Shared ownership mortgages

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.

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. 

When you buy a house or flat through the Shared Ownership scheme, it will be leasehold. Basically, a leasehold is a long tenancy. The share you pay rent on is still owned by your landlord (the housing association).

There are generally a few conditions with leasehold properties:

• You’ll be responsible for the repairs to and maintenance of your home. If you buy a flat, the housing provider is usually responsible for the upkeep of communal areas, for which you’ll pay an annual service charge.
• You can decorate your home as you like, at your own expense. You’ll need to check the lease if you want to carry out any major alterations, such as an extension or new flooring, as these might need to be authorised by your landlord.
• You won’t be able to sublet your home.
• You may be able to take in a lodger, but you should check with your landlord first.

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 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.

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.

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.

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.

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.

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.

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.