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Shared ownership mortgages explained

Saving up a large deposit is a barrier to many first time buyers trying to get a foot on the property ladder. A Shared Ownership scheme could help you by allowing you to purchase part of a property, with a housing association owning the rest of it.

When you buy a property through a Shared Ownership scheme, you typically purchase between 25% and 75% of the property, and a housing association will own the remaining share which you pay rent on. As of April 2021, it’s been possible to buy as little as a 10% share in your home, which makes the scheme even more affordable for those on limited incomes. Because you only need to secure a mortgage for the portion of the home you’re purchasing - your share, the amount required for a deposit is much lower than if you were buying a home outright.

You can buy further shares in the property as and when you can afford to, using a process called ‘stair-casing’. Previously, you had to buy a 10% share each time, but as of April 2021, it’s been possible to purchase additional shares of just 1% of the property value. In most cases, you can staircase all the way up to 100% ownership of the property, in which case you’ll no longer have to pay rent to the local authority.

The Government’s Help to Buy Shared Ownership scheme is different from the Help to Buy Equity Loan scheme, which helps buyers secure full ownership of a first home rather than shared ownership.

Shared ownership mortgage process

If you want to buy a home through a Shared Ownership scheme, you must first find a shared ownership property through your local authority. You can contact the Help to Buy agent in your area to see what’s available. Once you’ve found your dream home and have confirmed you meet the eligibility criteria, you can apply for a mortgage as you would for a standard home purchase. You may find that some lenders won’t offer you a standard mortgage and instead will insist on a special shared ownership mortgage. Don’t worry - we’re here to help you navigate this as specialist shared ownership mortgage brokers. For shared ownership mortgage advice, get in touch with L&C who will help you to find the best rates for your personal circumstances from a variety of different mortgage providers.

Shared ownership scheme eligibility criteria

To buy a house under the Help to Buy Shared Ownership scheme, there are some stipulations you must meet. The main Help to Buy shared ownership eligibility criteria are:

  • Your total household earnings must be £80,000 a year or less (£90,000 or less in London)
  • You must be either:
  • a first time buyer
  • a previous homeowner but can’t afford to buy one now
  • an existing shared ownership property owner who’s looking move

You will also have to prove that you’re not in mortgage or rent arrears, and that you have a good credit history. As with other mortgages, you’ll be expected to show that you can afford the costs of buying a home and meeting your mortgage repayments.

If you’re over 55, there’s a separate Shared Ownership scheme called Older People’s Shared Ownership (OPSO). If you’re eligible for this scheme, once you own 75% of your home, you no longer 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 (if you need a ground floor property, for example). With this scheme, you can buy a share of between 10% and 75% of the value of your home. This is called Home Ownership for People with Long-Term Disabilities (HOLD).

Finding the best shared ownership mortgage deal

If you’re not sure whether you qualify for a shared ownership mortgage, or which type of mortgage deal is best for you, get in touch with us today for expert shared ownership mortgage advice.

As with any other type of mortgage application, there are a few things you can do to maximise your chances of being accepted. Your credit score matters, so you should check this and ensure any errors are rectified - and if your credit score is poor, it’s a good idea to try and improve it before applying for a mortgage. It will also help if you have as much proof of income as possible, as lenders will want this to see whether you can afford repayments. You should also ensure you’re registered to vote at your current address.

Shared ownership mortgage repayment plan

If you own 25% of your home and pay off the mortgage on that amount through your monthly repayments, then you will no longer be required to make any mortgage payments, and instead will just pay rent on the remaining 75% of the property.

However, many owners prefer to buy more shares in their home through stair-casing. If you choose to do this, then it’s likely you’ll need a mortgage to buy the next portion of your home. You can do this through a shared ownership remortgage, or through an extension of your existing mortgage.

You can sell your home at any time you like - you don’t need to wait until you own 100% of the property. However, you can’t just advertise it on the open market when you’re ready to sell. You must give the housing association first refusal to buy the property. However, if you do own 100% of the property, then you’re free to advertise and sell it yourself.

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Apply for a shared ownership mortgage with L&C

If you’re hoping to get on the property ladder with a shared ownership mortgage, L&C is here to help.

Our online Mortgage Finder will compare deals from across the market and show you which ones you could be eligible for, and our expert advisers will be able to assess whether a shared ownership mortgage is the right option for you. Once we’ve found the best deal for you, we’ll support you through the whole application process, so you could soon be unlocking the door to your new home.

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Frequently asked questions

How much mortgage can I get for shared ownership?

You can take out a mortgage for the share of the property you’re buying but you’ll usually need to put down a deposit of at least 5% of that share. For example, if you’re buying a property costing £200,000 and the share you’re purchasing costs £75,000, you’ll have to put down a deposit of at least £3,750 (5% of £75,000). You can find out more in our guide 'What are shared ownership mortgages?’

Can you get a 100% mortgage on shared ownership?

There may be some specialist lenders that could arrange a 100% mortgage, but the majority of lenders – and certainly all the high street ones – will require you to put down a deposit of at least 5%. Even if you can find a lender prepared to offer a 100% mortgage, your local authority may not accept it, so make sure you check with them first.

Do you need a deposit for a shared ownership mortgage?

You’ll usually need to put down a deposit of at least 5% of the value of the share of the property you’re buying. The bigger the deposit you can afford to put down, the wider the choice of mortgage rates you’ll have access to.

How do you apply for a shared ownership mortgage?

Several lenders offer shared ownership mortgages, so it’s a good idea to speak to one of our expert advisers, who’ll be able to talk you through all the available options and recommend the best deal based on your individual circumstances.

How much do I need to earn to get a shared ownership mortgage?

If you’re purchasing a home through the Help to Buy Shared Ownership scheme, then you must have a total household income of no more than £80,000 - or £90,000 if you live in London.

Can you move from one shared ownership house to another?

You can’t buy a second property (either in the UK or abroad) when you own a home under a Shared Ownership scheme, but it is possible to move between homes. That said, selling a shared ownership property can be a little more complex than a regular sale. If you don’t own all of the property, you might first need to offer it back to the housing association. If they cannot find another buyer in a certain timeframe (usually 6-8 weeks) you can market the property yourself. Understanding the details can be a little tricky so speak to us at L&C if you need further clarity.

Can I remortgage my shared ownership property?

If you’re working towards owning your property outright, then remortgaging could allow you to apply for a larger loan to help you get there faster. The process of remortgaging a shared ownership is much the same as a standard remortgage but you should advise your housing association on your plans in advance. You can stick with your current lender or speak to us here at L&C to find a better deal on your shared ownership remortgage.

What are the advantages and disadvantages of shared ownership?

Although not exclusively for first time buyers, shared ownership can make it easier to get onto the property ladder if you’re struggling to save up enough money for a deposit. The monthly payments are often cheaper than if you had an outright mortgage, and are also usually lower than renting privately. However, you should be aware that as you’re a tenant until you staircase to 100% ownership, your landlord has the right to evict you. You also aren’t allowed to sublet your home, and as shared ownership properties are leasehold, you’ll be subject to the associated fees.