If you buy a property via a shared ownership scheme, you’ll need a shared ownership mortgage. But what is a shared ownership mortgage and how do you get one? Not all lenders offer this type of mortgage but there’s still plenty of choice from high street banks, smaller lenders and regional building societies.
A mortgage adviser will be able to help you find relevant lenders most suited to your circumstances. Our preferred mortgage adviser offers fee-free advice for most customers and have access to over 12,000 deals from 90 lenders.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What is shared ownership?
Shared ownership schemes help first-time buyers get on the property ladder. They require smaller deposits (normally a minimum of 5%) and smaller mortgages than if you buy a home the traditional way.
Shared ownership can be an affordable option as instead of buying the whole property, you buy a share of it. The rest of the property is typically owned by a housing association. You’ll get a mortgage on your share, then pay rent on the housing association’s share.
Most shared ownership schemes are aimed at first-time buyers within a maximum household income.
Shared ownership schemes are sometimes referred to as ‘part buy part rent’. Most homes sold this way are new builds.
Am I eligible for shared ownership?
Before applying for a shared ownership mortgage, you need to check you’re eligible for a shared ownership scheme.
Buyers normally need a household income of less than £80,000 (£90,000 in London) and to be a first-time buyer or a previous homeowner who cannot afford to buy now.
Help to Buy agents can help you find a shared ownership scheme in your area.
Can I get a shared ownership mortgage?
Once you’ve found a shared ownership property to buy, and checked you’re eligible, you need to look for a shared ownership mortgage. A mortgage broker can help you with this.
Your home may be repossessed if you do not keep up repayments on your mortgage.
When you make a shared ownership mortgage application, the lender will carry out an affordability assessment. It will include the rent you’ll pay the housing association in these calculations, as well as any service charges or ground rent on the property.
The lender will also look at your income, outgoings, and credit history.
Always remember that your home may be repossessed if you do not keep up repayments on your mortgage.
What is shared ownership staircasing?
The share of the property you initially buy can be as little as 10% – but you can increase this later via a process known as ‘staircasing’. This enables you to buy additional shares in your home in 1% instalments.
If you ‘staircase’ all the way to owning 100% of your home, you’ll no longer need to pay any rent, just your mortgage.
The cost of additional shares will depend on the value of your home. If the value has gone up since you bought it, additional shares will be more expensive. For example, if your property is now valued at £300,000 and you want to buy an additional 10% share, it will cost £30,000.
You can either buy additional shares with cash savings or by remortgaging for a higher amount. Remortgaging will mean going through the mortgage application process again.
Pros of shared ownership mortgages
- Quicker and easier to get on the property ladder with a small deposit and/or low income
- The total monthly payment of mortgage plus rent can be more cost effective than just renting
- You’ll benefit from any increase in the property’s value when you sell
- Owners have more security of tenure than private renters, assuming the mortgage and rent are paid up to date
- You only pay stamp duty on the share value – your solicitor will advise on the amount
- You can eventually buy the portion of the house you rent.
Cons of shared ownership mortgages
- For shared ownership properties that are leasehold, means a freeholder will have an interest in your home
- You’ll be responsible for repairs to your home and your share of repairs to the communal parts of the building (e.g. if you’re in a block of flats)
- Staircasing can be expensive
- The lease may prevent you doing certain things in/to your home, such as having a pet, building an extension, or subletting
- There’s not as much choice of shared ownership mortgages compared to mainstream mortgages
- Selling a shared ownership property can be tricky and time-consuming
- When you come to sell the property you will usually have to go through a shared ownership company first, this could cause unwanted delays
Your home may be repossessed if you do not keep up repayments on your mortgage.
Last Updated: January 19th, 2024
