Shared ownership mortgages & schemes
Shared ownership means you don't own 100% of your home yourself. You buy just a percentage of the house which means you can get on the property ladder even when you can't afford house prices in your area. A housing association will own the rest of your property.
Your ownership will be leasehold.
How does shared ownership work?
When you first buy your home under shared ownership, you choose how much you can afford. This is likely to be between 25% and 50% of the cost of the property although you could buy 75% if you can afford it.
You take out a mortgage to buy your share and you pay rent to the housing association every month on the portion they own. You'll still need to put down a deposit but, as you're buying less than a whole house, the deposit will be correspondingly smaller.
You'll find that not many lenders offer mortgages to people buying a shared ownership property and they might insist on a special shared ownership mortgage. Don't let this put you off because mortgage brokers can help here as they know which lenders to approach.
Should I buy my home under shared ownership?
Shared ownership is for people who can't afford the cost of buying a whole house and wouldn't otherwise be able to buy a home.
While this might sound an easy way to get on the housing property ladder, you need to think about it carefully. It's still a big financial commitment and, even though you don't own all your house, you'll be responsible for all the bills.
Can I buy a shared ownership home?
You're entitled to shared ownership if:
- between you, everyone in your house earns less than £60,000 (rising to £80,000 in April 2016). Higher figures apply in London.
- you're a first time buyer
- you used to own a house but you can't afford to buy one now
- you currently rent a council house or housing association property.
There's a separate scheme for people over 55, called the Older People's Shared Ownership. With this you can't buy more than 75% of your home but, if you do own 75% you don't have to pay rent on the other 25%.
People with long-term disabilities can apply for shared ownership properties if they can't find a suitable home in other Help to Buy schemes. Perhaps they need to live on the ground floor. This is called Home Ownership for People with Long-Term Disabilities (HOLD).
What happens after I buy a shared ownership property?
Once you're living in your shared ownership house, you can opt to buy a bigger stake in it, all the way to owing 100% - if you afford it and if the housing association allows 100% ownership. This is called staircasing.
The price you have to pay to buy the next slice will reflect what's happened to the value of your house since you first bought it. If the price has gone up, you'll pay more. If it's come down, you'll pay less.
It's a good way to climb the property ladder but be aware that there are costs involved every time you buy another portion of your home. These are notably valuation fees and legal fees and you'll be responsible for paying all of them.
If you want to sell a shared ownership home, you have to allow the housing association first refusal.
How do I buy a shared ownership home?
You buy shared ownership properties through the Help to Buy agent responsible for the scheme in the area where you want to live. You can contact the agent in the first place for help and advice about the scheme.
Although shared ownership mortgages are difficult to come by, our mortgage advisers can help you find one. They're happy to answer your questions and there's no obligation or charge for our service. It's fee free.