Shared Ownership Mortgages:
A Complete Guide

Shared Ownership Mortgages: A Complete Guide

Shared Ownership is a great way to step onto the property ladder with a smaller deposit and more affordable monthly payments. This guide will help you understand how Shared Ownership mortgages work, their benefits, and how to apply for one.

What is Shared Ownership?

Shared Ownership is a government-backed scheme that allows you to buy a portion of a property (between 10% to 75%) while renting the remaining share from a housing association or local authority. It's especially popular among first-time buyers, but others may also be eligible. The key advantage is that your mortgage is only for the portion you own, which lowers the amount you need to borrow.

Am I Eligible for Shared Ownership?

To be eligible, your household income must be less than £80,000 a year (or £90,000 in London), and you should not be able to afford a home outright. You must also meet at least one of the following conditions:

• Be a first-time buyer or former homeowner unable to purchase outright

• Forming a new household (e.g., after a relationship ends)

• Be over 18 years old

• Have a formal sale agreement in place if you own another home

If you're over 55, you may be eligible for the Older Persons Shared Ownership (OPSO) scheme. For those with disabilities, the HOLD scheme may offer suitable options. Armed forces personnel also get prioritised access.

How to Apply for a Shared Ownership Mortgage

The process starts with checking your eligibility. Then, create an account on the Share to Buy website to search for properties. After finding a property, register your interest, view the home, and submit a reservation fee. The housing provider will carry out a financial assessment to determine what share you can afford.

Once you know the share of the property you’re purchasing, you can apply for a Shared Ownership mortgage. Mortgage One can assist you throughout this process, helping you find a deal suited to your needs.

How Much Can You Borrow?

While Shared Ownership means you’ll need to borrow less, typical income multiples of 4-4.5x your salary still apply. The lower cost of the share you’re buying makes it more likely you’ll be able to afford a suitable home. You can use our Shared Ownership calculator to estimate your monthly mortgage and rent payments.

How Much Deposit Do You Need?

For Shared Ownership, your deposit is based on the portion of the property you're purchasing. Typically, you’ll need between 5% and 10% of your share's value. For example, if you’re buying a 50% share of a £200,000 home, a 5% deposit would amount to £5,000.

Buying More Shares (Staircasing)

Over time, you can increase the share of the property you own by buying additional portions through a process known as "staircasing." This allows you to eventually own the home outright, reducing or eliminating the rent payments. The price of these additional shares will depend on the property's market value at the time.

Pros and Cons of Shared Ownership

Pros:

• Lower deposit requirements

• Opportunity to increase ownership over time

• Rent is capped, providing predictable costs

Cons:

• You'll only own part of the property initially

• Staircasing can be costly due to valuation and legal fees

• The property will always be leasehold, meaning you’ll likely have to pay ground rent or service charges

Available Lenders and Mortgage Rates

Several lenders offer Shared Ownership mortgages, and rates will vary based on factors like your deposit and income. Fixed-rate and variable-rate mortgages are available, with fixed-rate options offering more predictability. Mortgage One can help you compare deals to find the best rate for your circumstances.

Remortgaging Your Shared Ownership Home

When your mortgage deal ends, you may want to remortgage to get a better interest rate or purchase more shares. Mortgage One's advisors can guide you through this process and help you find a better deal based on your current situation.

Speak to a Shared Ownership Specialist

Navigating the Shared Ownership scheme can feel complicated, but Mortgage One is here to help. Our advisors can assist you from initial application through to staircasing or remortgaging in the future. Get in touch today for personalised advice and to explore the best mortgage options available to you.