Shared ownership mortgages

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

Daniel Evans
Mortgages expert
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Posted 26 JULY 2021

What is a shared ownership mortgage?

A shared ownership mortgage is a type of mortgage available to homebuyers registered on the Shared Ownership Help to Buy scheme. It gives first-time buyers and people who can’t afford to buy on the open market the opportunity to borrow a mortgage amount with a lower deposit.

The most common types of shared ownership mortgages are:

  • Fixed rate – the interest rate you pay stays the same for an agreed length of time, usually from two to 10 years. This type of mortgage could be suitable if you prefer to know exactly how much you’ll be paying each month.
  • 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). A variable rate mortgage may suit you if you want to get the lowest possible interest rate but can afford higher repayments if the rate goes up.

How does a shared ownership mortgage work?

A shared ownership mortgage enables you to part rent and part buy. You 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 between 25% 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

Housing associations 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 portion.

Who is eligible for a shared ownership mortgage?

To be eligible for a shared ownership mortgage, you have to be a first-time buyer or a former homeowner who can’t afford to buy a new property. Your household income must be less than £80,000 a year (£90,000 in London).

Before you can apply for a shared ownership mortgage, 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.

What is a Shared Ownership scheme?

The Shared Ownership scheme offers first-time buyers an affordable way to buy a home. It’s a great opportunity for those trying to get on the property ladder.

If you can’t afford to buy a home outright, the scheme allows you to buy a part share (between 25% and 75%) of a property that’s owned by a housing association. You then pay them rent on the remaining share of your home.

How do I apply for a Shared Ownership scheme?

How you apply for shared ownership depends on where you live.

  • If you live in England (outside London), visit Share to Buy or contact your local housing association
  • If you live in London, you can find information on GOV.UK
  • If you live in Scotland, visit Help to Buy
  • If you live in Northern Ireland, visit Co-ownership NI
  • If you live in Wales, you’ll need to check with your local housing association.

Before you apply, you’ll need to check if you’re eligible for the scheme in your area. It’s also important to check with your local housing association as they may have their own eligibility criteria.

General eligibility criteria for shared ownership includes the following:

  • you must be at least 18 years old and resident in the UK
  • your income must be less than £80,000 if you live outside London
  • your income must be less than £90,000 if you live in London
  • you can’t own another home or, if you do, you should be in the process of selling it
  • you can’t afford to buy a property on the open market
  • you’re not behind on any mortgage or rent payments
  • you have a good credit history with no bad debts or County Court Judgments (CCJs)
  • you can afford to cover the costs of buying a home.

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.

Applying for a mortgage 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.

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

About our broker partner service

**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.

Which lenders offer shared ownership mortgages?

Only a small number of lenders offer shared ownership mortgages, so your choices may be limited. The ones that do include:

  • Leeds Building Society
  • Lloyds Bank
  • Halifax
  • Barclays

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.

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 also have to pay an annual charge, known as ground rent, to cover the maintenance costs of communal areas.

How does stamp duty work for shared ownership properties?

The stamp duty (SDLT) threshold is set at: 

  • £300,000 for first-time buyers
  • £125,000 if you were a previous homeowner

If you buy a shared ownership property over the stamp duty threshold, you can choose to pay a one-off SDLT payment based on the market value of the property or you can pay the SDLT in stages.

If the property is over the threshold and you buy more shares in it later on, you 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. They’ll help you work out the best option based on your circumstances. You can find out more information on SDLT for shared ownership properties on the government website.

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

You can keep buying shares from the housing association until you own 100% of the property. This is called ‘staircasing’. To increase your share, you’ll need to pay your housing association to carry out a mortgage valuation. The housing association will set the cost of your new share based on the mortgage valuation.

You can buy shares in increases of 10%, but these will cost more if your home’s value has gone up and less if it’s fallen. It’s worth remembering that the more shares you buy, the less rent you’ll pay.

What are the advantages of shared ownership? 

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

  • Shared ownership can help those with lower incomes to get on the housing ladder – you’ll have more security and be more invested in your home.
  • 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.

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 the property back, and it can put it on the market for a period of time before you can do so yourself.
  • Shared ownership properties are usually leasehold. That means it’s likely you’ll need to pay a monthly service charge. You’ll also need to contribute to any major refurbishments. This can get expensive because even if you own less than half of the property, you’ll still be fully responsible for those repairs.
  • 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.
  • If you default on your mortgage/rent payment, your home may be repossessed. If you get into financial trouble, the housing association is unlikely to help you.

How do I sell my shared ownership home?  

If you want to sell your shared ownership home, 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 period 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 your lender (the housing association) depending on how much you each own.

If the value of your property falls, you could find yourself in the position of having to pay more money into a property that’s decreasing in value, or having to sell at a loss. That said, falling house prices could actually work in your favour, as you’ll be able to buy a bigger share in your home at a lower price.

Can I make home improvements? 

Your housing association will probably need to approve any major refurbishments, such as a new kitchen or extension. But the good news is that, like any lender, they want you to invest in your home so are likely to say yes.

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 fancy features, such as lifts and 24-hour concierge services.

What are the alternatives to shared ownership mortgages?  

If you live in London, Help to Buy is another government-run scheme. If you can come up with a 5% deposit, the government will loan you 40% of the purchase price. You can borrow the remaining 55% from a commercial mortgage lender.

London Help to Buy loans are available on new-build properties worth up to £600,000.

Outside London, you could look into a Help to Buy: Equity Loan. Here, the government could lend you 20% of the property value. You can then borrow 75% from a commercial lender, meaning you only need to come up with a 5% deposit.

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 years old, you might be eligible for Older People’s Shared Ownership. It works in the same way as the general Shared Ownership 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.

How much do shared ownership mortgages cost? 

Commercial mortgage lenders may well charge you a fee. This could be a lump sum, or a percentage of the total loan value. It might be possible to add this cost to your mortgage debt.

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

You’ll need to know your income (and that of your partner’s, if you’re taking out a joint mortgage). You’ll also need to know the price of the property you want to buy.

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