If you're on a low income or struggling to save a large enough deposit to buy a home, shared ownership could be a great option. A broker can help you understand your options and decide whether this is the right path for you.
How do shared ownership mortgages work?
You still borrow money from a lender to buy a home and provide a deposit of at least 5%, like any mortgage. The difference is that it only has to cover a percentage of the cost of the home - which you choose yourself based on affordability.
You can buy between 10% and 75% of the home to start with.
For example: Of a £200,000 property, you might choose to buy 50% - or £100,000 of it. This is made up of a minimum of a 5% deposit, in this case £10,000 and therefore £90,000 would be borrowed from the mortgage lender.
A housing association owns the other 50% of your property, so you pay rent to them for that share. Rent cannot be charged at more than 3% of the total property value per year. So the maximum rent for 50% of a £200,000 property is £250 per month - but there’s also sometimes a small service charge for communal areas.
You repay the loan over a set term - usually 25-30 years. At the end of this, you own 50% of the property - or whatever percentage you bought. You can increase ownership of your home over time, and most housing associations let you buy 100% of the property, but there are a few exceptions. This process is called staircasing.
What are the advantages and disadvantages of shared ownership?
You don't need to borrow as much, so the deposit and affordability criteria are easier to meet
It's often cheaper than private rental - even though you’re paying rent and a mortgage
You can usually buy the full property in stages when you can afford to
If the value of your home increases, the value of your share increases too
Not all lenders offer a mortgage for this scheme, so there are fewer options than buying a home the traditional way
You can’t buy any property you want and are bound to those available in the scheme
Properties are leasehold, and usually include service charges as well as rent
Not all housing associations allow you to buy 100% of the property - always check the terms
You may need to offer the property back to the housing association first if you want to sell. This can slow down the home-selling process
Shared-ownership mortgages FAQ
Can I buy a bigger share of my home at a later date?
Yes, usually you can buy as much as you want to - up to 100%. This is known as staircasing and you can increase ownership by as little as 1% at a time.
Some lenders limit the amount you can buy, for example, the over 55’s shared ownership scheme only allows you to buy 75% of the property. Always make sure you understand any ownership limits before you select a home.
Can I get a shared ownership remortgage?
Yes, but only from those lenders that also offer shared ownership mortgages - not all lenders offer remortgages to shared ownership scheme customers.
Can I make home improvements on a shared ownership mortgage?
Yes, you can, but there may be limits to what you can do - which vary from one housing association to the next.
Most allow redecoration and minor changes like a new bathroom suite. If you want to add to or change the property’s structure, you’ll need permission from your housing association.
What happens if the value of my house changes?
If you want to buy more shares in your home and the value has gone up, you’ll need to buy them at the higher cost. Likewise, if the property value falls, it could be a good time to buy a bigger share in your home more cheaply.
Can I sell my shared ownership home?
Yes, but most housing associations have a clause that offers them first refusal. This means you can’t advertise on the open market until they’ve had an opportunity to buy it back.
If you don’t yet own 100% of the property, you can only sell it via the housing association. Also you’ll only be entitled to profit that matches the percentage of your ownership.
So if you own 50% and the sale brings in a profit of £20,000, only £10,000 of that is yours. The other 50% belongs to the housing association.
Learn about different mortgage types
are a type of loan used to buy a property. The mortgage is secured against the value of the property.
are designed to help give you that first step on the housing ladder.
is when you borrow 95% of a property's price. You put down a deposit of 5%, and borrow the rest from a lender.
YOU SHOULD THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME/PROPERTY. YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
The Financial Conduct Authority does not regulate mortgages for commercial or investment buy-to-let properties.
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