Shared Ownership
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What is a shared ownership mortgage?
A shared ownership mortgage allows buyers to purchase a portion of a property while paying rent on the remaining share owned by a housing association or developer.
Typically, buyers purchase between 25% and 75% of the property’s value and take out a mortgage on that share. Rent is then paid on the remaining percentage, along with any applicable service charges.
This arrangement can make homeownership more accessible for people who may not be able to afford a property on the open market or who wish to purchase in areas where property prices are higher.
How does a shared ownership mortgage work?
Shared ownership arrangements differ slightly from traditional mortgages. Some important points to understand include:
- The deposit is calculated based on the share you are purchasing rather than the full market value of the property.
- Many shared ownership schemes allow a process called staircasing, where you may gradually increase the percentage of the property you own over time.
- You will usually have an agreement with both a mortgage lender and a housing association or property provider.
- The property must normally be used as your main residence and cannot usually be fully rented out.
- If you decide to sell your share, the housing association may have certain rights to help find a buyer or approve the sale.
Because shared ownership schemes involve both a mortgage and a rental agreement, it is important to understand all terms and conditions before proceeding.
Am I eligible for a shared ownership mortgage?
Shared ownership schemes are typically designed for people who cannot afford to purchase a suitable home outright on the open market.
In many cases, eligibility rules include household income limits of up to £80,000 per year outside London and up to £90,000 per year within London, although requirements can vary depending on the scheme.
Applicants may also need to meet one of the following criteria:
- First-time buyers
- Previous homeowners who are currently unable to purchase a home
- Existing shared ownership residents who wish to move
- Individuals needing to establish a new household
Mortgage lenders will also normally carry out affordability assessments and credit checks before approving an application.
How to arrange a shared ownership mortgage
Shared ownership mortgages can involve additional steps compared with standard mortgages, as they require coordination between the buyer, the lender, and the housing association.
An adviser can help explain the available options, review eligibility, and guide you through the process of arranging finance for your share of the property.
How the shared ownership process typically works
1. Discussing your circumstances
The process usually begins with a discussion about your financial situation, property goals, and whether shared ownership may be suitable for you.
2. Preparing the necessary documents
You may be asked to provide identification, proof of income, bank statements, and other documents required by lenders and housing associations.
3. Agreement in principle
An agreement in principle may be obtained from a lender, which provides an indication of how much you may be able to borrow.
4. Submitting a mortgage application
Once a suitable property share is identified, a full mortgage application can be submitted to the lender for review.
5. Mortgage offer and completion
If the lender approves the application, a formal mortgage offer will be issued and the legal process can move forward until completion.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Which banks do shared ownership mortgages?
Not every lender offers shared ownership mortgages. However, there’s a reasonable number of high-street banks and specialist mortgage providers that offer them, including:
- Accord Mortgages
- Barclays
- Halifax
- HSBC
- Leeds Building Society
- Lloyds
- Nationwide
- NatWest
- Newbury Building Society
- Santander
- Skipton Building Society
- TSB
- Virgin Money
Our experienced mortgage advisors can recommend which lenders are best suited to your needs and help you secure the best deals on a shared ownership mortgage.
How much can I borrow on a shared ownership mortgage?
The amount you can afford to borrow for a shared ownership mortgage depends on a variety of factors, including:
- The property value
- The mortgage period
- Your deposit
- Your share of the property
- Your household income
The minimum share usually starts from 25% of the property value and most lenders require a minimum deposit of 5-10% of the share you’re purchasing.
Speak to our expert mortgage advisors for an estimate of how much you could borrow on a shared ownership mortgage.
Are shared ownership mortgage rates higher?
Yes, shared ownership mortgage rates tend to be slightly higher than standard mortgages. There are fewer lenders offering this type of mortgage and therefore less competition, which means interest rates can be a bit higher. As with all mortgages, putting down a larger deposit can let you access better rates.
Our mortgage brokers can leverage our network to find you the best shared ownership deals and give you impartial advice on how much of a deposit you should put down given your situation.
Can I remortgage a shared ownership mortgage?
Yes, you can remortgage a shared ownership property – for example, if you want to release equity or simply a better deal. However, you’ll likely have fewer options because fewer lenders offer shared ownership mortgages.
Our specialist mortgage brokers can help you find the right option depending on your unique circumstances and navigate the process of remortgaging your shared ownership property.
How does Stamp Duty Land Tax (SDLT) work for a shared ownership property?
You’re liable to pay SDLT when you buy a share in a property, and you can pay it in two ways:
A one-off payment:
The amount you pay is based on the total market value of the property at the time of the original purchase, which is known as making a ‘market value election’.
In stages:
You may make your first payment on the price you pay for the lease if it’s above the SDLT threshold. If you increase your share of the property to 80%, you must pay SDLT on the transaction that took you over that percentage and any additional transactions.
Speak to our expert advisors or use our stamp duty calculator for an estimate of how much you’d need to pay and ask your solicitor for advice on which payment option is best for you.
What is 'staircasing' and how does it work?
Staircasing means buying additional shares in a shared ownership property, which you can do at any time. It’s normally required that you buy a further 10% share as a minimum.
When you tell the housing association you wish to buy an additional share of the property, it instructs an RICS surveyor to conduct a valuation. As the applicant, you can expect to pay the valuation fee. The current market value will dictate the price you pay for the extra share.
Your home may be repossessed if you do not keep up repayments on your mortgage.