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Want to buy a home through the shared ownership scheme? Then you’ll need to find out about shared ownership mortgages. We explain what they are, how to get one and how to find the best shared ownership mortgage deals.
Shared ownership mortgages are the type of mortgage you’ll need to take out if you buy a property through Shared ownership, a scheme designed to help you buy a home if you can’t afford to buy on the open market.
The shared ownership scheme makes the cost of home ownership more affordable because you can buy as little as a 10% share in a property and your deposit can be 5% of that share (or less in some cases), rather than of the whole property. You’ll rent the remaining share from your local housing association or developer that owns it. The scheme is also referred to as Part Buy, Part Rent or Share to Buy.
When it comes to shared ownership mortgages, while many mainstream lenders do offer these types of mortgages, not all do. So it’s very important to shop around to get the best deal.
Find out how much you can borrow and start your mortgage search online now with our partners at L&C
Before you can apply for shared ownership mortgages, you first need to apply for the shared ownership scheme and be approved. There are criteria you’ll need to meet including:
You can read more about whether you’re eligible to apply for a shared ownership with our guide Shared ownership: What is it? Is it worth it?
Just like when you take out a traditional mortgage, with shared ownership mortgages you can choose to take out a:
For more information, read our guide on Understanding mortgage types and what one you need.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
So how do shared ownership mortgages work in practice? Here’s an illustration. Say you want to buy a 25% stake in a shared ownership home worth £400,000…
| Value of the property: | £400,000 |
| Share you want to buy: | 25% |
| Value of your share | £100,000 |
| Deposit needed (5% of your share) | £5,000 |
| Mortgage needed | £95,000 |
| Share owned by housing association | 75% |
| Estimated mortgage per month | £572* |
| Estimated monthly rent | £687.50** |
| Approx monthly service charge*** | £100 |
| Estimated monthly costs: | £1359.50 |
* Calculation based on 25 year mortgage at 5.3%. Rates on shared ownership mortgages can change quicky so speak to a mortgage broker for up to date shared ownership mortgage rates
** First year rent based on 2.75% of the housing association’s share.
*** Service charge usually covers the cost of repairing, insuring and maintaining the building and common areas. They can vary widely and change each year. This is for illustration only.
With shared ownership mortgages, rather than using an online mortgage calculator to find out how much you may be able to borrow like you would if you were taking out a traditional mortgage, your best course of action is to speak to a fee-free mortgage broker. You’ll get detailed information on shared ownership mortgages, tailored to your circumstances and you’ll be able to see your shared ownership mortgage options too.
When it comes to finding shared ownership mortgages, a broker can prove invaluable. They know the market and will be able to tell you which shared ownership mortgage lenders will suit your requirements. For example, L&C’s David Hollingworth explains, ‘Some lenders may have specific deals available for shared ownership whereas others will offer their normal range of deals on shared ownership.’
But getting the best mortgage broker is vital. ‘In a similar way to buying on the open market there could be a referral to a mortgage adviser but it’s important to make sure that they will offer the best value,’ advises David. ‘Check that the adviser will offer whole of market coverage and check whether they will charge a broker fee. Other brokers like L&C don’t charge a broker fee which could help save money.’
Here at HomeOwners Alliance we have teamed up with fee-free mortgage brokers L&C to offer you expert advice on shared ownership mortgages. You can start by checking how much you can borrow, they’ll then give you a call when you’re ready to talk through the options before using the information you’ve already supplied to apply for the mortgage for you, when you’re ready to proceed.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
With shared ownership mortgages, the loan to value (LTV) works differently than on standard mortgages. The LTV isn’t calculated on the whole value of the property, just the portion you are buying.
For example, if you were buying a 50% share of a flat worth £200,000 you would need to stump up £100,000 from a combination of mortgage and deposit. So if you have a deposit of £10,000 then you’ll need £90,000 in mortgage – making the loan to value 90%.
With shared ownership mortgages you’ll usually need at least a 5% deposit of your share of the property.
Once you’ve registered for the shared ownership scheme and started looking at properties, you’ll need to go to a financial assessment with the housing association to find out the size of share you’ll be able to afford to buy and the rent you’ll pay each month. Then it’s time to look at shared ownership mortgages.
As we explain above, not all lenders offer shared ownership mortgages so we recommend speaking to a fee-free mortgage broker who can provide specialist advice on shared ownership mortgages.
You’ll need to provide certain paperwork as part of your shared ownership mortgage application, such as:
Shared ownership mortgage lenders include several High Street lenders, as well as smaller and specialist mortgage providers. For example, share ownership mortgage lenders include:
However, a fee-free mortgage broker will advise you on which lender it are best suited to your needs and find you the best shared ownership mortgage rates too.
For many people who can’t afford to buy a home on the open market, shared ownership is a great way to get on the property ladder. But you must do you research and check affordability. For example, while rent may be set at a discounted rate in the first year, it can only increase following rent reviews and any increases are linked to inflation.
Also, don’t assume you are more protected because it is a government scheme. You still need to keep up repayments on both the rent and your mortgage. It is also down to you to manage the household bills.
Plus shared ownership properties are leasehold. As a result there are extra costs and restrictions such as limitations on sub-letting and you may need to pay ground rent charges too. So do instruct a solicitor not recommended by the developer to check the detail of your lease.
For more information on the pros and cons of shared ownership, read our guide Shared Ownership: What is it? Is it worth it?
Once you have bought your share, you can choose to buy a bigger stake in it. You could purchase up to owning 100% if you can afford it and if the housing association allows 100% ownership. This is called staircasing, you can find out more with our dedicated guide to staircasing your shared ownership home.
When you come to the end of your current mortgage term it’s time to remortgage. You’ll find the experience is much the same as with a standard remortgage. The only difference is your choice of shared ownership lenders will be more restricted. So you won’t necessarily get the best mortgage rates available on the market. If you can now afford to buy the property outright by staircasing to 100% you will become eligible for a standard mortgage and have a better choice of cheaper mortgage rates to choose from.
This is possible but our experience is it would be a real challenge. Guarantor mortgages are difficult to get for a standard house purchase, it would be even harder for shared ownership. We would recommend that you speak to a mortgage broker. They can look at your circumstances and work out what your best mortgage options are.
Unfortunately, not. Mortgage lenders will only allow the people named on the shared ownership lease to be on the mortgage application. This means they have to live at the property as their main residence.
But your parents could help you with your deposit in order to help you get on the property ladder.
This depend on what your credit issues have been and how recent they were. In many cases, it is very difficult to get a shared ownership mortgage with a bad credit rating. The local housing association offering shared ownership properties may also not accept your application. But don’t assume you can’t do it without exploring it first. Also, you can do a lot to improve your credit rating. So, take the time to go through your credit report and do what you can to improve it.
Yes. You can get a shared ownership mortgage if you are self-employed. A mortgage lender will need to see that you have an adequate track record of earnings. However, it can be challenging to find a lender that offers shared ownership mortgages AND accepts self-employed applicants. We would recommending contacting a mortgage broker for help finding a lender who will offer you a mortgage.
Possibly. ‘Many will expect a deposit, usually a minimum of 5%, to be put down on the share that they are buying but some will be prepared to offer up to 100% of the share because they have the security on the full market value,’ explains L&C’s David Hollingworth. However, if you want to do this, you should take advice from a fee-free mortgage broker. Plus you’ll also need a housing association to agree and most require at least a 5% deposit.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
According to the Shared ownership (England): the fourth tenure? report, there are approximately 202,000 households living in shared ownership homes in England. This represents less than 1% of all households.
The main advantage of shared ownership is that you can get on the property ladder with a smaller deposit and mortgage. Plus if offers more long-term stability than renting and you may be able to buy a bigger share of the property over time.
But there are some potential pitfalls you need consider carefully. For example, costs like service charge and rent can spiral. Plus there are usually restrictions on what you can do with your property like sub-letting it or making alterations. To find out more information read our guide on Shared ownership: What is it? Is it worth it?
Find a shared ownership mortgage today with our online mortgage service
You can only buy a property that has been built under the Shared Ownership scheme. These homes will either be new-build properties or resales – i.e. one that a current owner bought under the scheme and is now selling. Find out how to find shared ownership properties in our guide Shared Ownership: What is it? Is it worth it?
When buying a property through shared ownership, the property will be leasehold. Find out more about what’s involved in our guide on Buying a leasehold property.
If you don’t own 100% of your home (and even when you do in some cases), the housing association or local authority has the right to buy it themselves or sell it to an eligible buyer at a value established by a RICS valuer for a set period of time. To find out more about this process, read our guide Shared Ownership: What is it? Is it worth it?
You’ll usually need to get permission to make improvements to your shared ownership home, but check your lease to be sure. But bear in mind that you if do improve it, like by fitting a new kitchen, and this increases your home’s value, this means it will be more expensive for you to buy additional shares of your property as it will be worth more. Read our guide Staircasing your shared ownership.
With shared ownership mortgages, you’ll usually need a deposit of between 5% and 10% of the share you’re buying. But there are other costs when you’re buying too such as legal fees. And there are ongoing monthly costs too such as rent and service charge. For more on the costs of buying a shared ownership property, read our guide Shared Ownership: What is it? Is it worth it?
While not all lenders offer shared ownership mortgages, many do. But lenders’ criteria varies so if you’re considering buying through the shared ownership scheme it’s advisable to speak to a fee-free mortgage broker to get their advice.
No. If you are buying through the shared ownership scheme you will need a specialist shared ownership mortgage. For more on the scheme read our guide Shared Ownership: What is it? Is it worth it?
Shared ownership mortgages usually takes around two months from start to finish, but it can take as little as 28 days if everything goes smoothly quickly. If you’re buying through this scheme, make sure you’re aware of all the pros and cons first. Find out more in our guide Shared Ownership: What is it? Is it worth it?
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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