Shared ownership mortgage guide
We explain what it is, how it works, and whether shared ownership is suitable for your circumstances.
In this guide:
What is shared ownership?
Shared ownership is not very common in the UK right now.
Shared ownership is expected to rise and could be a good solution for buyers with a limited budget.
Shared ownership schemes allow you to buy a share in a property, and pay rent on the rest of the share.
It can help first-time buyers or others who cannot currently afford to buy a home to get on the property ladder. Even with a much smaller deposit than they‘d usually need.
Buyers can buy between 25% and 75% of the property, with the option to buy a bigger share at a later date.
Shared ownership properties are on a leasehold.
Most shared ownership homes are new builds. But more housing associations are starting to offer resold properties.
How does Shared Ownership work?
Housing associations offer shared ownership homes. This is part of a government initiative to help people who would usually find it impossible to buy their own homes.
The rules are slightly different in each country within the UK. Often it’s possible to put down a small deposit of around 5% of the property’s value. Then you cover the rest of your share in the property by taking out a mortgage.
You’ll co-own your house with the housing association.
You'll pay both your mortgage repayments and a certain amount in rent each month.
You can later increase the percentage of the home that you own. You have the option to pay for and own the whole property in the end.
Once you own the property, you can continue to live there or sell it. Your housing association will have “first refusal” for 21 years from the initial purchase. This means that you’ll have to give them the opportunity to buy it first before you can offer to sell it to someone else.
You can also sell the share of your home that you own, even if you have not bought 100% of the property. Then the housing association will still own a share in the property. You can then choose to buy back your share or find its own buyer.
Who does Shared Ownership suit?
Shared ownership is ideal for those with low incomes. As well as families who are looking to get a mortgage but cannot get a large mortgage from a lender.
Who does shared ownership not suit?
Shared ownership often works out more expensive in the long term than a regular mortgage.
So if you have the money, you may not want to consider shared ownership.
Will I be eligible for a Shared Ownership mortgage?
Not everyone is eligible for a shared ownership mortgage.
You can buy a property through shared ownership if you:
used to own a home, but can no longer afford to
already have a Shared Ownership agreement
are a first-time buyer
have a combined household income of less than £80k (or £90k in London)
You may be eligible if you have a household income of less than £80,000 (or £90,000 in London).
Council and housing association tenants
You may be eligible if you currently rent a council or housing association property.
You’ll also need a good credit history, with no rent arrears.
You may have to send financial details to prove that you can afford the costs of a shared ownership house.
If you’re over 55 you might want to look into the Older People’s Shared Ownership scheme.
If you have a long-term disability, then you could be eligible for HOLD.
HOLD is the Home Ownership for People with Long-term Disabilities scheme.
It does not matter what your job is. But military personnel get priority over other applicants.
Selling a shared ownership property
There are restrictions when it comes to selling shared ownership properties.
It means that you’ll have to work with the housing association you bought through when you sell your home.
They’ll usually have first refusal on the property, even if you now own it outright.
If you do not own the whole house, your housing association may want to buy your share back from you or find their own buyer.
These issues may slow down the process, but you’ll still be able to sell whenever you want to. You can still release the equity you have in the house.
Is shared ownership a good idea?
There are some advantages and disadvantages when considering shared ownership.
If you think you meet the criteria, it’s worth discussing it more with a mortgage broker.
Good for lower incomes
A big advantage is that it lets people on lower incomes get on the property ladder.
It also gives people a chance to get a bigger property that they'd not be able to afford otherwise.
Shared ownership also lets you buy a home over time.
It lets you buy a bigger share if your finances change and you can now afford it.
Could be cheaper than rent
Your monthly outgoings may be cheaper than when you're paying rent alone.
This depends on your deposit amount and mortgage terms.
Selling and home improvement restrictions
There are restrictions on selling your home that could stop you from getting a quick sale in the future.
You might need permission to make improvements or changes to it as you will not own it outright.
Tenants and pets
You might find that pets, or renting a room to another tenant, are not allowed.
Could be costlier
There’s a chance that paying both rent and mortgage payments could be the same or more than rent you'd be paying.
You may also be responsible for service charges if you’re in a flat or other shared community of properties.
Shared Ownership vs. Help to Buy
How does shared ownership compare to Help to Buy*?
If you use Help to Buy, you get a mortgage to buy 75% of the property. The government then tops that up with a 20% loan, so you only have to find a 5% deposit.
With shared ownership, you can buy as little as 25% of the property. That means the amount you borrow is much less.
Help to Buy is only available on new build properties.
Shared ownership is available on different types of homes.
Is shared ownership a better idea?
Choosing between Help to Buy and Shared Ownership schemes depends on your own circumstances.
If you’re a first-timer looking to buy before 2023, Help to Buy is a ‘leg up’ that will help pay for your new home.
People on low incomes are likely to prefer shared ownership. This is because it gives you more freedom to buy as much or as little of a property as you can afford.
Under Help to Buy, you’d need a 5% deposit of £12,500 on a home that costs £250,000. With Shared Ownership, you could buy a 25% share in a £250,000 home, and your deposit would be £3,125.
That explains why Shared Ownership is the right choice for many. It could be worth considering if you need some help to buy your own home.
*The Help to Buy scheme stopped taking new applicants on 31st October. All new builds must be completed by 31st March 2023 in order to be eligible for the scheme.
Shared ownership (Wales)
In Wales, the shared ownership scheme works in mostly the same way as it does in England.
The Welsh government has set its own criteria you’ll need to meet to qualify for this scheme.
be buying your first home (or forming a new household such as after a divorce. Or moving to an area for work that you’re unable to afford a suitable home)
take out a repayment mortgage (not interest-only) for the share of the home bought
have bought the home from a participating landlord
have an annual household income of less than £60,000
not own another home
be unable to afford to buy a property that is a suitable size for your family on the open market
pass a financial assessment
More about the Welsh shared ownership on the Welsh government website.
Co-ownership (Northern Ireland)
Co-ownership is a scheme in Northern Ireland for people who cannot afford to buy a house without financial help.
It can help first time buyers, as well as those who have owned a home before, to buy a property in stages.
You may not need a deposit, and co-owning rates could be more affordable than buying outright.
Like the shared ownership scheme, you buy a share of the house and pay rent on the rest to Co-Ownership.
With co-ownership, you can buy a home up to the value of £165,000. You can then buy a share of between 50% and 90%, depending on how much you can afford.
The housing association, Co-Ownership will own whatever share of the property is left. You’ll pay rent on the share that they own.
So, if you buy a 60% share of the property, you pay the mortgage on that percentage. You then pay rent to Co-Ownership on the remaining 40%.
If you’re able to, you can choose to increase your share of the property over time in 5% amounts.
Most people who use the co-ownership scheme tend to be first time buyers.
You can also use the scheme if you've owned a home before.
To be eligible for co-ownership, you must:
be over 18 and live in the UK
not already own the property or land in Northern Ireland or anywhere else. There’s an exception for co-ownership portability cases
have the right to live in Northern Ireland
aim to be living in the property as your only home and not use it for business purposes
not have had any payday loans or home credit in the last 12 months
have completed any Debt Relief Orders, bankruptcies or Individual Voluntary Arrangements at least 6 years before you apply for co-ownership
have no outstanding adverse credit when making an application for co-ownership. For example, CCJ’s or defaults
be willing to have Co-Ownership assess your credit history using Experian
You’ll also need to show that you’ll be able to afford to pay the costs of buying a home. As well as show that you do not have any other way to own a property without help.
You can apply for co-ownership online. You'll need to pay a non-refundable £100 assessment fee to continue with your application.
Before you apply, make sure that you have all the information and documentation you need.
Details of the documentation you need to give are on the Co-Ownership website.
They also recommend that you check your own credit score before you start an application.
After you get an Approval in Principle, they'll ask you to upload the property you plan to buy. After this they'll ask you to pay a £450 property fee.
The cost of your rent depends on how much of the home you own and the value of the property.
Rent costs and any annual increases are set by the Department for Communities (DfC).
You’ll buy and pay a mortgage on as much of the property as you can afford (between 50% and 90%).
You’ll be responsible for this and will arrange the mortgage and lender yourself.
Your lender may ask you for a deposit, but Co-Ownership will not.
It's your responsibility to pay costs such as insurance, ground rent, maintenance and repairs.