Shared Ownership

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Shared Ownership Mortgage (Part 1)

Luke Platt talks us through the shared ownership scheme and the main things to consider.

What is shared ownership and how does it work?

Shared ownership allows you to buy a share of a property and pay rent on the remaining part. It’s a government-backed incentive scheme, primarily aimed at helping First Time Buyers and others who can’t afford the open market to buy a home.

The percentage you can purchase may vary, depending on location and your affordability to purchase the share. Generally in England, you can buy shares of between 10% and 75% full market value. The minimum share is often 25%.

Shared ownership is also known as a part-buy, part-rent incentive. The idea is that you will purchase your shared ownership property via a housing association or council. The home will either be a new build or a resale of an existing shared ownership property. In that case, you would need to purchase the same percentage of shares as the previous owner – or more.

You’ll also need a deposit and a mortgage on the share of the property you’re buying. The remaining share is owned by the housing association or council, and you will pay rent on this outstanding amount.

Who is eligible for shared ownership? Who can get a shared ownership mortgage?

Generally shared ownership mortgages are designed for First Time Buyers, or those who used to own a home but can now no longer afford to buy outright. Or, you might already be in a shared ownership home – you can move from one shared ownership property to another.

Sometimes these homes suit someone setting up a new household, perhaps after a relationship breakdown. Or, you may own your own home and wish to move, but cannot afford to buy outright. There are many different eligibility options for a shared ownership mortgage.

There are scheme limitations, however. For example, it’s only available for households with a combined income of less than £80,000 a year – or £90,000 in London. You would need to be unable to afford a deposit and mortgage payments on a non-shared ownership property.

Which lenders offer shared ownership mortgages? Are there many?

It’s not all the lenders, but multiple providers do offer shared ownership mortgages. Speak to a mortgage broker, as we will know which lenders will offer this scheme.

Which properties are available for shared ownership?

They’re generally purchased through a housing association or a council. The home will either be a new build or a resale of an existing shared ownership property. On a resale property you will need to purchase the same percentage of shares as the previous owner, or more.

How much deposit do I need for a shared ownership mortgage?

A 5% deposit is generally the minimum level required for a shared ownership mortgage. Having said that, it is possible to purchase without any deposit, but that would be subject to housing association approval.

Will my shared ownership property be freehold or leasehold?

In my experience, shared ownership properties are mostly leasehold.

Can I buy a bigger share of my home at a later date?

Absolutely. If you wish to purchase a 25% share initially, it’s possible to purchase more over time. Usually it happens in increments of about 10%. You can do that all the way up until you earn the house outright.

Some older properties have older leases which set the minimum increment at 25%. But newer properties might just allow you to buy an additional 5% each time.

That process is called staircasing. Each time you wish to purchase another share, you’d go back to the Housing Association and they would do a valuation on the property. You would purchase the additional shares based on the new value.

Can I ever fully own a shared ownership home?

Yes – staircasing can be done all the way up to 100% on shared ownership properties. Some properties are restricted to a maximum 80% ownership, so it is worth checking when you contact the housing association. Ask whether you will ultimately be able to own the home in full.

What happens if the value of my house changes?

When you’re staircasing and looking to purchase more shares, these will be based on the value of the home at that time, not when you first bought. A valuation would take place and the housing association would probably want their own valuer to do this. That would give you an indication of the new value of your house.

What if I have bad credit? Can I still get a shared ownership mortgage?

Absolutely. Bad credit isn’t the be-all and end-all. I would say use a mortgage broker, as we know which lenders would accept bad credit for shared ownership mortgages.

What else do we need to know about shared ownership mortgages?

With anything regarding mortgages, if you’re in doubt, you’re unsure or you’ve got questions, just pick up the phone or email a mortgage broker. We’re here to help you in all instances.

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Shared Ownership Mortgage (Part 2)

Luke Platt continues the conversation on shared ownership mortgages. Episode two of two, recorded in January 2025.

What are the affordability criteria for shared ownership? How is this assessed?

When it comes to shared ownership, there seems to be two different variants of affordability.

You’ve got your own lender’s initial affordability, where they’ll be looking at your income and your credit commitments that you’ve got in the background. Plus, because you have a percentage of the property, and you will be renting the remainder, there is also a housing association calculation that needs to be done.

We can help you out here at Smiths Financial. We would simply ask you for your pay slips, your bank statements and some detail on the service charges that are applicable on the rent. We’ve got our own affordability calculator that we can carry out for you and that can go alongside the Decision in Principle that we’d also be able to provide to you as well.

It’s important that the lender and both the housing association are aware of what your net monthly income is towards the mortgage payments. So that’s the reason why there is an additional calculation carried out.

There’s no charge for working that out for you, so get in touch and we’ll help you look at the affordability.

How do I sell my shared ownership home?

To sell your shared ownership home, your first port of call is to get in touch with the housing association to let them know that you wish to sell your property. You would also need to get a new RICs valuation done on the property, because obviously, property prices go up and down. The RICs valuation would be carried out by a RICs surveyor. The housing association can usually recommend one or you can choose your own.

From there regarding the mortgage side of things, the best thing to do would be to reach out to us here at Smith Financial Solutions. We’ll have a fact-find conversation with you and talk you through the process of selling the shared ownership home.

We would also look at your affordability, to see what you can borrow moving forwards, and whether you are looking to move to another shared ownership property, or purchase a property on the open market.

Can I make home improvements to my shared ownership home?

You certainly can. Although you don’t own the home outright, to 100%, you do own a percentage of the home. It might be a 25% share going all the way up to 100%.

There are shared ownership schemes that offer as little as 10% share, but the majority are around 25% minimum. With that, you would potentially be able to make home improvements, within reason. If you’re looking at knocking down walls etc., however, you should obtain permission from the housing association.

How does the remortgaging process work with shared ownership?

You would again need a valuation done on the property, so you’ve got the right property value – as this affects your Loan to Value. As an example, you might have a 25% share of a shared ownership property and you took a 95% mortgage on it.

You do a valuation to make sure that the property hasn’t gone into negative equity. The RICs surveyor will carry out the valuation if you are looking to purchase more shares for example. If you are just changing lenders and switching products, then it’s just a mortgage valuation required from the lender.
Following that, get in touch with us here at Smiths Financial Solutions and we’ll talk you through the process of remortgaging.

How does stamp duty work for shared ownership properties?

Let’s say the full value of the price of the property is £500,00. You can elect to pay the stamp duty on the full property price or, if you are buying below the stamp duty limit at that time, you can, potentially not pay until you start to staircase your share up and own more of the property.

Speak to your solicitor or talk to us here at Smith’s Financial Solutions. We’ll explain the stamp duty limits and how that might affect your purchase or your remortgage on a shared ownership property.

Are there any other fees we need to know about with shared ownership mortgages?

You need to think about the service charges, ground rent and the rent on the remaining share. If you’re purchasing a 25% share, you are going to be renting the remaining 75%. Those are the types of fees that may be playing in the background.

If you are purchasing a property, then there are additional fees such as a mortgage broker fee, solicitors fees, reservation fee for the property. You would also usually be required to pay at least the first month’s rent and service charge upfront upon completion of your property.

Again, talk to us here at Smith’s Financial Solutions. We’re more than happy to work out what those fees are and guide you accordingly.

What are the alternatives to shared ownership mortgages? Are there any alternatives here?

There are lots of schemes out there and shared ownership is one of them. You could also opt for a standard residential mortgage, or look at Right to Buy mortgages if appropriate.

Various lenders offer different low deposit schemes, such as a lender offering a £5000 deposit scheme. These can be withdrawn at any time, so it’s a scheme that is currently available.

Again, get in touch with us here at Smith Financial. We’ll talk you through all of them and give you an idea of alternative mortgages as opposed to shared ownership.

What are the advantages and disadvantages of shared ownership?

An advantage of shared ownership is that it gives you the opportunity to purchase a home at a lower price than you would find on the open market. For a lot of people in this day and age, it is really crucial in trying to find a home that is affordable for them.

That’s a real strength in using shared ownership. I have also seen some disadvantages in dealing with these sorts of mortgages. For example, let’s say you have 75% share of a shared ownership mortgage, when it comes to selling the property and move, you are looking for somebody that would be able to buy you out at a 75% share – they need to replace what you have purchased. That can be a disadvantage in some ways.

You also have service charges and rent. which are potentially going to go up annually. That would be something you can discuss with the housing association at the time of application. If in doubt, give us a call here. We’ll help you and talk to you further.

How do I apply for shared ownership? What is the process?

The process of applying for shared ownership is pretty much the same as applying for a standard residential mortgage. The first port of call is to get in touch with a mortgage broker like us here at Smiths Financial Solutions.
We’ll talk you through the process, tell you what to look out for and guide you along the way.

The first thing we would look at is your affordability with the lenders, and if you qualify for the shared ownership scheme. We would also review your credit reports and ensure you fit the lender’s criteria.
There is a process for the Housing Association and we will touch on this later.

How can a mortgage broker help with shared ownership mortgages? Have you got anything else to add?

At Smiths Financial Solutions we’ve developed a good relationship with many housing associations. If you’re struggling to know your affordability or in understanding what to do, get in touch with us. We’ll do our utmost to help you.