What is Shared Ownership?

Generally, the higher the deposit you can save, the better the mortgage deals you're likely to get, but sometimes it's not realistic, practical or possible to save tens of thousands of pounds up front. However, that doesn't necessarily mean there’s no chance of getting on the property ladder. There’s a range of affordable home-ownership schemes available and shared ownership is one of them.

What’s a shared ownership scheme?

Shared ownership is a scheme designed to help people with small deposits, like first-time buyers or people who might struggle to buy a home on the open market, get on to the property ladder by buying a share in a property and paying rent on the rest.

How does shared ownership work?

You buy a share in a property from a body such as a housing association or registered provider and only make mortgage repayments on the share you own, which is normally between 25% to 75% but can be as low as 10% of the property. You then also pay rent to the housing association or developer on the remaining share, often at a reduced rate. This means you will require a smaller mortgage and don’t need to save as much of a deposit up front – sometimes as little as 5% of the share you’re buying.

For example

If you were buying a property worth £150,000 and needed a 5% deposit you would need to save £7,500. However, if you were only buying a 25% share of the property through a shared ownership scheme, the value of the share would be £37,500. You would only need to save a 5% deposit of this share which would be £1,875.

How is the rent portion worked out?

If you buy a 25% share in a property worth £150,000, your share would be worth £37,500. This leaves a balance of £112,500 which is owned by the housing association which you would be charged rent on. Based on an assumed initial rental rate of 2.75% on a new shared ownership property, that’s £3,093.75 per year, or approximately, £257.81 per month to be paid in rent in addition to your mortgage payments.

The landlord will review your rent at the times set out in your lease. This is usually once a year and linked to RPI inflation.

You could lose your home if you don’t keep up your mortgage repayments or your Shared Ownership lease.

What is staircasing?

Staircasing is when you increase the share of the property you own in stages, possibly up to 100% and becoming an outright owner. The amount you’ll pay will be based on the value of the property at the time – if it rises in value, you’ll pay more for your share - if it falls, you’ll pay less. You’ll be charged by the housing association to carry out a valuation of the property and will need to have the cash or mortgage finance to be able to pay for the additional share of the property.

Each housing association has different rules, but depending on the shared ownership lease you can generally buy a 5% or 10% share as a minimum when staircasing. If you want to buy a share of more than 10%, then usually this must be done in increments of 5% (e.g. 15%, 20%, 25%). In 2022 a new gradual staircasing model was introduced enabling shared owners to staircase in smaller instalments of 1% per year for the first 15 years.

Smiling couple unpack boxes in the living room of their new home.

Am I eligible for shared ownership?

The eligibility criteria can differ from country to country. You can check the eligibility requirements for shared ownership by visiting the website for each country: England, Scotland and Wales. Northern Ireland has a similar scheme called co-ownership.

There’s also a scheme available in England only called HOLD (Home Ownership for People with Long-Term Disabilities), which could be useful if you have a long term disability and you’ve been unable to find a home to suit your needs through other shared ownership schemes.

There is also another scheme in England only for people aged over 55 called OPSO (Older People’s Shared Ownership). It works in the same way as the general shared ownership scheme, but you can only buy up to 75% of your home.

How do I apply for shared ownership?

To find out how to apply in England, visit the government shared ownership web page. In Wales you need to register with the participating Landlord in your local authority, and in Scotland you need to contact the relevant social landlord once you have seen a property that you are interested in.

They might also ask questions about your income, savings, credit history etc. And they’ll be able to show you shared ownership properties in your area. Once you’ve found a property you like, you’ll need to pay a reservation fee. At this point there will be another financial assessment, which might include a credit check.

What if I want to sell my shared ownership house?

If you own 100% of the property, you’ll be able to sell it yourself. Otherwise, your housing provider will have a set period of time (as set out in the terms of your lease) to try and sell your home to other buyers who are looking to purchase through the scheme. After that time, you'll be able to sell it yourself, but it'll need to be sold on a shared ownership basis and the buyer must purchase a share equal to or higher than what you currently own. Contact the housing provider for more information.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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