How shared ownership works

Shared ownership is a homeownership scheme designed to help people who may not be able to afford to buy a home outright. This is how it works:

1. Ownership Share: Under shared ownership, you buy a share of a property from a housing association, usually between 25% and 75% of the property’s value. The remaining share is owned by the housing association, and you pay rent on this portion.
2. Mortgage and Rent: You’ll need to take out a mortgage to pay for your share of the property. In addition to your mortgage payments, you’ll also pay rent to the housing association for the share they own. The rent is usually set at a below-market rate.
3. Staircasing: Over time, you have the option to increase your ownership share in the property through a process called staircasing. This allows you to buy additional shares in the property until you own it outright. As you buy more shares, your rent payments to the housing association decrease.
4. Responsibilities: As a shared owner, you’re responsible for maintaining your property just like any other homeowner. This includes repairs and maintenance inside your home. The housing association is responsible for maintaining the communal areas and the exterior of the building.
5. Eligibility: Shared ownership schemes are typically aimed at first-time buyers, key workers, and those with a household income below a certain threshold. Each housing association may have its own eligibility criteria, so it’s essential to check with them directly.
6. Affordability: Shared ownership can make homeownership more affordable, as the initial deposit and mortgage payments are often lower than buying a home outright. It can also provide an opportunity to get onto the property ladder in areas where buying a home may otherwise be unaffordable.
7. Pros and Cons: While shared ownership offers many benefits, it’s essential to consider the potential drawbacks, such as restrictions on making alterations to your property, potential service charges, and limitations on selling your share.

One of the benefits of a shared ownership mortgage is that because you only own a percentage of the property, the loan-to-value of your mortgage tends to be lower. This opens the door for more preferential rates. Usually, the best mortgage rates are 60% loan-to-value and under.

Shared ownership can be an excellent option for those looking to get onto the property ladder but may not have the means to buy a home outright. It’s essential to carefully consider your financial situation and long-term housing needs before committing to a shared ownership scheme. It can be a complex proposition to understand so we’ll help you calculate the total monthly expenditure you can expect with both mortgage and rental payments.