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Shared Ownership Mortgages

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What is a Shared Ownership Mortgage?

A Shared Ownership mortgage is a Government scheme designed to enable people to buy a portion of their desired home – typically 25%, 50% or 75% – rather than the whole property, and therefore get onto the property ladder. The scheme means they will not need to supply as large a deposit as they would have done on the entire home; for example, if the buyers have £5,000 as a deposit, then this would represent 10% of a 25% share in a property worth £200,000.

The other benefit of Shared Ownership is that the monthly mortgage payments will also be correspondingly lower, but the buyer will need to pay rent to the owners of the other share of the property – usually a Housing Association – and this should be factored into their monthly costs. However, over time you will have the option to increase your share of the ownership and buy out the rented portion.

Shared Ownership Mortgage Specialists

While home ownership is an aspiration for most people, some have problems getting on the property ladder, perhaps due to a lower income. For those who struggle to get a larger deposit together and then also get accepted for a mortgage. Shared Ownership can provide a vital first step in home ownership, enabling people to move into a larger house than they might have expected to with the size of deposit they have.

Read Our Shared Ownership Guide

However, not all mortgage lenders want to get involved with Shared Ownership mortgages, and you could waste a lot of time shopping around until you found one that would look at your application. At The Mortgage Centres, we have advisors who are specialists in the Shared Ownership mortgage area and know exactly which lenders to deal with. We’ll also be able to help you prepare your application thoroughly, so that lenders will understand you have planned for all the costs involved and will meet their affordability criteria.

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With our help, you’ll be on the road to getting the right Shared Ownership mortgage to meet your circumstances and get you onto the home you’ve dreamt of.

You’ll find there are many different types of Shared Ownership mortgage, each designed to help a specific kind of buyer take the first step to owning their home.

Shared Ownership Mortgages Information

Can I Remortgage a Shared Ownership property?

Despite this not being the most common kind of mortgage on offer, it is indeed possible to remortgage a Shared Ownership property. The principle is the same as with a standard mortgage – you are being loaned money against the value of your property – but in this case, the property in question is just the share of your home that you own. However, if you want to remortgage to get a better deal, or to take advantage of the increased value of your property and release some equity, then the fact that it is a Shared Ownership arrangement should not stand in your way.

The only issue may arise from the fact that Shared Ownership mortgages are only available from a select range of lenders, so your options to choose from will be already limited compared to the broader mortgage market. You may also find that many lenders that do offer Shared Ownership mortgages will not want to work with you directly, preferring instead to handle applications via a trusted intermediary so they can be sure that clients are the right fit for their products, and vice versa.

It’s also a good idea to consult with the co-owners of the property, be that the Housing Association, local authority or other approved body, to confirm that they permit remortgaging. Rules can vary from one local authority to another, so make sure you check that there is nothing in your agreement against it.

As ever, you must also make sure that any new mortgage deal is the right one for your circumstances. There are a number of influencing factors to consider, and what might be a great product fit for one borrower might not be suitable for another.

The most suitable course of action is to work with a specialist broker, such as our team at The Mortgage Centres, to identify the most suitable product and lender to meet your needs and get guidance at every stage of the application process to give it the best chance of success. The initial consultation is always free and our quotes come with no obligation. Give our team a call today!

How are Shared Ownership Mortgages different?

Shared Ownership mortgages have most of the features of a standard mortgage, but there are some very noticeable differences. The first is the level of deposit required, which will not be a percentage of the value of the entire property, but only the portion that you will own. For example, if you are taking a 50% share of a property worth £250,000, then (assuming a standard 10% loan-to-value ratio) you will only need to supply a deposit of £12,500. To buy the property outright, you would need double that figure for the deposit – £25K.

As a Shared Ownership mortgage is designed to help people who would not otherwise be able to get on the property ladder, there are a number of criteria that borrowers need to meet. These include a maximum level of income, being a first-time buyer or a previous homeowner who cannot now afford to buy, or an existing local authority or housing association tenant, or being registered with a long-term illness or disability.

Another condition is that you must actually live in the property, and not rent out all or part of it to someone else. The exact full criteria may vary from one local authority to another, and indeed over time, so it’s best to check the current guidelines where you are before proceeding.

With a Shared Ownership mortgage, you can also use a process known as ‘staircasing’ to gradually increase your level of ownership of the property. It’s common for people to start with a 25% share and then gradually increase their mortgage to 50%, 75%, 90% or full ownership as and when their circumstances permit. Again, you’ll need to check the approved body’s policy on increasing to full ownership.

The final difference with a Shared Ownership mortgage, especially if you have achieved 100% ownership, applies if and when you come to sell it. If you partially own the property, the Housing Association will have the right to find a buyer themselves, at least for a set initial period. If you wholly own the property, you have the right to sell it yourself, but the Housing Association usually has the first right of refusal if you are selling within 21 years of having bought it.

Shared Ownership Considerations

Before going ahead with buying property under a Shared Ownership scheme, there are a number of factors you should consider:

  • Buying a Shared Ownership property with a Housing Association, local authority or housebuilder is very different to buying a house with a friend or relative. There is a very clear division of roles and it is more like a business partnership.
  • To find a property eligible for Shared Ownership in the area you want to live in, you will need to approach the local Help to Buy agent. They will know what is currently available or about to come on the market.
  • If you choose to increase your share of the property, the price you pay for the extra share will be based on the current valuation. So, if the property’s value has increased since you bought it, the price will be more, but the portion will obviously be cheaper if the value has come down.

Getting on the property ladder can be challenging even for those with typical incomes and few commitments. If you’re on a lower income, and perhaps also have to deal with other adverse circumstances, home ownership might seem almost impossible without some help from the Government. Housing schemes such as this exist to help those who need it most to get their start in owning property, enabling them to own an asset later in life.

How to find a Shared Ownership mortgage

If you know you meet the criteria for a Shared Ownership mortgage and are thinking of applying to a lender, then your best first move is to talk to an experienced mortgage broker who has a deep understanding of the market, the lenders who are willing to offer this kind of product and the deals you can expect to find. Our specialist Shared Ownership advisors at The Mortgage Centres will be able to let you know what your options are and guide you through every stage of the process. The first consultation is always free and comes with a no-obligation quote.

Shared Ownership Mortgage Lenders

Shared Ownership mortgages are unusual in that they are offered against a portion of the property in question (typically a minimum of 25%) rather than the whole house or apartment, with the balance of ownership lying with a Housing Association or approved body. The borrower will own their share of the property and pay rent on the other portion to the co-owner.

With ownership being complicated in this way, many lenders are unwilling to consider Shared Ownership mortgages. If you need to get a home loan to buy a share of a property, or to remortgage your portion, the range of options when it comes to lenders could be limited and you’ll need advice in finding the one that is best suited to meet your needs.

The mortgage market is very dynamic and constantly changing. The lenders who consider Shared Ownership mortgages, and the types of deals they will offer, can vary even from day to day, so it would be impractical to compile a list here. Your best option will always be to consult with a specialist mortgage broker, who will be able to outline your options and give you a clear idea of your next steps.

Shared Ownership Mortgage Rates

Should you qualify, then finding the right mortgage scheme for your Shared Ownership property will be a key element of your journey to home ownership. As with standard mortgages, the best scheme for you may not always be the one with the cheapest headline interest rate, and it’s a good idea to study your options carefully, allowing for the anticipated lifetime of the mortgage.

Shared Ownership mortgages are usually distinct products offered by specialist lenders, and their rates will be costed differently to their range of standard mortgages. As ever, the level of deposit that you can provide will have a bearing on the deals available, with a higher deposit usually opening the door to a more favourable interest rate.

As Shared Ownership mortgage deals and rates tend to change over the course of time and vary from lender to lender, we are unable to list typical rates here. But you should study the monthly and annual costs associated with the deal, as well as the anticipated rent payments on the portion of the home owned by another party, to give yourself a good idea of how a particular rate will pan out over the duration of the agreement.

Shared Ownership Mortgage Broker

Your first step to obtaining a mortgage under the Shared Ownership scheme will always be to contact a Help to Buy agent in the area you want to live. They’ll be able to confirm what properties may be available and also if you meet the criteria. When these elements are in place, you’ll be in a position to make an offer and will want to find out what mortgage you will be able to secure.

Our advisors have an intimate understanding of the mortgage market, and the many lenders within it, and will be able to identify the Shared Ownership mortgage product that will best meet your individual circumstances, budget and lifestyle, while also maximising your borrowing potential.

Getting a Shared Ownership mortgage is an opportunity to work towards owning your own home in a manageable way. Want to see what your options are for a Shared Ownership mortgage? Get in touch with our team today.

Shared Ownership FAQs

  • How does Shared Ownership work when you sell?
  • What types of Shared Ownership properties can I buy?
  • What is the minimum Shared Ownership share I can purchase?
  • What is the maximum Shared Ownership share I can buy?
  • Can I purchase more Shared Ownership shares at a later date?
  • When can I buy more Shared Ownership shares?
  • How is Shared Ownership rent calculated?

If you want to sell your Shared Ownership property, whether you own a percentage or the whole residence, the Housing Association or approved body will always have the right of first refusal to purchase it or to find a buyer themselves, although in cases of whole ownership that right only extends until 21 years after you bought the property. This is to keep affordable housing stock within the community and available to people in more difficult circumstances where possible. However, they will usually have a limited time to do this after which, if no buyer has been found, you are entitled to find one yourself.

You can buy both new-build or existing properties under the Shared Ownership scheme, as long as they are owned by an approved qualifying body. In most cases, the approved body will be a Housing Association or local authority, but you might also find properties available through housing action trusts, the Northern Ireland Housing Executive, the Commission for the New Towns and some development corporations. Shared Ownership properties will always be leasehold.

The rules for the Shared Ownership scheme for property available through an approved qualifying body mean you must purchase a minimum share of 25%, although recent new policies announced in late 2019 will see this reduced to 10% on new Shared Ownership properties.

At present, the maximum share of the property you can buy under the Shared Ownership scheme is 75%. If you are an older person and reach this stage, you will not have to pay rent on the remaining share. If you increase your share to 100%, you will own the property leasehold outright, but may still need to coordinate with the Housing Association, local authority or other approved body if you plan to sell it.

Yes, as your circumstances change and your income allows, you will be able to buy a greater share of your Shared Ownership property at a later date. Buying your property in increments in this way is known as ‘staircasing’. Rules may vary between housing authorities, but the minimum share will usually be 25% and the maximum 75% before you buy the property outright, but there might be some flexibility in the levels of increments in between.

When you buy additional shares of your property, be aware that the cost will be at the prevailing market rate. So, if you already own 25%, and buy another 25%, then the price will be higher if the value of your property has gone up. Likewise, it will be cheaper if the property value has decreased.

The Government does not place any time restrictions on when you will be able to buy a greater share of your property under the Shared Ownership scheme. However, local authorities or Housing Associations may have their own individual rules on the interval between buying your first and subsequent shares, and may impose other staircasing restrictions. It’s always best to check with the approved qualifying body where you are.

Individual local authorities or Housing Associations will each define their own methods to calculate your rent, but the annual figure is typically based on 3% of their ‘retained equity’ in your home.

‘Retained equity’ is the approved body’s portion of the Shared Ownership property. So, if you own 50% of your home, then the local authority or Housing Association owns the other 50%. If your property is valued at £250,000, then your annual rent might be 3% of £125,000, or £3,750, which works out at £312.50 per month.

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