Shared Ownership Mortgage
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Shared Ownership Mortgage (Part 1)
Rita and Rohit Kohli explain how a shared ownership mortgage works. Episode one of two, recorded in April 2025.
What is shared ownership and how does it work?
Some people are more familiar with the terminology ‘part-buy, part-rent’ – it’s the same thing. Typically a developer building new houses will offer the scheme, through a management company who looks after the property. They will sell a certain share of the property based on its value.
The minimum can be 10% up to 25% or more. Your affordability and deposit will determine the size of share you can buy in that property.
You would approach the developer or the management company – whoever’s selling the property in question. They will explain how it works, what the property is valued at and the minimum share that you can buy in it.
You would own your share, and rent the remainder from the housing company. The lower your share, the more rent you’re going to pay. However, it is designed with ‘staircasing’ in mind, where over time you can buy more shares in the property.
Eventually, you could own it 100%. It comes down to your personal circumstances and affordability as to when you might be ready to buy a new share.
Who is eligible for shared ownership? Who can get a shared ownership mortgage?
They’re usually targeted at First Time Buyers looking to get onto the property ladder, who can’t save up the deposit needed for the traditional route. But you don’t necessarily have to be a First Time Buyer to buy a shared ownership property.
You may have owned a home previously and are back in rented. If you want to buy again, this is an option for you.
There may be restrictions on certain developments, depending where you’re looking. Some developments may be targeted at people with a connection to the local area, or in certain professions – such as key workers.
Generally, though, you just register with a developer or a shared ownership company to get onto a waiting list. It is largely available on affordable housing schemes. It’s a good way to get you started on the property ladder if you have a lower income or a limited deposit.
Which lenders offer shared ownership mortgages? Are there many?
There isn’t a huge array, but a handful of lenders do offer shared ownership mortgages. Again, it comes down to affordability, your circumstances and the size of share you want.
What’s slightly different to a standard purchase is that the rent and service charges have to be included. If that all matches up and it’s affordable, those lenders that offer shared ownership will accept you for a mortgage.
Which properties are available for shared ownership?
It’s mainly houses. There aren’t many schemes for shared ownership flats. It’s mainly in new build developments where affordable housing is being provided.
You will see some properties come on the open market, as well, where you can buy the share from the current owner.
How much deposit do I need for a shared ownership mortgage?
You can start with 5%, but that does limit your options because only a few lenders do shared ownership, and the majority of them prefer a 10% deposit. Some will accept 5%, though.
It’s a question of the size of your planned share and whether you can afford to boost the deposit up to 10% – that would give you access to more lenders.
Will my shared ownership property be freehold or leasehold?
It’s more likely to be leasehold, at least whilst you own a share of that property. The management company will own the freehold and you take a leasehold, with the right to live in that property.
If you can staircase up to buy the whole property, potentially you can purchase the freehold at that point.
Can I buy a bigger share of my home at a later date? Can I ever fully own a shared ownership home?
Absolutely, yes. That’s what it’s designed for, so that eventually you can own 100% the property. If you’re moving up the career ladder, you might not necessarily want anybody else to be party to your mortgage.
Shared ownership allows you to gradually buy more of your home. As your income grows, you can afford to take on a bigger mortgage to buy those additional shares.
What happens if the value of my house changes?
The value of the house will change all the time. When you’re buying a new build home, generally it’s at the lower end of the scale because it’s a new development.
As the development becomes more popular, depending on the location, it may go up with the market, unless there’s a huge change in the economy. Usually shared ownership houses do go up in value.
That will affect how much extra you can buy, as the cost of a new share will increase too. But on the positive side, as the value of your home increases you will benefit from the increase in the property value when you sell.
Perhaps you bought 50% of a house worth £200,000. It’s now valued at £300,000 – which means your share has gone from £100,000 to £150,000. You still have a 50% share.
Can I get a shared ownership mortgage with bad credit?
You can. There are lots of checks that shared ownership management companies do to ensure that it is affordable to you. It can be a little bit harder to get a shared ownership mortgage if you have had bad credit, but it’s not impossible.
It depends on how bad your credit has been. Usually the schemes have waiting lists attached and people will be assessed based on their ability to get a mortgage.
What else do we need to know before part two?
When you set out to buy your initial shares, the management company will help you through it – as well as your mortgage broker and solicitors. These three entities are all involved.
Do keep a record of all your paperwork for the future. When you want to buy more shares, you need to understand who the management company is and approach them first. Then you can explore how to buy more shares.
Next, speak to your mortgage broker about how much you can borrow. We need to know the numbers – and the management company will confirm the value of the property.
Bear in mind that there could be additional admin charges every time you do this. Again, you’ll need a solicitor in the background to help you buy those extra shares, so think about the long term costs as well.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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Shared Ownership Mortgage (Part 2)
Continuing the conversation on shared ownership with Rita and Rohit Kohli. Episode two of two, recorded in April 2025.
How do I sell my shared ownership home?
You need to get in touch with the management company – typically the people you’re paying the partial rent to. You should have some paperwork from them, so just give them a call.Just ask about how to go about selling your share. Typically, the management company would have a waiting list of people who are ready to buy. They will approach that list first with the details of your home.
Once it’s sold at a particular value, minus your mortgage, you can take any equity left in your share to use as a deposit for your next home.
Can I make home improvements to my shared ownership property?
Bear in mind that if you have a shared ownership, you are still renting that home as well. If you want to make home improvements, you need to approach the management company first and discuss your plans with them.They may allow you to do small things, such as improve the garden or redecorate – changes that won’t materially impact the structure of the building itself. If you want to take walls down or add an extension, you will need permission from the management company.
They may want to look at your plans in detail to understand exactly what you’re trying to do. There may be fees involved for approval. It can be done, but there could be a lot of admin and hoops to jump through.
Also, making home improvements can increase the value of your property. Then, when you come to want to buy more shares, it’s going to be a little bit more expensive for you.
How does the remortgaging process work with shared ownership?
You’re still limited to the lenders that offer shared ownership for a remortgage, but you can still shop around. We can help you see who’s offering competitive rates.Typically, remortgaging is a key point to consider buying more shares. It then goes back to speaking to the management company and getting a valuation. We can work out the affordability there.
You might transfer your existing mortgage to a new deal, and also borrow extra to buy more shares. That can be a little bit more complex, but it’s a way to achieve your home ownership goals.
How does stamp duty work for shared ownership properties?
We’re not tax specialists, so you need to speak to your solicitor or conveyancer for the exact details on this.With shared ownership, you actually have a choice around stamp duty. When you buy the property, you could pay stamp duty for the full value of your home – not just your share. Then, if you buy shares in the future, you won’t pay stamp duty again.
Alternatively, you could just pay the stamp duty on the share you’re buying. But if you buy shares in the future, you may have to pay stamp duty again on those additional shares.
Crucially, if you are both First Time Buyers, you will potentially benefit from the first timer allowance – which may mitigate some or all of that stamp duty liability. You may not have to pay stamp duty at all. But do check that from your conveyancer or solicitor on the legal side of the house purchase [information correct at the time of recording in April 2025].
Are there any other fees involved?
We’ve talked about rent, but alongside that you’d typically have maintenance or service charges from the management company. These are generally not that high, to keep things affordable, but it’s a form of subscription for the maintenance of the building. Typically it covers your buildings insurance, as well.Normally you will know that information, because the property details tell you what the rent and service charge will be.
There may be even ground rent to cover, which again is typically not too expensive. These are ongoing costs to pay every month alongside your rent and your mortgage.
There are also one-off fees such as the legal costs when you’re first buying your share, and admin costs to the housing company.
If you’re thinking about buying more shares in the future, remember that every time you approach the management company to understand how much you can afford to buy and what it’s worth, they’ll charge you for the privilege. Check the paperwork or ask them beforehand what those admin fees could look like.
What are the alternatives to shared ownership mortgages?
The alternatives are few and far between since Help to Buy finished. But there are schemes like the First Home Scheme or Deposit Unlock, which are run by developers. They offer the ability to purchase properties at lower values or discounts based on your circumstances.They’re often tied to certain conditions – they may be for key workers, for example.
There are also other mortgage schemes to look at, like certain low deposit schemes. There are some alternatives, but not very many [information correct at the time of recording in April 2025] .
What are the advantages and disadvantages of shared ownership?
The big advantage is that you get on the property ladder. Perhaps you’re on a good career path, but can’t get a mortgage yet with your current salary. You might have really good credit or a good deposit saved up, but it’s just really expensive to buy in your area. Shared ownership gives you the chance to buy a home.You don’t have to stay in that house forever. If you sell, you can take your equity with you. You might go on to a standard purchase if you’ve got enough deposit.
The disadvantage could be that rent and service charges make it quite costly. If you’re going for shared ownership, you have to do your research. You have to know the area that you want to live in and view it as a longer term project – it can then work to your advantage.
How do I apply for shared ownership? What’s the process?
There are a few things to do to get ready. Make sure you are eligible for shared ownership. Although the eligibility criteria are broad, there are some limitations around income. You can’t qualify for shared ownership if your combined household income is above a certain level.You need to then find schemes offering shared ownership and register with those. Get onto their waiting lists, view the properties and see whether it’s going to work for you.
As part of that, you’ll be assessed by the shared ownership company to see whether you’re eligible. From there, the process is pretty similar to a normal mortgage. Once you’ve had an offer accepted, you need to start your mortgage application and engage a conveyancer or solicitor to do the legal work for you.
How can a mortgage broker help somebody looking into shared ownership?
Just have that chat. If you’ve found an area where shared ownership is offered, get the numbers and speak to a broker about the share you’re looking to buy. We would look at the affordability. There are budget plans we can run to make sure you fit the income thresholds.We explore how much disposable income you will have left after the mortgage, rent and ground rent. Once you’re ready to buy, the developer will usually want an Agreement in Principle to secure that property – as you can imagine, they are popular.
We’d do that early on by getting your documents ready and doing the affordability checks to get that Agreement in Principle. The developer then has to approve you, and at that point for a new build property, there’s usually a reservation fee. It can be anything from £500 to £1,000, to be paid within 14 days. Some might be generous and might give you 30 days.
Once you’ve put that reservation down, you’re committed. So it’s always worth doing your checks first and getting that Agreement in Principle in place. We help you keep an eye on the timescales.
Finally, how long will it be until the property is built? We work with the lenders around your mortgage offer because typically they’re only valid for six months. On a new build, they may give you a further extension for another three months. It’s a complex process – so I would certainly recommend using a broker.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS. YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.