For many aspiring homeowners in the UK, getting a foot on the property ladder can seem incredibly challenging, especially with rising property prices and increasing deposit requirements. One solution that continues to grow in popularity is the shared ownership mortgage. This scheme can provide a more affordable route to homeownership, particularly for first-time buyers and those on a lower income. But what exactly is a shared ownership mortgage, how does it work, and what should you consider before applying for one?

 

This comprehensive guide will explain everything you need to know about shared ownership mortgages, from eligibility and benefits to the potential drawbacks and process. Whether you’re considering shared ownership as your route to owning a home or simply want to understand more about your mortgage options, this article can provide valuable insight.

 

What is a Shared Ownership Mortgage?

A shared ownership mortgage is a type of home purchase scheme designed to help individuals and families buy a home when they cannot afford to purchase on the open market. Under the shared ownership scheme, you buy a share of a property—typically between 10% and 75%—and pay rent to a housing association on the remaining share.

 

You’ll need a mortgage to fund the portion you are buying, which is where the shared ownership mortgage comes in. Because you are only buying a share of the property, the deposit and mortgage amount required is often lower than for traditional purchases.

 

How Does Shared Ownership Work?

Shared ownership properties are provided through housing associations. You purchase a share of a property using a mortgage and pay a subsidised rent on the part you don’t own. Over time, you can choose to increase your ownership share in the property through a process known as ‘staircasing’ until, in most cases, you eventually own 100%.

 

Here’s a simplified example:

 

• You purchase a 40% share of a property valued at £200,000. That’s a £80,000 share.
• You place a 10% deposit (£8,000) and take out a mortgage for the remaining £72,000.
• You pay rent on the remaining 60% (£120,000) to the housing association.

 

The rent you pay is usually below market rate, though the amount may vary depending on the provider. You’ll also usually need to pay service charges and other related costs.

 

Who is Eligible for a Shared Ownership Mortgage?

The shared ownership scheme is designed for individuals who cannot afford to buy a home outright. To qualify, you must typically meet the following criteria:

 

• Your household income is less than £80,000 per year (or £90,000 in London).
• You are a first-time buyer, or you used to own a home but can’t afford to buy one now.
• You are currently renting a council or housing association property.
• You have a good credit history and can demonstrate the ability to afford the mortgage, rent, and associated costs.

 

Some schemes may prioritise key workers or individuals with a local connection to the area. It’s important to check the criteria with the specific housing association offering the property.

 

Benefits of a Shared Ownership Mortgage

There are several potential advantages of choosing a shared ownership mortgage:

 

1. Lower Deposit Requirement

Since you are only purchasing a portion of the property, the deposit needed is based on your share, not the full property value. This makes it more accessible for those who have not yet built up substantial savings.

 

2. Reduced Mortgage Borrowing

Only needing a mortgage for a percentage of the property means you’ll borrow less, which could make monthly repayments more manageable compared to a full mortgage.

 

3. Opportunity to Increase Ownership

You may be able to staircase your ownership over time. This gives you flexibility to increase your share when your financial situation improves.

 

4. Potential Access to New-Build Homes

Many shared ownership homes are newly built, giving buyers the chance to own a modern and energy-efficient home.

 

Things to Consider Before Applying

While shared ownership mortgages can be an attractive option, there are some important factors to consider:

 

1. Rent and Other Costs

You’ll still be paying rent on the portion of the property you don’t own. This, combined with mortgage repayments, service charges, and maintenance costs, means your overall monthly costs might not be significantly lower than renting or buying outright.

 

2. Limited Property Choice

Shared ownership properties are only available through housing associations, and choice may be limited based on location and availability.

 

3. Restrictions and Leasehold Terms

Nearly all shared ownership homes are leasehold, meaning you’ll need to understand any conditions, maintenance responsibilities, or lease-related clauses, such as ground rent and renewal terms.

 

4. Selling Your Shared Ownership Home

Selling a shared ownership property may be more complex than selling outright. The housing association often has the right to find a buyer for your share first before you can sell it on the open market. This process is known as being subject to ‘first refusal’ rights.

 

What is Staircasing?

Staircasing is the process of buying additional shares in your shared ownership property. You can usually staircase in increments (e.g., 10%) until you eventually own 100% of the home. This is typically done by arranging a new mortgage or increasing your existing one to fund the purchase of a further share.

 

It’s important to note:

 

• Each staircasing transaction involves valuation and legal fees.
• The cost of further shares is based on the current market value, not the original price.
• Staircasing to 100% may enable you to purchase the freehold, but this depends on the terms of the lease and the type of property.

 

How to Apply for a Shared Ownership Mortgage

The process for securing a shared ownership mortgage involves several stages:

 

1. Check Your Eligibility

Before anything else, confirm your eligibility for the scheme with the local Help to Buy agent or directly with the housing provider.

 

2. Find a Shared Ownership Property

Properties are typically listed on housing association websites, local authority portals, and property platforms that specialise in affordable housing.

 

3. Get a Mortgage in Principle

Before making an offer on a shared ownership property, it’s advisable to get a mortgage in principle. This gives you a general idea of how much you may be able to borrow.

 

4. Reserve the Property

Once you’ve selected a property, you can reserve it with the housing association by paying a reservation fee.

 

5. Complete Your Mortgage Application

The next step is to submit a formal mortgage application for the share you are buying. A mortgage broker can help you find the right deals as possible based on your situation.

 

6. Legal Work and Exchange of Contracts

Your solicitor will handle the legal side, including reviewing the lease, conducting searches, and liaising with the housing association. Once everything is in order, contracts will be exchanged, and completion will be scheduled.

 

What Types of Properties are Available?

You can purchase various types of properties under the shared ownership scheme, including:

 

• New-build homes provided by housing associations
• Resale shared ownership homes from existing shared owners
• Newly converted properties or apartments

 

The properties available vary depending on region and housing association. London and the South East typically have a broader range of shared ownership housing due to affordability pressures.

 

Can You Remortgage a Shared Ownership Property?

Yes, it’s possible to remortgage a shared ownership home, either to secure a better interest rate or to fund purchasing an additional share of the property. However, not all lenders offer products for shared ownership remortgages, so it’s important to explore your options carefully. A mortgage advisor can help you review affordability and lender criteria.

 

Shared Ownership vs Help to Buy

Both shared ownership and Help to Buy are government-backed schemes aimed at increasing homeownership, but they work differently.

 

Help to Buy (which ended in March 2023 for most new applications) allowed buyers to secure a home with a 5% deposit and a 20% equity loan (40% in London). In contrast, shared ownership involves buying a portion of a home and paying rent on the remainder.

 

In shared ownership, you are both a leaseholder and a tenant until you staircase to full ownership. Help to Buy purchasers own the entire property but have to repay the government loan after a period or upon sale.

 

While the Help to Buy scheme has largely been phased out, shared ownership remains open and a key tool for supporting affordable homeownership in England.

 

What Costs Are Involved?

Aside from the mortgage repayments and rent, buyers should budget for:

 

• Deposit – typically 5% to 10% of the share you are purchasing
• Legal fees and solicitor charges
• Mortgage arrangement and valuation fees
• Stamp duty – in some cases, you may defer this to when you staircase to 80% or more
• Service charges and ground rent (depending on the lease)
• Ongoing maintenance and repair costs

 

Understanding the full cost picture is essential when planning your purchase, so be sure to discuss this with your legal and mortgage advisors.

 

Can You Rent Out a Shared Ownership Property?

Generally, you are not allowed to sublet or rent out a shared ownership home unless you have staircased to 100% ownership and purchased the freehold, if applicable. Exceptions may be made in special circumstances, but they require the housing association’s approval. It’s important to review your lease carefully for any terms and conditions regarding letting.

 

Is Shared Ownership Right for You?

Deciding whether a shared ownership mortgage is suitable depends on your financial situation, long-term goals, and lifestyle preferences. For many, this scheme offers a viable pathway into homeownership and can help reduce the initial deposit hurdle. However, it’s important to weigh the pros and cons carefully and understand the commitment and limitations involved.

 

Conclusion

The shared ownership mortgage scheme provides a practical option for buyers who are unable to afford a full home purchase upfront. By allowing you to buy a share and pay rent on the rest, it opens the door to homeownership for many who might otherwise be priced out. Although there are complexities and limitations to be aware of, with appropriate advice and planning, shared ownership can represent an important stepping stone in your property journey.

 

If you’re considering whether a shared ownership mortgage is suitable for your circumstances, exploring your options with a professional mortgage advisor may help you make an informed decision as possible.