Shared ownership mortgages are part of a government scheme that aims to assist lower income households and first time buyers purchase a property. You can take out a mortgage for the share you own (usually between 25% and 75%), while paying rent on the rest.
Who qualifies for shared ownership?
You will be eligible to buy a home through a shared ownership scheme if your household income is less that £80,000 (£90,000 in London). You will also need to be either a first-time buyer or a previous homeowner who cannot afford to buy now. Alternatively you will need to be renting from a council or housing association.
You will need to be able to prove you’re not in mortgage or rent arrears, that you have a good credit history, and you can afford the costs of buying a shared ownership home.
Military personnel will be given priority over other groups through government-funded shared ownership schemes.
Shared ownership schemes, which are offered by housing associations, allow you to part-buy and part-rent your home.
If you have a long-term disability, you could also qualify for a shared ownership scheme under the government’s Home Ownership for People with Long-Term Disabilities (HOLD).
Can I buy a larger share of my home at a later date?
Yes. Using a process called staircasing, you can keep buying chunks of the rented part of your home from the relevant housing association, until you own all of it.
How much you pay for additional shares will depend on the value of your home at the time – and this will be determined by the housing association. You'll pay more for the share if your home's value has gone up and less if it's fallen.
How do I sell my home?
If you achieve 100% ownership of your home, you can sell your property yourself. However, the housing association has the right to 'first refusal' for 21 years after you first purchased your home. This means it can choose to buy the property back before you sell it to anyone else.
If you don't own 100% of your home, the housing association can choose to find its own buyer.
What are the advantages?
Providing you meet the eligibility criteria, shared ownership schemes can be a great way to get on to the property ladder and you may find you can buy a bigger home than you would have otherwise been able to afford.
What's more, as you're saving on rent, you may find you can afford to stash away some extra cash each month, which you can later use to increase your stake in the property.
What are the disadvantages?
Firstly, you might not qualify for a shared ownership scheme. But if you do, and you later sell up, you could find your hands are tied when it comes to who can buy your home, making it more difficult to get a quick sale.
And, as you don't own the property outright, you may have to seek permission from the housing association should you want to make improvements to it.
As well as your mortgage and rent to the housing association, you might also have to pay service charges for the maintenance of the communal areas of your building (i.e. if you buy a flat in a block).
You might also find there are certain things you are not allowed to do in your shared ownership home such as let it to a tenant or get a pet.
How do I apply for a shared ownership scheme?
The government offers a shared ownership scheme under its Help to Buy mortgage scheme, so a good place to start is your local Help to Buy agent. You can find your nearest agent at www.helptobuy.org.uk and they will be able to run through your options.
If you live in a council or housing association home, you can apply for Social HomeBuy.This is a scheme that helps you buy a share of the home you already live in, and pay rent on the rest.
You will need to buy at least 25% of your home but you will get a discount of between £9,000 and £16,000 on the value of your property – depending on where you live and the size of the share you're buying. If you choose to increase your stake in your home later on, again, you will get a discount. If you want to apply, ask your landlord for an application form.
Are shared ownership schemes the same as shared equity schemes?
No. Shared equity schemes offer a low-interest loan on part of the home you cannot afford to buy, instead of buying it and renting it back to you at a low-cost rent. Shared equity schemes are also offered under the government’s Help to Buy program which you can read more about in our guide.
Mortgages for shared ownership
If you buy a shared ownership property, you’ll need a shared ownership mortgage for the proportion of the property you buy. You’ll typically need a 5% deposit, rather than the 10% required for most other mortgage deals.
Not all lenders offer shared ownership mortgages. The ones that do include Kent Reliance, Nationwide, Barclays, Leeds Building Society and Halifax. It’s a good idea to use a mortgage broker with experience of shared ownership mortgages as they will know the best lenders to approach.
Your mortgage is secured on your home, which you could lose if you do not keep up your repayments.