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Shared ownership mortgages

Shared ownership mortgages

Shared ownership mortgages, which are part of the government’s Help to Buy Scheme, are designed to help non-homeowners get onto the property ladder. This allows you to take out a mortgage on a share of a property currently owned by a housing association.

Tobi Owens
From the Mortgages team
4
minute read
posted 6 JANUARY 2020

What is a shared ownership mortgage?

A shared ownership mortgage allows you to buy a share of a new-build or existing home from a housing association and pay rent on the remainder. The mortgage can cover anything between 25%-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 the 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  = £67,000

Housing associations are also known as social rents, as they charge less than the private rental market (up to 80% of the market value). If the subsidised rent on your property is £80 per week and you own a 25% share, you’ll pay £60 per week in rent to cover the housing association’s share.

Who can get a shared ownership mortgage?

To be eligible for the shared ownership scheme, you have to be a first-time buyer or you used to own a home and can’t afford to buy a new one. Plus, your household income must be less than £80,000 a year (£90,000 in London). 

How do I apply for a shared ownership mortgage?

How you apply for a shared ownership mortgage will depend on where you live. If you live in England (outside of London), visit Share to Buy or get in contact with your local housing association. If you live in London, you can find information on gov.uk. For Scotland, see  Help to Buy, and for Northern Ireland, the  Co-ownership NI  website. If you live in Wales, you’ll need to check with your local housing association.

Once you’ve found a property, you’ll then need to find a mortgage lender willing to lend on a shared ownership property.

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

Shared ownership mortgages typically require a deposit of between 5-10% of the share you’re buying. Plus, you’ll need to ensure you have enough money to cover moving costs, stamp duty, solicitor’s fees and a management fee, also known as a leasehold fee. As the property is leased to you by the housing association, you’ll also have to pay an annual charge known as ground rent.

Can I buy a larger share of my home?

Yes. You can buy a larger share of your home, known as staircasing, by buying more shares from the housing association until you own 100% of the property. To increase your share, you’ll need to pay your housing association to carry out a mortgage valuation. The cost of your new share is set by the housing association and will depend on the mortgage valuation. You’ll pay more for the share if your home’s value has gone up and less if it’s fallen.

What are the disadvantages of shared ownership?

There are fewer mortgage providers who'll lend on shared ownership properties, so you'll have less choice and may end up paying more in interest and fees as a result.

Unless you work up to owning 100% of your property, selling a shared ownership property can be complex. As you don't own the full property, your housing association has first refusal to buy the property back and can put it on the market for a period of time before you’re able to do so.

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