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        Shared Ownership Mortgages

        Looking at a shared ownership mortgage? It can be simple! Find out who the lenders are, how to get a mortgage in principle & all the big questions in our guide!

        Firstly, are you looking to purchase a shared ownership / shared equity property?

        No impact on your credit score

        Pete Mugleston

        Author: Pete Mugleston - Mortgage Expert, MD

        Updated: March 24, 2022

        With rising house prices making it increasingly difficult to take that first step on the property ladder, Shared Ownership is one way to reduce the cost and make homeownership more accessible.

        In this guide we’ll tell you everything you need to know about the scheme, from registering your interest and finding a property you love through to figuring out deposit requirements and securing the best mortgage deal.

        How does the Shared Ownership scheme work?

        The Shared Ownership scheme is a government initiative, introduced in the 1980s, to help predominantly first time buyers purchase a share in a property, with the option to buy more in the future.

        For example, you could buy an initial 40% share in a property worth £250,000. Your share would cost you £100,000, which you would either need to pay for with cash or a mortgage, and you would pay rent to your landlord – usually a local housing association, local authority or developer – on the remaining £150,000.

        Most people start with an initial share of between 25% and 75% but in April 2021 the scheme was changed to allow a minimum share of 10% in some circumstances. In this article we’re looking at Shared Ownership in England. In other parts of the UK different terms apply.

        Try our calculator below to get a clearer idea of how it works.

        calculator icon

        Shared Ownership Calculator

        Our shared ownership calculator will give you an indication of how much your monthly repayments will be overall, including both for your mortgage and rent. All you have to do is enter details for the property purchase price, interest rate, term length, percentage share and the deposit into the appropriate field.


        Enter the value of the property
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        2.5% is average but the rate you get may vary
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        Enter the share you're buying as a percentage
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        Share too high
        25 years is the average, but most lenders offer shorter and longer terms
        years
        Enter the deposit amount here
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        Deposit must be less than property value

        Monthly rental payments:

        Monthly mortgage repayments:

        Total monthly repayments:

        Get started with a specialist shared ownership broker who can find the right lender and best possible terms for your circumstances.

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        Maximise your chance of approval with specialist advice from an expert in Government Schemes.

        Eligibility criteria

        Many people assume that Shared Ownership is only open to first time buyers, but it’s actually more flexible than that. The key criterion is that you can’t afford a home to meet your needs, so this could apply to:

        • First time buyers
        • Previous homeowners struggling to get back on the property ladder
        • Existing shared owners looking to move
        • Homeowners who need to move because of a change in circumstances but can’t afford it e.g. change in family size or dynamic

        You won’t qualify for Shared Ownership if you have an annual household income of over £80,000, (£90,000 for London), you should have a good credit history, no existing rent or mortgage arrears and the property has to be your primary residence. If you’re an existing homeowner you need to be in the process of selling.

        Mortgage acceptance criteria

        When it comes to getting a Shared Ownership mortgage, you may find that lenders have slightly stricter criteria or want more information from you, as Shared Ownership is considered higher risk. Some lenders might offer you a mortgage in principle first, while others are happy to move straight to full application.

        Lenders will be looking at:

        • Affordability – Lenders will look at your employment status, income, benefits, expenses and other debt commitments to make sure you can afford your mortgage repayments. With a Shared Ownership mortgage these calculations will factor in your potential monthly rent payments and service charges.
        • Deposit available – Although the Shared Ownership initiative was set up to make homeownership accessible through low deposits, individual lenders will still have their own requirements. This is typically 5-10% of the property value.
        • Credit history – A poor credit history or existing rent or mortgage arrears may well preclude you from the scheme in the first place, but will definitely impact your chances of getting a mortgage. Talk to a broker about specialist lender options if you’re worried about bad credit.
        • Percentage share – For Shared Ownership mortgages, lenders will also look at the percentage share of the property that you want to buy. Some lenders will set minimum or maximum levels on this.

        How to buy a Shared Ownership house

        Once you’ve checked that you’re eligible, the process has a few simple stages:

        1. Register your interest through the Help to Buy website. There are three different regional agents depending on the area of the country you’re looking at and if you want to buy in London, you’ll need to go through the Homes For Londoners portal.
        2. Browse available properties and contact the landlord when you find one you like. You’ll then have an assessment with an advisor to make sure you’re eligible and see what share you can afford. If you want to go ahead you’ll need to pay a reservation fee, normally between £250 and £500. This gets deducted from what you owe on completion, but is non-refundable otherwise.
        3. Find a mortgage broker who specialises in Shared Ownership mortgages. Not everyone will be open to lending to you, and a broker can guide you straight to the relevant lenders and help you secure the best rates. A broker can help with other aspects of the purchase too, like working out the best option for stamp duty payments. They can also help you to navigate any lease clauses that could impact your chances of getting a mortgage, such as ground rent doubling, (where ground rent starts low but increases significantly over time), or any restrictive covenants that could make it harder to resell.

        Which lenders offer Shared Ownership mortgages?

        Take a look at our rates table below to get an idea of the Shared Ownership mortgage deals currently available and which lenders are offering them.

        Lender Product Details
        Frosted Rates Image

        Looking for more rates and deals?

        We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market and help you secure the best ones available.

        Last updated April 2023

        Please note that the above rates were accurate at the time of writing, but are always subject to change. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

        How much does Shared Ownership cost?

        Rather than paying a single mortgage or rent payment a month, with Shared Ownership you’ll need to factor in three main costs:

        • Mortgage repayment to the lender on your share
        • Rent payment on the remainder to the housing association
        • Service charge

        The service charge is applicable regardless of whether you buy a house or a flat as all Shared Ownership properties are sold as leasehold. Leasehold means that you don’t own the land the property stands on and in fact with Shared Ownership you don’t legally own any of the property, even your share of it, until you reach a 100% share.

        Until then you are technically just leasing it from the freeholder – the housing association or other landlord. On top of these monthly costs you may be eligible for ground rent and contributions to a shared maintenance fund, depending on the property type.

        You’ll also be responsible for all internal property maintenance costs, regardless of your share. This means that if you need to fix a heating system for example, you’ll have to pay for everything, even if you only own 10% of the property.  The changes made to the scheme in 2021 did make this more affordable – under this version you can claim up to £500 towards maintenance costs back from your landlord every year for ten years, and can roll over one year of this at any one time.

        How is rent calculated?

        Rent is calculated annually as a percentage of the value of the unowned shares. Most landlords calculate at 2.75% although it can be as high as 3%. Details should form part of the original property advert.

        In our earlier example, where the homeowner buys a 40% share of a £250,000 house, leaving the landlord with a £150,000 share, the annual rent would be calculated as £150,000 x 2.75% = £4,125. Dividing this by 12 gives us a monthly rent due of £343.75, alongside mortgage repayments and service charges.

        Stamp duty

        You have a choice when it comes to paying stamp duty on your Shared Ownership home:

        • Option one – Pay stamp duty on just the percentage share that you’re buying
        • Option two – Pay stamp duty on the full market value of the property

        Option one might seem like the obvious choice, but it’s more complicated than that – if you get the point of staircasing up to owning 80%, you will be liable to pay the additional stamp duty and at this point your house could have increased in value significantly. Under option one you may also be eligible for a stamp duty charge on the rent you pay every month.

        Essentially it comes down to deciding whether a higher upfront cost is worth it for long term savings. It can be difficult to work it out, and it does depend on how property values increase.

        Use our calculator below to work out how much your stamp duty charges will amount to.

        calculator icon

        Stamp Duty Calculator

        This calculator can tell you how much Stamp Duty Land Tax you will need to pay on your property purchase, whether you're a first-time buyer, a home-mover or in the market for an investment property.

        Enter an amount in pound sterling
        £

        Your stamp duty to pay is:

        Your effective tax rate is

        Now that you've worked out how much stamp duty is payable, it's a good idea to talk to a broker about your mortgage options. They can help you make sure you aren't paying over the odds with all costs and fees factored in.

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        How to buy more shares in your Shared Ownership house

        Once you’ve purchased your new home with an initial share you have the option as time goes on to increase the amount you own by purchasing additional shares. This process is called ‘staircasing’.

        Every time you staircase you are liable for valuation fees and any remortgaging costs if you’re financing it through a mortgage. You will also normally have to pay an administration fee to your landlord, somewhere in the region of £150 to £500.

        The original minimum increase was 5% but the changes made to the scheme in April 2021 give some owners the option to staircase by 1% per year for 15 years. These increases are normally paid for by cash rather than through a remortgage, and are exempt from valuation and admin fees. You can not increase by 2%, 3% or 4%.

        How much can you staircase?

        Some properties come with a limit on the number of times you are allowed to staircase – often this is three. So for example, you might buy a property with a 25% share, increase this to 50% after a few years, then to 75%, then to 100% as your third and final jump.

        The final share that you own is up to you – some people aim to own their property completely, others are happy to remain with just a share and never staircase at all. One benefit of getting to the full 100% is that, if you own a house, you can then transfer from leasehold to freehold, reducing your monthly costs and meaning you legally own both the property and the land it stands on. Owning the full 100% also means you’ll be able to resell more easily on the open market.

        Property types available

        When browsing for Shared Ownership properties you’ll see that you’re limited to just properties being offered for sale under the scheme rather than having access to the whole market. You should find both flats and houses available though, and most Shared Ownership properties are new builds – either brand new or resells.

        The only exception here is if you’re buying under a strand of the scheme called Home Ownership for People with Long-term Disabilities, known as HOLD. In this case, you can apply to buy any property, as long as there isn’t otherwise anything available that meets your specific needs, for example you need a ground floor flat in a particular area.

        The benefits of Shared Ownership

        Hopefully this guide has given you a good insight into the benefits of Shared Ownership, namely:

        • It’s a more affordable way to get on the property ladder with a lower deposit
        • You have flexibility around how you decide to increase your share over the years
        • You get to benefit from increasing equity as house prices rise

        With the right broker support it’s possible to get a good deal on a mortgage and for Shared Ownership to be an important first step on your journey to long term financial security.

        Things to consider

        Although Shared Ownership can significantly reduce the upfront costs of buying a house, the monthly costs may be higher, at least initially. Make sure you’re happy with the rental element as well as the mortgage repayments, and that you have a good understanding of your commitments in terms of monthly service charges, ground rent and maintenance costs.

        You do not want to find yourself in a position where you can’t afford your repayments as you could risk losing your home. Finally, remember to check the remaining term on your lease as extending a lease can be costly.

        Get matched with a specialised Shared Ownership mortgage broker

        Finding a Shared Ownership mortgage isn’t always straightforward, but you can make things a lot simpler by using a mortgage broker who specialises in Shared Ownership. They will have an in-depth knowledge of the scheme and how it works, and they will have contacts with lenders who look favourably on Shared Ownership mortgage applications.

        When you use our free broker matching service we will quickly assess your needs and match you with the broker that has the best combination of skills and experience to support and guide you through the Shared Ownership process.

        Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and a specialist Shared Ownership mortgage broker today.

        FAQs

        Yes, you can buy as an individual or jointly, just as you would any mortgage. Be aware though that the £80,000 income cap applies to the household rather than to an individual, so if there are two of you applying jointly then your combined income must not exceed £80,000.

        Yes. In fact there is a special provision for over 55s called the Older People’s Shared Ownership (OPSO) scheme. Under this provision, over 55s who own at least 75% of their home are exempt from having to pay rent on the rest.

        Yes, in Scotland Shared Ownership is available for initial shares of between 25% and 75% and an occupancy charge also applies. In Northern Ireland you can own a share of 50-70% but property value is capped at £165,000. In Wales the terms are similar to England but the maximum eligible household income is £60,000.

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        Pete Mugleston

        Pete Mugleston

        Mortgage Expert, MD

        About the author

        Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

        Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.