How does a shared ownership mortgage work?
A shared ownership mortgage works a lot like other types of mortgage. You pay a deposit towards the cost of the property and borrow the rest. You’ll make monthly payments to pay back what you owe plus interest.
Shared ownership mortgages typically have a fixed interest rate for the first two to five years, meaning your payments should be the same each month. When your fixed rate ends you’ll be put on the lender’s standard variable rate (SVR). The SVR is usually more expensive and can go up or down, so you may want to remortgage to a new fixed rate. Just make sure your current fixed rate has ended or you’ll pay an early repayment fee.
What property can I buy with a shared ownership mortgage?
Each shared equity scheme has its own rules about what property you can part-buy. If you’re applying for the government’s Shared Ownership scheme, the home must be either:
- A new build
- A shared ownership home that’s being resold
- A home that meets your needs if you have a long-term disability
In Northern Ireland you can get a shared ownership home costing up to £195,000 through Co-Ownership, a registered housing association.
Are shared ownership properties freehold or leasehold?
Shared ownership homes are leasehold. This means your ownership lasts for a fixed amount of time — usually between 90 and 999 years. If your leasehold is getting close to expiring it can be expensive to renew. You’ll usually be charged ground rent and service fees on a leasehold property which can increase over time.
How much does a shared ownership home cost?
The upfront costs typically include:
- A reservation fee of up to £500
- A deposit, typically at least 5%
- Legal fees and other one-off costs of buying a home
Your monthly payments usually include:
- Rent. The larger your share of the property, the less rent you pay.
- Ground rent and service fees. Your landlord may charge you for using the land your home is built on and for maintaining communal areas.
- Mortgage payments. The amount depends on things like how much you owe, the length of your mortgage and your interest rate. Work out the monthly payments with our mortgage calculator.
You may also want to spend on furnishing, maintaining and improving your home, and buying more shares in your home in the future.
How much of a shared ownership property can I buy?
With the government’s Shared Ownership scheme you can typically buy between 25-75% of a home, or as little as 10% in some cases. In Northern Ireland it’s between 50-90%.
Can I buy more of my shared ownership home once I own it?
Yes, this is called staircasing. You can buy up to 80-100% depending on your home. There may be a waiting period before you can buy more shares. You can usually buy 10% or more at a time — although it’s 25% or more with some older leases, and 1% or more with some newer leases.
How much you pay depends on your home’s value when you buy the shares. You may have to pay around £150 to £500 for a valuation. If you make home improvements without your landlord’s written permission, your changes will affect the valuation and usually make the shares more expensive for you.
Is getting a mortgage for shared ownership a good idea?
Some advantages of shared ownership may include:
- You can benefit if your home’s value goes up (although it can drop too)
- You may be able to get a mortgage with a smaller deposit and lower income
- You can buy more of your home over time
Potential disadvantages include:
- Although you can move, you may not have full control over the sale of your home
- You'll usually have to pay ground rent and service charges which can increase
- You can’t rent out your home (although you can sublet a room)
What are alternatives to shared ownership schemes?
Shared ownership isn’t right for everyone. Here are some other options to consider.
Look for a cheaper home. For example, something smaller or in an area where property prices are lower.
Save with a Lifetime ISA. You can save up to £4,000 a year into a Lifetime ISA and get a 25% top up from the government. First-time buyers can use their savings as a deposit on a home costing up to £450k.
Get a guarantor mortgage. A guarantor may help you get approved for a mortgage by agreeing to make the payments if you can’t. They must pass the lender’s checks and should understand the risks of being a guarantor.
Get a 95% mortgage. Some lenders offer mortgages where you only need a 5% deposit. With these mortgages you’ll usually pay a higher interest rate.
Find the right mortgage with Experian. Searching mortgages is free, takes less than two minutes and won’t affect your credit score.
Can I get shared ownership if I’m over 55?
You may be eligible for the Older Persons Shared Ownership (OPSO) scheme if you’re aged 55 or over. On this scheme, you won’t pay rent once you own 75% of your home.
Can I buy part of a home I’m already renting?
If you’ve been living in social or affordable housing for at least three years, you may be able to part-buy the home you’re renting through the Right to Shared Ownership Scheme. This scheme is available in England only.
Where do I find shared ownership mortgage lenders?
Comparing with Experian is a great place to start. We show you offers from a range of trusted lenders, including home-mover and first-time buyer mortgages. You can filter by things like mortgage amount, length and type of rate. When you find an offer you like, you can usually narrow your search on the lender’s website.
Comparing is free, takes less than two minutes and won’t affect your credit score. Your score dips when you apply for a mortgage but should go up again if you look after it.
