When your deposit and borrowing fall short of a suitable home’s full price, buying a share could offer another route. Here, we look at shared ownership mortgages in England and the costs to consider beyond the initial purchase.
How does shared ownership work?
Shared ownership is a part-buy, part-rent arrangement for eligible new-build and resale homes. You buy a share of the property, then pay rent on the rest. The provider may be a housing association or council.
SHARE
Buy an initial share
Shares are usually 25–75% of the home’s value, although some homes offer 10%. Your starting share depends on the property and affordability.
FUNDING
Fund the share you buy
Your savings and any mortgage fund your share, not the full purchase price.
RENT
Pay rent on the rest
Budget for rent and charges alongside any monthly payment to your mortgage lender.
STAIRCASING
Buy more shares later
Increasing your share depends on your budget and lease rules, with further costs to consider.
How much could you borrow?
Use our affordability calculator for a quick estimate.
Who qualifies for shared ownership?
Your annual household income must be £80,000 or less, or £90,000 or less in London. You must also be unable to afford all the deposit and mortgage payments for a suitable home without the scheme.
Previous owners and people forming a new household may also qualify, not just first-time buyers. Existing homeowners who qualify must sell their current home by the day their shared ownership purchase completes. Some homes require a local connection, so check the full shared ownership eligibility rules.
The provider checks scheme eligibility, while your mortgage lender separately assesses income, credit and affordability. As a result, meeting the scheme rules does not guarantee a mortgage.
Your shared ownership mortgage and deposit
A shared ownership deposit is usually 5 to 10% of the share you buy, not the whole home’s value. Your lender and mortgage product determine how much you need.
Illustrative example: buying a 25% share with a 10% deposit on that share.
Purchase detail
Illustration
Whole home value
£300,000
25% share being bought
£75,000
Deposit: 10% of purchased share
£7,500
Mortgage before any financed fees
£67,500
Provider’s retained share, with rent due
75%
These figures are not a mortgage quotation or confirmation of approval. You’ll also need to budget for legal and other buying costs.
Compare shared ownership mortgage rates alongside product fees and lender requirements. A lower interest rate does not always mean a lower total cost, so compare deals over the same period.
Is shared ownership worth it?
Weigh up shared ownership pros and cons against your budget. For example, a smaller share can reduce the upfront cost. However, budget for mortgage payments, rent and service charges together, plus household bills. Check how rent and charges could rise.
Repair bills and service charges do not necessarily shrink with your share. A warranty or an initial repair period may cover some repairs, so check what applies.
Scheme homes are leasehold, so you own under a lease for a set period. Read the lease and key information document before reserving. Also weigh up other first-time buyer schemes where relevant.
WORTH KNOWING
Falling behind on rent or breaking the lease terms can put your home and the money invested in it at risk.
Buying more shares or selling
Shared ownership staircasing means buying more of the provider’s share; mortgage repayments alone do not do this. The price of extra shares generally reflects the home’s current value. You may also face valuation, legal and borrowing costs. Buying more shares reduces the rent you pay, but some leases cap ownership below 100%.
If you sell before owning the whole home, the provider normally has the first opportunity to find a buyer. Check your lease for the resale process, restrictions and any valuation or selling costs.
How to apply for shared ownership
Find suitable shared ownership properties and check eligibility and total affordability with the provider. Next, discuss an Agreement in Principle with an adviser: it gives an initial indication, not a mortgage offer. Ask a conveyancer to review the lease, then work through the full mortgage application and purchase checks. The exact order varies by provider.
How Muttuo can help
As a shared ownership mortgage broker, we’ll help you consider the mortgage alongside rent and service charges.
Compare mortgage rates and fees
Check lender requirements against your circumstances
Prepare for your mortgage application
Plan your shared ownership purchase
Talk through your deposit, budget and plans with an adviser.
Your lender may repossess your home if you do not keep up with your mortgage repayments.
Your shared ownership questions answered
Do you pay stamp duty on shared ownership?
Stamp Duty Land Tax (SDLT) can apply. For qualifying purchases, you can calculate SDLT on the whole home’s market value through a market value election. Alternatively, you can pay in stages. Eligible first-time buyers may receive relief. Ask your conveyancer to check how HMRC’s rules apply to the lease, rent and buying further shares.
Can you rent out a shared ownership home?
Before full ownership, renting the whole home needs provider permission, normally only given in exceptional circumstances. You can usually take in a lodger while you live there. Even so, check your lease and mortgage requirements, including after reaching full ownership.
