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Shared ownership mortgages

Shared ownership mortgages are designed to help non-homeowners step onto the property ladder. Part of a government scheme, they allow you to take out a mortgage on a share of a property currently owned by a housing association.

Shared ownership mortgages are designed to help non-homeowners step onto the property ladder. Part of a government scheme, they allow you to take out a mortgage on a share of a property currently owned by a housing association.

Written by
Alex Hasty
Insurance comparison and finance expert
Last Updated
5 APRIL 2024
12 min read
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What is a shared ownership mortgage?

A shared ownership mortgage is a type of mortgage available to homebuyers registered on the government’s shared ownership scheme. 

Shared ownership offers you the chance to buy a share of a property and pay rent on the rest. 

It gives first-time buyers and people who can’t afford to buy on the open market the opportunity to borrow an affordable mortgage amount with a small deposit. It doesn’t mean you have to share a home or mortgage with someone else.

The most common types of shared ownership mortgages are:

  • Fixed-rate mortgage – the interest rate you pay stays the same for an agreed fixed-rate period, usually from two to 10 years. This type of mortgage could be suitable if you prefer to know exactly how much your monthly repayments will be.
  • Variable rate – the interest rate is decided by your lender and can go up and down. Depending on the variable rate mortgage, your interest rates could be tied to the Bank of England base rate (tracker) or the lender’s standard variable rate (SVR). 

 

How does a shared ownership mortgage work?

A shared ownership mortgage enables you to buy a share of a new-build or existing home from a housing association, then pay rent on the rest.

The mortgage can cover anything from 10% to 75% of the property value, depending on what you can afford. You’ll need a deposit equal to 5-10% of the share you’re buying.

For example, if you want to buy a 25% share of a £300,000 property under shared ownership:

  • Your share of the property: £75,000
  • Your deposit: £7,500 (10% of the value of your share)
  • Housing association share: £225,000
  • Mortgage needed: £67,500.

Most landlords charge 2.75% of their share as rent on a new-build home. So, if their share is valued at £225,000, you may pay £516 a month in rent to cover the housing association’s portion. 

For resale homes, the rent will start at the same rate the previous shared owner was paying.

Can I buy a bigger share of my home at a later date?

In most cases, after you’ve been living in your shared ownership home for a while, you’ll have the option of buying more shares when you can afford to. This is called ‘staircasing’.

Staircasing allows you to gradually build up your ownership over time by buying shares in increments. Every time you increase your share, you’ll need to pay for a surveyor to carry out a valuation of your property because the cost will depend on its market value at the time. 

If you want to buy more shares, you might be able to extend the borrowing on your existing mortgage. Alternatively, you may need to remortgage, which could cost you mortgage fees. If you have a fixed-rate deal and want to remortgage to staircase, you may have to pay early repayment charges to leave your existing deal. 

If your scheme allows you to staircase up to 100%, you can eventually own the property outright. While you’ll no longer need to pay rent, you’ll still have mortgage repayments. But you can switch from a shared ownership mortgage to a standard mortgage, which tends to have lower interest rates.

Who is eligible for a shared ownership mortgage?

To be eligible for a shared ownership mortgage, you must:

  • Be over 18 years old
  • Be a first-time buyer or a former homeowner who can’t afford to buy a new property
  • Have an annual household income of £80,000 or less if you live outside London
  • Have an annual household income of £90,000 or less if you live in London
  • Not own another home. If you do, you must be in the process of selling it
  • Not be in mortgage or rent arrears
  • Have a good credit history with no bad debts or county court judgments (CCJs)
  • Be able to afford regular repayments and costs involved with buying a home

How do I apply for a shared ownership scheme?

Before you submit a shared ownership mortgage application, you’ll need to contact your local housing association to find out if the scheme is available in your area and if you’re eligible to apply. You’ll then need to register on the official shared ownership scheme for your region.

How do I apply for a shared ownership mortgage?

Once you’ve registered for shared ownership, you can start searching for properties for sale under the scheme. You’ll need to attend a financial assessment through your housing association to find out what size share you’ll be able to afford and the monthly rent you’ll need to pay.

You can then start looking at your mortgage options. Not all lenders offer shared ownership mortgages, so it’s a good idea to find a mortgage broker who can offer specialist advice on shared ownership mortgages.

Our partners London & Country Mortgages Ltd (L&C)** offer fee-free expert mortgage advice. If you’d like to talk about your shared ownership mortgage options, give them a call on 0808 292 0811.

A mortgage application involves a fair bit of paperwork. This is likely to include (but isn’t limited to):

  • Proof of identity and address
  • Bank statements
  • Employment details
  • Proof of income, such as payslips or accounts if you’re self-employed
  • Proof of any state benefits
  • Proof of the deposit you’re putting towards your share of the property
  • Your credit report.

Check your credit score before applying to make sure there aren’t any mistakes or past debts that could affect your chances of approval.

Mortgage providers will carry out an affordability check, reviewing your credit rating, outgoings and any existing debts (credit cards, loans etc.) to make sure you can keep up with your monthly payments.

For more information, read our detailed guide on how to apply for a mortgage.

About London & Country Mortgages LTD (L&C)
**London & Country Mortgages Ltd (L&C) are a multi-award-winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receive a % of commission that our partner London & Country earns from lenders. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage offer.

Which lenders offer shared ownership mortgages?

Several of the big high-street banks offer shared ownership mortgages, as well as smaller and specialist mortgage providers. Examples include:

  • Barclays
  • Halifax
  • Leeds Building Society
  • Lloyds
  • Nationwide
  • Newbury Building Society
  • Santander
  • Skipton Building Society
  • TSB
  • Virgin Money.

An experienced mortgage broker will be able to advise you on which lenders are best suited to your needs. They could also help you find the best deals with the lowest interest rates.

What are the advantages of shared ownership?

There are plenty of benefits to shared ownership. For example:

  • It’s easier to get on the housing ladder. Shared ownership helps those with lower incomes get a home, giving them more security.
  • You’ll pay a lower deposit. Your deposit is based on 5-10% of your share, not the full market value of the property.
  • You can benefit from any rise in house prices. The value of your share in the property should rise accordingly.
  • Shared ownership can be cheaper than renting. But it isn’t always, so you’ll need to do the sums. The rent you do pay tends to be lower than rental rates on the open market.
  • Stamp duty. If you’re liable to pay stamp duty, you can choose to pay it in stages.

What are the disadvantages of shared ownership? 

Shared ownership offers many benefits, but there are also a few downsides:

  • Fewer mortgage lenders will lend on shared ownership properties. That means you'll have less choice and may end up paying more in interest and fees.
  • Selling a shared ownership property can take longer. As you don’t own the full property, your housing association has first refusal to buy back the property. And it can put it on the market for a period of time before you can do so yourself.
  • Shared ownership properties are leasehold. This means you don’t own the building your home is in so you may need to contribute to communal service charges. You’ll also be responsible for refurbishments and repairs to your home, even if you only own a share of it.
  • You can’t rent out the property. In most cases, you’ll be banned from subletting. That means you won’t be able to rent out your house and move somewhere cheaper, for example. Nor will you be able to put your home on Airbnb.

What happens if I fall behind on my shared ownership payments?

If you’re struggling with your payments, the first step is to contact your mortgage lender or housing association to see if there’s anything they can do to help. They may be able to reduce your payments for a while or give you more time to pay what you owe.

If you continue to fall behind with your mortgage or rent payments, your lender or landlord may take court proceedings against you and your home could be repossessed. This is usually a last resort though.

What do I need to get a shared ownership mortgage quote?  

Once you’ve been accepted by the shared ownership scheme provider, you can then start your mortgage application. You’ll need to provide the lender with details about your household income and credit history. You’ll also need to know the price of the property you want to buy.

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Frequently asked questions

Which properties are available for shared ownership?

You can only buy a property that’s been specifically built under the shared ownership scheme. That means you can’t just buy any property that’s for sale on the open market.

If you have a long-term disability, you may be able to buy any home that’s for sale on a shared ownership basis. But only if you can’t find a property through a home ownership scheme that’s suitable for your needs – for example, a bungalow or a ground-floor flat.

Properties under the shared ownership scheme are either new-build homes or resales. A resale property is one that a current owner bought under the scheme and is now selling on.

You can find a list of shared ownership properties for sale on the Share to Buy website.

How much deposit do I need for a shared ownership mortgage?

For a shared ownership mortgage, you’ll typically need to put down a deposit of between 5% to 10% of the share that you’re buying.

You’ll also need enough money to cover moving costs, stamp duty, solicitor’s fees and a management fee, also known as a leasehold fee. If your shared ownership property is a flat, you’ll usually have to pay a service charge to cover the maintenance costs of communal areas.

Will my shared ownership property be freehold or leasehold?

When you buy a house or flat through the shared ownership scheme, it will be leasehold – even when you own 100%. 

A leasehold is basically a long tenancy, buying you the right to occupy a property for the length of the lease agreement, typically 99 or 125 years. You own the property itself but not the land it’s built on. In the case of communal buildings, a flat leasehold usually covers everything within the four walls of the property. 

The share you pay rent on is still owned by your landlord (the housing association).

How does stamp duty work for shared ownership properties?

The stamp duty (SDLT) threshold is set at: 

  • £425,000 for first-time buyers
  • £250,000 if you were a previous homeowner

If you buy a shared ownership property over the stamp duty threshold, you can either pay a one-off SDLT payment based on the market value of the property (as if you were buying 100% ownership). Or you can pay the SDLT in stages, starting with anything you may owe on your initial share of the property. You then won’t need to pay any more stamp duty until you own an 80% share.

Calculating any potential stamp duty can be complicated, so it’s best to get advice from the solicitor who is dealing with your sale. You can also find more information on SDLT for shared ownership properties on the government website on GOV.UK.

How do I sell my shared ownership home?

If you’ve achieved 100% ownership, you can usually sell the property as normal through an estate agent. But if ownership is still shared, you won’t get to set the price. Instead, the housing association’s property valuer does that.

You’ll also have to give the housing association a certain amount of time to market the property. If they don’t manage to sell it during that time, you can put it on the open market.

When it comes to splitting the proceeds, you’ll each receive a share depending on how much you both own.

What happens if the value of my house changes?

If, when you come to sell the property, its value has increased, you’ll split the profit with the housing association depending on how much you each own.

If the value of your property falls, you could find yourself in negative equity. This is when your property (or your share in it) becomes worth less than the amount you still owe on your mortgage. 

If that’s the case, it might be better to hold off selling or staircasing if you can until house prices recover.

Can I make home improvements?

Your landlord will probably need to approve any major refurbishments, such as a new kitchen or extension. But you’re generally free to make cosmetic changes, like redecorating your bedroom.

The downside is that if you then want to buy a bigger share of your home, it may cost you more as you’ll probably have increased the value of the property.

Are there any other fees I need to know about?

If you’re planning on staircasing (buying extra shares in your property), there are other fees to consider on top of the cost of the share. You’ll also need to pay a valuation fee, legal fees, mortgage fees and maybe stamp duty.

Shared ownership properties are usually new builds. These can involve expensive service charges, particularly if the property comes with features such as lifts and 24-hour concierge services.

What are the alternatives to shared ownership mortgages?

Some English councils offer a First Homes Scheme to help first-time buyers. Homes are sold at a discount of between 30% and 50%, and priority may be given to key workers and those already living in the area.

If you’re a council tenant or housing association tenant, you might be able to buy your home at a discounted price under the Right to Buy scheme.

If you’re over 55, you might be eligible for Older People’s Shared Ownership. It works in the same way as the general shared swnership scheme, but you’ll only be able to buy up to 75% of your home. Once you own a 75% share, you won’t have to pay any more rent on the rest.

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Alex Hasty - Insurance comparison and finance expert

At Compare the Market, Alex has had roles as Commercial Associate Director, Director of Trading and Director of Growth. He’s currently responsible for the development and execution of Comparethemarket’s longer-term strategic options, ensuring the right breadth of products and services that meet customer needs.

Learn more about Alex

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.

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