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Shared ownership mortgages
A shared ownership mortgage is a government-backed initiative that could help you get on the property ladder.
What is a shared ownership?
Shared ownership mortgages allow you to buy a share of a property rather than owning it all. You’ll pay a mortgage on your share and rent on the rest.
If you’re a first time buyer, saving a large deposit can be tricky. That’s where shared ownership mortgages can help. They’re offered mainly by housing associations and also known as ‘part-buy, part-rent’ mortgages.
How do I apply for a shared ownership mortgage?
It’s easy to get started. Just contact your Housing Association, Local Authority or the private provider to apply for the shared ownership scheme.
The amount you can borrow will normally depend on:
- Income
- Savings
- Credit history
- Preferred location
- Mortgage costs
- Rent
- Service charges
- Ground rent.
As soon as you’re accepted, you can start looking for your new home, usually a new build.
Visit the government website for more information on buying, selling and the changes being made to shared ownership housing.
Pros and cons of shared ownership
Pros
- You can buy the part of the home you’re renting later – called ‘staircasing’.
- You can own your home without a large deposit.
- You can sell your shared ownership at any time, even if you don’t fully own it.
Cons
- When selling your home, the shared owner may not give you full control over who you sell to.
- As most shared ownership properties are leasehold, you'll likely have to pay ground rent and service charges.
- If you’ve purchased a flat, you might need to pay maintenance charges for communal areas too.
- You won’t be able to rent out your home to someone else. But you can sublet a room – you must live there at the same time.
More on staircasing
Staircasing is when you buy a bigger share of your home. It allows you to build up your ownership over time by buying more when you can afford to.
The drawback is that every time you increase your share, you’ll need to pay for a surveyor. This is to carry out a valuation of your property as the cost to buy will be determined by its current market value.
You could extend your current mortgage or remortgage. Weigh up whether this is worth any extra fees you may incur.
Some schemes allow you to staircase up to 100%, so you can eventually own the property outright. While you wouldn’t need to pay rent, you’d still have mortgage repayments. A standard mortgage usually has lower interest rates than a shared ownership one.
Shared ownership FAQs
How does shared ownership work when you sell your home?
If you want to sell your share of the property, your shared owner will have the first option to sell your share, before you do.
This is called ‘first refusal’ and means they can find their own buyer if they want to.
If you don’t fully own the property at the end of your tenancy agreement, your shared owner has the first refusal to sell your share to someone else.
Can you build an extension on a shared ownership house?
You’d need to get permission to add an extension. You can ask the shared owner for this.
Can you make home improvements in a shared ownership house?
Provided you don’t make any structural changes, you can decorate and refurbish as much as you like. But please check your tenancy agreement first.
Can you buy a shared ownership house outright?
You can buy a bigger percentage of your home at any time. This is called ‘staircasing’.
You may be able to buy a 10% share of the overall value of your shared ownership home. To buy any bigger percentage than that, you may have to pay extra.
The amount you’ll have to pay to increase your share depends on how much your home is worth. Contact your shared owner for a valuation.
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