First-time buyer mortgages



Understanding Shared Ownership

October 22, 2021
Information published was correct at the time of writing

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If you want to get on the property ladder then shared ownership could be a good way to help you take your first step up, by buying a share of your home. It works differently to the conventional house-buying process and is generally a more affordable way to start homeownership. It also gives you a chance to buy a bigger property than you may otherwise be able to afford. And, over time, you can acquire a larger share if your finances change and you can afford it. So if saving a deposit to buy a home seems like an impossible goal, the government’s Shared Ownership scheme could make it more achievable.

WHAT IS SHARED OWNERSHIP?
Shared Ownership is a government scheme designed to make it more affordable to get on the property ladder. Instead of having to save up to buy a whole home of your own, you can buy a share of a property, with the rest owned by a housing association. You’ll pay the mortgage on the share that you own, and you’ll pay rent and service charges on the remaining share but at a subsidised rate.

HOW MUCH DO YOU NEED TO SAVE?
You can currently buy a share of 25% or more of a property, but the government has plans to reduce the minimum share to 10%. You’ll need to get a mortgage to pay for your share of the property, so you’ll need to save a deposit of around 5-10% of the share you plan to buy. A 5% deposit for a 10% share would be just 0.5% of the total property price.

CAN YOU BUY MORE OVER TIME?
Yes. You can buy a larger share of your home through a process called ‘staircasing’. So, you could start by buying 10% of your home, and then save to buy the next 10%, and so on. Each time you increase your share in your home, you’ll have to increase your mortgage, and your repayments are likely to become more expensive. The rent and service charges you’ll pay will decrease as you’ll be enting a smaller portion of your home. Through this process, you could eventually own 100% of your property.

HOW MUCH WILL YOU PAY IN RENT AND SERVICE CHARGES?
Your annual rent is usually around 3% of the value of the portion of the property owned by the housing association. For example, if the property is worth £200,000 and you own a 50% share (£100,000), the portion the housing association owns is worth £100,000. Your annual rent will be around £3,000, or £250 a month.

Service charges vary but are intended to cover the maintenance and repairs of the property, which will be managed by the housing association.

HOW DO YOU BUY A SHARED OWNERSHIP PROPERTY?
You can find Shared Ownership properties online, through the usual listing sites. Once you’ve found the one you want to buy, you’ll put down a reservation fee of around £200. Then the housing association will check your financial background and agree on what share of the property you can buy. Next, you’ll need to find a mortgage. Not all mortgage providers offer Shared Ownership mortgages, so you should seek professional mortgage advice to discuss your options. The properties are usually leasehold properties and you therefore have to pay a monthly service charge as well as contribute to major maintenance works.

HOW DO YOU SELL A SHARED OWNERSHIP PROPERTY?
You can sell your share of the property at any time, to someone else who wants to take part in the Shared Ownership scheme. The housing association will even help you to find a buyer.

WHO IS ELIGIBLE FOR THE SHARED OWNERSHIP SCHEME?
You need to be 18 or over, with a household income of up to £80,000 (or £90,000 in London). You must be a first-time buyer or in the process of selling your property. You must meet the affordability criteria of a mortgage provider but be unable to afford the full cost of a home on the open market.

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