What Is Shared Ownership?
Shared ownership is a government-backed scheme that allows you to buy a share of a property, typically between 25% and 75%, and pay rent to a housing association on the remaining share. You take out a mortgage to cover the share you're buying and pay a subsidised rent on the rest.
The scheme is designed to help people who can't afford to buy a home outright on the open market. It significantly reduces the deposit needed and the size of the mortgage required, making home ownership more accessible.
Shared ownership properties are typically new-build homes or resales of existing shared ownership properties. They're available through housing associations across England, with similar schemes operating in Wales, Scotland and Northern Ireland under different names.
How Shared Ownership Mortgages Work
A shared ownership mortgage works like a standard mortgage but covers only the share of the property you're buying, not the full market value. For example, if a property is worth £300,000 and you're buying a 50% share, your mortgage would be for up to £150,000 (minus your deposit).
You'll need a deposit based on the share you're purchasing, not the full property value. Most lenders require a deposit of 5-10% of your share, which makes the upfront costs considerably lower than buying outright.
On top of your mortgage repayments, you'll pay rent to the housing association on the share you don't own. This rent is typically set at 2.75% of the housing association's share per year and may increase annually. Your combined mortgage and rent payments should be lower than buying the property outright.
Staircasing: Buying More of Your Home
Staircasing is the process of buying additional shares of your shared ownership property over time. As your financial situation improves, you can purchase more of the property from the housing association, eventually owning it outright.
Each time you staircase, the additional share is valued at the current market rate. If property prices have risen, you'll pay more per share than you did originally. Conversely, if prices have fallen, you could benefit from a lower cost per share.
To fund staircasing, you'll typically need to remortgage or extend your existing mortgage to cover the additional share. Some lenders are more experienced with staircasing than others, so it's worth using a broker who understands shared ownership. Once you reach 100% ownership, you no longer pay rent and own the property outright.
Remortgaging a Shared Ownership Property
Remortgaging a shared ownership property follows a similar process to remortgaging a standard property, but there are some additional considerations. Not all lenders offer shared ownership mortgages, so your choice of products may be more limited.
You'll need permission from your housing association before remortgaging, and some lenders may take the rent payments into account when assessing affordability. It's important to factor in both your mortgage payments and rent when budgeting for a new deal.
When remortgaging, it can be an opportunity to staircase at the same time. By increasing your mortgage to buy a larger share, you reduce your rent payments and own more of your home. A mortgage broker experienced in shared ownership can advise on the best approach.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.