What Is Shared Ownership? A Guide for Buyers

In Summary…
Shared ownership lets you buy a share of a property and pay rent on the rest, making it possible to get onto the property ladder with a smaller deposit. You can usually buy more shares over time through a process called staircasing, although extra costs and lease conditions apply. It can make buying more accessible, but it’s important to understand the full costs before deciding if it’s right for you.

Getting onto the property ladder can feel out of reach for a lot of people, especially when house prices, deposits and mortgage payments are climbing. Shared ownership is one way to make buying a home more affordable, allowing you to buy a share of a property and pay rent on the rest.

But what is shared ownership and how does it work? What will you pay each month, and can you eventually own the whole property? Here’s what buyers need to know about the shared ownership scheme.

How Does Shared Ownership Work?

Let’s say you find a home valued at £250,000 and buy a 40% share.

• Your share is worth £100,000.
• You arrange a mortgage or use savings to buy that share.
• You pay rent to the housing provider on the remaining 60%.

Your deposit is based on the share you’re buying rather than the full property value. Deposits are usually around 5% to 10% of your share, although mortgage requirements vary between lenders.

You’ll also need to budget for rent and potentially service charges, ground rent and other property costs. Shared ownership homes are leasehold, so it’s important to understand the lease and what you’re responsible for before committing.

Who Can Apply For Shared Ownership?

In England, the shared ownership scheme is generally aimed at people who cannot afford to buy a suitable home on the open market. The main eligibility requirements are:

• Your household income must be £90,000 a year or less (£110,000 in London).
• You must be unable to afford the deposit and mortgage payments for a suitable home outright.
• You must meet at least one qualifying circumstance. This could include being a first-time buyer, having previously owned a home but being unable to afford one now, or needing to move as an existing shared owner.

Providers typically also require that you don’t already own a property, or that you’re selling it, and they check your credit history and immigration status as part of your application. Some properties will also have additional local eligibility requirements. The housing provider will assess your circumstances and affordability.

What are the Pros and Cons of Shared Ownership?

Shared ownership can make buying a home possible sooner, but it isn’t automatically the right choice for everyone; you should weigh up the pros and cons before applying;

Potential benefits:

• You need a smaller deposit than you would to buy the whole property.
• Your mortgage is based on the share you purchase.
• You can increase your ownership over time.
• It can provide a route into home ownership if buying outright isn’t currently affordable.

Things to consider:

• You’ll pay both mortgage repayments and rent.
• Service charges and other costs can add up.
• You’re buying a leasehold property, with responsibilities set out in the lease.
• Staircasing involves further costs, and the price of additional shares can rise if the property increases in value.
• Selling can involve extra steps because the housing provider may have nomination rights or a period to find a buyer.

Make sure you look at the total monthly cost, not just the mortgage payment, before deciding whether a property is affordable.

Is Shared Ownership Available Across the UK?

Shared ownership works differently depending on where you live – here’s how the scheme works across the UK:

• Scotland: There are separate affordable home ownership arrangements. You can find details through the Scottish Government’s shared ownership guidance.
• Wales: Wales has its own Shared Ownership scheme, with different eligibility and purchase arrangements.
• Northern Ireland: The equivalent scheme is known as Co-Ownership.

If you’re buying in England, make sure you’re reading guidance for the English scheme rather than assuming the rules are the same across the UK.

Thinking About Buying a Home?

Shared ownership can offer a route onto the property ladder, but it’s important to understand the costs and conditions before you commit.

Take time to check the lease, speak to a mortgage adviser and make sure the property works for your budget both now and in the future.