sound simple enough but you’ll need to work out if it’s the right kind of home ownership for you. With rent to pay on top of a mortgage, you’ve other costs to consider too – and it won’t suit everyone’s circumstances.

Here’s a Q&A to help you decide if it could work for you. 

What is shared ownership?

It’s a government-backed scheme to help you onto the property ladder. You first buy a share of between 10% and 75% of the value of a home (usually a new-build flat or house). So who owns the rest? Either a local housing association or the developer who built it – your de facto landlord.

Every month, you then pay a mortgage on the bit you do own plus rent on the share you don’t. For this reason, it’s also known as ‘part rent, part buy’. 

How does the scheme work and what might it cost?

When you buy a share of the property, it’s made up of your deposit and mortgage (just as if you were buying a home normally). But the sums you’ll need for each are much smaller. Why? Because they’re worked out on your portion of the home – not the full price.

Say you bought a 25% stake in a £160,000 flat. This would cost you £40,000 in total, so you might put down a 10% deposit of £4,000 and take out a £36,000 mortgage for the rest.

On top of this monthly mortgage payment, you’ll also need to pay a monthly rent to the housing association.

This is worked out as a percentage – usually between 2% and 3% – of the share you don’t own. So in this example, 3% of £120,000 is £3,600 rent a year – or £300 a month.

You’ve other costs to cover too. Since shared ownership properties are leasehold, you’ll have annual ground rent and monthly service charges. And stamp duty will be key, though it’s paid differently to regular duty – with a choice of two ways to pay.

Am I eligible? 

You can apply if you’re a first-time buyer, a previous homeowner who can no longer afford a mainstream mortgage, or already live in a shared ownership home and want to move. And it doesn’t matter if you’re single or a couple, your household income must be less than £80,000 a year (£90,000 if you live in London). As with any mortgage, you must also pass checks to make sure you’ve a decent credit history and you're able to afford the monthly payments. 

Can I buy any property with the scheme?

No – your choice depends on what’s currently on offer from housing associations (and what’s being built by developers) across the country.

To find a home you can buy with a shared ownership deal, you’ll need to first contact what’s called your local Help-To-Buy agent. It varies by region:

• London: Share to Buy
• England (outside London): Help to Buy
• Northern Ireland: Co-ownership
• Scotland: Shared ownership
• Wales: Shared ownership

They’ll show you details of all available homes once they’ve taken you through formal details of how to apply and to see if you pass the affordability checks.

If you’re successful, you’ll begin to get a clear idea of what size home share you can buy at this stage. Typically, the housing association or developer may also suggest you speak to a broker or financial adviser about a mortgage. However, if you prefer, you can choose to go direct to a lender and sort out the mortgage yourself.

When can I ‘staircase’ my way to greater ownership?

As a rule, you can gradually own more of your home by what’s called ‘staircasing’ – paying to buy a bigger share – at any point (though some schemes may have time restrictions, so do please check your lease).

Whether it’s typically from saving, a work promotion or extending the mortgage, for example, you could find yourself able to bump up the size of your share in chunks of 1%, 5% or more.

How much it costs to buy the extra will depend on the value of your property when you decide to boost your share – not the price when you first bought the home.

Using the same £160,000 example as above, imagine you wanted to boost your 25% stake to 40%. You discover its market value is now £200,000 – buying 15% extra at this higher price will cost more than it did before.

You’ll also have to pay admin and legal fees each time you build up your stake. However, since you own more of the property, you’ll pay less rent in turn.

Of course, the idea is to staircase all the way to 100%. In the 12 months to April 2021, some 4,300 households [PDF, 1.2MB] bought the last percentage of their home to become owners, a government report found. 

Can I do what I like with my shared ownership home?

You can make changes like any other homeowner – but your lease may limit what you do (and how you go about it).

It’s usually no problem to decorate as you wish but structural changes such as knocking a wall through may need approval first. Keeping a pet may also not be allowed if you buy a flat rather than a house. To tackle any issues early, ask to see the terms of the lease or any ‘restrictive covenants’ before you buy.

Will I be able to sell my home when I want?

You can – but how easy it might be will depend on how much of your property you own.

If you’ve made your way to 100% ownership, you’re usually free to sell the property as normal via an estate agent (though some types of lease may say your housing association gets first dibs, so check).

But if you’re still in shared ownership, it can be a little different. First alert your housing association, who will try to sell it to another shared ownership buyer. If it can’t find a buyer, you’re then free to take it to an estate agent or market it yourself. How much you make will depend on the final sale price, and the share you own.  

Is shared ownership right for me?

Becoming a home owner is an ambition for many and – if you’ve a small deposit - shared ownership is another way to achieve it.

But you’ve a lot more hoops to jump through to get there. From rent payments to the cost of staircasing and leaseholder fees, you’ll need to be fully prepared for what’s involved.

If you’re keen to go ahead, make sure your solicitor or conveyancer scrutinises every last clause of your contract – and tells you what it all means in plain English. 

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