How does a shared ownership mortgage work?

Buying a home on the open market can feel out of reach when your deposit or borrowing power falls short. However, buying a shared ownership home could offer another route onto the property ladder.

With a shared ownership property, you buy part of an eligible home and pay rent on the remaining share. Your monthly costs may also include service charges, so affordability depends on more than the mortgage alone.

Rules differ across the UK, so this guide focuses on the shared ownership scheme in England.

How shared ownership could help you

What is a shared ownership mortgage?

With a shared ownership mortgage, you buy part of the home rather than the whole property. You then pay rent on the remaining share, which belongs to a housing association, council or other provider.

How a shared ownership mortgage could work

Your monthly costs could also include service charges, management fees and buildings insurance. In England, shared ownership homes are leasehold properties, so check the lease before buying.

Speaking to a shared ownership mortgage broker can give you a clearer idea of what you could afford. They can consider the mortgage, rent and other housing costs when helping you find a home that meets your needs.

Who is eligible for a shared ownership mortgage?

Shared ownership eligibility depends on the scheme, property and provider. Under current rules in England, your household income must be £80,000 or less. The limit rises to £90,000 in London.

You must also be unable to afford a suitable home without shared ownership. Moreover, shared ownership is not only for first-time buyers. Previous homeowners, existing shared owners and people starting a new household may also apply.

Some providers may require you to live or work locally, or have another connection to the area. A shared ownership mortgage lender will also check your income, debts, credit history and regular monthly costs.

What will a shared ownership mortgage cost?

Your monthly payments will include the mortgage on your share and rent on the part owned by the provider. You may also need to budget for service charges, estate fees or payments into a reserve fund.

Shared ownership mortgage rates vary between lenders and depend on your circumstances. When comparing deals, review the interest rate, product fee, initial deal period and any early repayment charges.

Before reserving a home, ask the provider for a copy of the key information document. Read the details carefully, including the rent, service charges and how each cost could rise over time.

How do you apply for a shared ownership mortgage?

Start by checking your budget and whether you meet the shared ownership eligibility rules. Next, find a suitable home through a shared ownership provider, who will check whether the monthly costs fit your budget.

Before reserving a property, an Agreement in Principle can show how much you might be able to borrow. After the provider confirms your eligibility, you can submit your full mortgage application.

Since not every lender offers shared ownership mortgages, comparing your options can take more work. Speaking to a mortgage broker is a useful first step, as they can compare lenders, rates and criteria for you.

Is shared ownership for you?

Shared ownership may lower the deposit you need if buying outright on the open market feels out of reach. However, the mortgage, rent and service charges may cost more than you expect each month.

If your finances allow, you may be able to increase your share later through staircasing. Buying more shares usually lowers your rent, although valuation, legal and mortgage fees may apply.

Before deciding, weigh up the overall cost and check the provider’s rules for staircasing and selling your home.

How Muttuo Mortgages can help

Shared ownership rates and criteria vary by lender. Muttuo compares options from more than 100 lenders to see which may suit you.

Muttuo Mortgages can help you:

Tell us about your income, deposit and plans. We will explain how we can help, which fee applies and what happens next.

Your lender may repossess your home if you do not keep up with your mortgage repayments.