Shared Ownership Mortgages Explained

This guide explains how shared ownership mortgages work, who is eligible, how much deposit you need, what the monthly costs look like in practice and how staircasing allows you to increase your ownership over time. Shared ownership is one of the main government-backed routes onto the property ladder for buyers who cannot afford to purchase a home outright, and understanding how the mortgage sits alongside the rent and service charges is essential before committing.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

For a free initial consultation about shared ownership mortgages, call 01202 155992 or contact Mortgage One.

How Shared Ownership Works

Shared ownership allows you to buy a share of a property, typically between 10 and 75 per cent of its full market value, and pay rent to a housing association on the portion you do not own. You take out a mortgage on the share you purchase. Your monthly costs include the mortgage payment, rent on the housing association’s share and any service charges or ground rent that apply to the property.

The rent on the housing association’s share is typically set at 2.5 to 2.75 per cent of the value of their share per year, reviewed annually. This is lower than market rent, but it is important to factor it into your total monthly costs alongside the mortgage payment and service charges when assessing affordability.

Eligibility

To be eligible for shared ownership in England, you must meet the following criteria:

•       Your household income must be £80,000 or less per year, or £90,000 or less in London.

•       You must be a first-time buyer, a former homeowner who cannot afford to buy outright, or an existing shared owner looking to move.

•       You must not own another property at the time of purchase.

•       You must be able to demonstrate that you cannot afford to buy a home that meets your needs through a standard purchase.

Older Persons Shared Ownership is available for buyers aged 55 and over, with a maximum share of 75 per cent. The Home Ownership for People with Long-term Disabilities scheme offers shared ownership on properties sourced from the open market. Armed forces personnel receive priority access. Mortgage One’s government mortgage schemes guide covers all current schemes including shared ownership.

Deposit Requirements

Your deposit is calculated on the share you are purchasing, not the full property value. Most lenders require a deposit of 5 to 10 per cent of the share price. For example, if you are buying a 25 per cent share of a property valued at £300,000, your share costs £75,000 and a 5 per cent deposit would be £3,750.

This is one of the main advantages of shared ownership: the deposit needed is significantly lower than for an outright purchase. However, the total monthly cost, including mortgage, rent and service charges, must be affordable.

The New Shared Ownership Model

Shared ownership properties delivered through the Affordable Homes Programme from April 2021 onwards follow the new model, which introduced several changes designed to make the scheme more accessible and flexible:

•       The minimum initial share was reduced from 25 per cent to 10 per cent, lowering the entry cost further.

•       Gradual staircasing allows you to buy additional shares in increments of 1 per cent during the first 15 years, with reduced transaction costs. Under the old model, the minimum staircasing increment was 10 per cent.

•       A 10-year initial repair period means the housing association covers the cost of essential repairs to the structure and key installations during the first 10 years, up to £500 per year. This reduces the risk of unexpected maintenance costs in the early years of ownership.

•       The nomination period for resales has been reduced from eight weeks to four weeks, giving shared owners more control over the resale process.

Properties built under the old model before April 2021 still operate under the original shared ownership terms. Both models may be available in the market depending on when the property was built and funded.

To discuss shared ownership mortgage options for a specific property, call 01202 155992 or contact Mortgage One.

How Affordability Is Assessed

Lenders assess shared ownership affordability differently from standard mortgage applications. The mortgage itself is assessed using normal income multiples, typically 4 to 4.5 times your household income. However, the lender also factors in the rent you will pay on the housing association’s share and any service charges, which reduces the amount of mortgage you can support.

This means your maximum borrowing on a shared ownership mortgage may be lower than on a standard purchase of the same value. The affordability check ensures you can sustain the combined cost of mortgage, rent and service charges. Mortgage One’s first-time buyer mortgage guide explains how affordability assessments work for first-time buyers more broadly.

Staircasing

Staircasing is the process of buying additional shares in your property over time. Each time you staircase, the additional share is valued at the current market value, not the original purchase price. You will need a new valuation and will incur legal fees for each staircasing transaction.

Under the new model, you can staircase in 1 per cent increments during the first 15 years, which makes smaller purchases more practical. Under the old model, the minimum increment was typically 10 per cent. Once you own 100 per cent of the property, the rent to the housing association stops and you own the property outright. In some cases, full staircasing may convert the property from leasehold to freehold, depending on the property type.

Selling a Shared Ownership Property

When you sell a shared ownership property, the housing association typically has a nomination period during which it can find a buyer from its waiting list. Under the new model, this period is four weeks. If the housing association does not find a buyer within the nomination period, you can sell on the open market. The buyer must meet the scheme’s eligibility criteria unless you have staircased to 100 per cent ownership.

Selling can take longer than a standard property sale because of the nomination period and the requirement for the buyer to be assessed for eligibility. This is an important consideration when planning the timing of a sale.

Leasehold, Service Charges and Ground Rent

Shared ownership properties are leasehold. You will pay service charges to cover the maintenance of communal areas, buildings insurance and management fees. Ground rent may also apply, depending on the terms of the lease. These costs are in addition to your mortgage payment and rent, and should be factored into your monthly budget. Mortgage One’s new build mortgages guide covers leasehold considerations for new build shared ownership properties.

Remortgaging a Shared Ownership Property

When your initial mortgage deal ends, you can remortgage to a new product in the same way as any other mortgage. The lender pool for shared ownership remortgages is smaller than for standard remortgages, but several lenders offer competitive products. If you have built up equity through staircasing or property value growth, your LTV position may have improved, which could unlock better rates. Mortgage One’s remortgaging guide explains the remortgage process and timing.

How Mortgage One Can Help

Shared ownership mortgages require a lender that accepts the specific housing association, lease terms and property type involved. Not all lenders offer shared ownership products, and those that do may have different criteria for new build versus resale shared ownership. As a whole of market mortgage broker, Mortgage One can identify lenders that work with the housing association and property you are considering, assess your affordability across mortgage, rent and service charges, and ensure the application is structured correctly.

For expert guidance on shared ownership mortgages, call 01202 155992 or contact Mortgage One.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1. What is shared ownership?

Shared ownership allows you to buy a share of a property, typically 10 to 75 per cent, and pay rent on the portion you do not own. You take out a mortgage on the share you purchase. Your monthly costs include the mortgage payment, rent and any service charges.

2. How much deposit do I need?

Your deposit is based on the share you are purchasing, not the full property value. Most lenders require 5 to 10 per cent of the share price. On a 25 per cent share of a £300,000 property, a 5 per cent deposit would be £3,750.

3. What is staircasing?

Staircasing is the process of buying additional shares in your property over time at the current market value. Under the new model, you can staircase in 1 per cent increments during the first 15 years. Once you own 100 per cent, the rent stops.

4. What is the income limit for shared ownership?

Your household income must be £80,000 or less per year, or £90,000 or less if you are buying in London.

5. What are the monthly costs?

Your monthly costs include the mortgage payment on your share, rent on the housing association’s share (typically 2.5 to 2.75 per cent of their share per year) and service charges. All three must be affordable.

6. Can I sell a shared ownership property?

Yes. The housing association has a nomination period to find a buyer from its waiting list. If it does not find a buyer within this period, you can sell on the open market. Selling can take longer than a standard sale.

7. What changed under the new shared ownership model?

The minimum initial share was reduced from 25 to 10 per cent. Gradual staircasing in 1 per cent increments was introduced. A 10-year initial repair period was added. The resale nomination period was reduced from eight to four weeks.

8. Can I remortgage a shared ownership property?

Yes. When your initial deal ends, you can remortgage to a new product. The lender pool is smaller than for standard remortgages, but several lenders offer shared ownership products. A broker can identify which lenders are active in this space.