Shared Ownership: how the scheme works and the best way get a mortgage

Shared Ownership: how the scheme works and the best way get a mortgage

Shared Ownership can be an affordable way to buy a property in the UK, but it's widely misunderstood. Here we explain how the scheme works and how to get a shared ownership mortgage.

Anna Jordan

Mortgages and Home

Anna Jordan
Updated on 19 September 2017

What is shared ownership?

Shared Ownership schemes are provided through housing associations.

They allow you to buy between a quarter and three-quarters of a property and rent the rest from the housing association, with the option to buy a bigger share of the property later on.

This can be an attractive option for a first-time buyer who's priced out of the market. However, a recent survey by property developer Aster found that only 60% of people actually understand the main benefits of shared ownership.

So let's look a little more at the nuts and bolts to see if it's right for you. 

Are you eligible?

Your household must earn less than £80,000 a year (or £90,000 in London) and one of the following must apply:

  • you’re a first-time buyer
  • you used to own your home but can’t afford to buy one now
  • you’re an existing shared owner

Shared ownership costs and fees

Shared Ownership properties are usually leasehold, so you’ll be charged an annual management fee on top of your mortgage and rent.

Keep in mind you’ll also need to pay all of the regular costs like Stamp Duty and solicitors’ fees to buy through Shared Ownership or buy a greater share of the property.

As with many things, Shared Ownership differs throughout the UK.

Check out what you need to know in Scotland and Northern Ireland. In Wales, you can find out about Shared Ownership in your area through your local council.

To buy a home through a Shared Ownership scheme contact the Help to Buy agent in the area where you want to live.

Owning your home outright

If you want to up your share in future (known as ‘staircasing’), you will need to get your home valued again.

Chances are that if the prices for properties in your area have increased then you’ll be paying more than what you did for your initial share – that’s on top of the valuer’s fee.

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Shared ownership for other groups

People aged 55 and over can buy up to 75% of your home through the Older People’s Shared Ownership (OPSO) scheme. Once you own 75% you won’t pay rent on the rest.

If other Help to Buy scheme properties are unsuitable for you because you’re disabled, you could try home ownership for people with a long-term disability (HOLD). Just be aware that with this scheme, you can only buy up to 25% of your home. 

Selling a shared ownership property

Depending on your local authority’s rules, you might have a difficult time renting your property out at a later time.

If you still only own a share of the property the housing association has the right to find a buyer for it. 

The local housing association will have 'first refusal' if you decide to sell the property even if it is 100% yours. Their right to buy the property back first will last for 21 years from the date of 100% ownership.  

You might also have to seek the housing association’s permission to make improvements before you make them. And even though you might only own 25% of the property, you’ll be responsible for 100% of the repair costs, which is a bit of a kick in the teeth.

It’s also worth noting that you may not be allowed any pets, or it could be restricted to just cats and dogs.

Typically, you’re allowed one room more than the number of occupants when you buy the property which could be restrictive if you're looking to have a family or just want the extra space.

How to get a mortgage

Like Help to Buy, Shared Ownership mortgages only need a 5% deposit, though you could potentially stump up less.

Be warned that these types of mortgages can be a bit trickier to find as they’re not widely advertised. Many providers even exclude Shared Ownership properties in the criteria on their standard product ranges.

Your local broker is a good place to start as they'll have a better idea of what’s out there - have a word with experts from the area you want to live in.

From what we could gather, Barclays has a wider range of deals than its competitors. The bank allows you to apply for any of its standard mortgages to buy your share of the property. You’ll still have to prove that you’ll be able to make your repayments as well as your rent though.

Nationwide also offers shared ownership starting at 25% while Santander can give you a mortgage on its standard new business range (excluding Flexible Offset and Help to Buy). Just be aware that the rent must be included as a non-regular expenditure in the affordability calculator.

Leeds Building Society offers a range of Shared Ownership mortgages ranging from two to five years at a fixed-rate.

Teachers Building Society offers Shared Ownership mortgages to education professionals across the UK as well as individuals of any profession who want to buy a property in Wessex (Dorset, Hampshire and Wiltshire).

Some lenders offer better rates for customers with existing current accounts, so it’s worth checking with your bank first to find out about possible preferential rates.

Don't think shared ownership is right for you? Have a look at a whole host of fixed-rate and tracker mortgages with loveMONEY

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