Shared Ownership Mortgages: How They Work

Making the transition from renting to owning a property can be a daunting task for many, particularly with rising house prices and stricter mortgage requirements. However, shared ownership offers an alternative route to home ownership. This article will explain what shared ownership is and how shared ownership mortgages work, the application process, as well as the associated costs and fees.

What is Shared Ownership?

Shared Ownership is a government-backed scheme aimed at helping first-time buyers, those who previously owned a home but can no longer afford to buy, key workers, and those with a disability or long-term illness, to purchase a property. With shared ownership, you buy a share of between 25% and 75% of the property’s value and pay rent on the remainder to a housing association or private landlord.

Definition of Shared Ownership

Shared ownership is a form of affordable homeownership where you buy a percentage, typically between 25% and 75%, of a property’s value and pay rent on the remaining share. Shared ownership properties are often built by housing associations, who provide affordable housing to those who cannot afford to buy a home outright.

Benefits of Shared Ownership

Shared ownership offers several advantages, including:

  • Lower upfront costs than buying a property outright, as the deposit is only required on the share you are purchasing, not the whole property
  • Lower monthly mortgage repayments and rent payments than if you were to buy a property outright
  • Gradual increase in ownership share through staircasing, where you buy more shares in the property over time until you own the property outright
  • The opportunity to live in areas where buying a property outright would be otherwise unaffordable

Potential Drawbacks of Shared Ownership

There are also some potential drawbacks to consider before deciding to go down the shared ownership route:

  • Limited choice of properties, as not all developers offer shared ownership homes
  • Restrictions on selling and subletting the property
  • Additional costs such as legal fees and service charges, which can make it more expensive than renting
  • Less control over the property than if you owned it outright

How Shared Ownership Mortgages Work

Shared ownership mortgages work in a similar way to traditional mortgages, but with some key differences.

Mortgage Lenders and Eligibility

There are fewer mortgage lenders offering shared ownership mortgages compared to traditional mortgages, but the number is increasing. When applying for a shared ownership mortgage, you will often need to meet specific criteria set by the lender, including:

  • A minimum income requirement
  • A requirement to live or work in the local area
  • A good credit score and a clean financial history

Deposit Requirements

The deposit required for a shared ownership mortgage is only on the portion you purchase, not the whole property. However, the deposit requirements often vary depending on the lender and the percentage share you are purchasing. Typically, the deposit for shared ownership can range from 5% to 10% of the share you are buying.

Monthly Payments and Affordability

The monthly payments for shared ownership mortgages include both the mortgage repayments and rent payments on the share you do not own. The cost of the mortgage repayments is calculated based on the share you are purchasing, while the rent payment is calculated based on the share you do not own. The affordability of shared ownership will depend on several factors, including your income, the share you are purchasing, and the rent payments.

Staircasing: Increasing Your Ownership Share

One of the significant advantages of shared ownership is the opportunity to increase your ownership share over time through staircasing. You can purchase additional shares in the property until you own the property outright. The cost of staircasing depends on the current value of the property and the value of the share you wish to purchase. However, you will need to factor in the cost of a surveyor and legal fees.

The Application Process for Shared Ownership Mortgages

Assessing Your Eligibility

The first step in the shared ownership application process is to assess your eligibility. You can do this by contacting a shared ownership provider or mortgage lender. They will ask you a series of questions to determine if you meet the eligibility criteria for the scheme and the mortgage. If you are indeed eligible, they will provide you with an application pack.

Finding a Shared Ownership Property

Once you have established that you are eligible for shared ownership, you can start searching for a suitable property. There are several websites that list shared ownership homes available in your area, and you can also approach housing associations and developers directly.

Applying for a Mortgage

Once you have found a property, you can apply for a shared ownership mortgage. You will need to provide detailed information to the lender, including your income, employment details, and financial history. The lender will assess your application and make an offer based on their lending criteria.

Completing the Purchase

Once the mortgage offer has been made, and you have completed the necessary legal checks and paperwork, you can complete the purchase. You will sign a shared ownership lease and pay the deposit and any other associated costs.

Costs and Fees Associated with Shared Ownership Mortgages

Mortgage Fees

Shared ownership mortgages may include several fees, including valuation fees, arrangement fees, and mortgage broker fees. The fees may vary depending on the lender and the mortgage product.

Rent and Service Charges

When you purchase a shared ownership property, you will be required to pay rent on the share you do not own. You will also be responsible for paying service charges, which cover the costs of the upkeep of communal areas and facilities. The rent and service charges will vary depending on the property and the percentage share you own.

Stamp Duty and Legal Fees

You may be required to pay stamp duty on the percentage share you are purchasing. The amount of stamp duty depends on the value of the share and the current stamp duty rates. You will also need to factor in legal fees, conveyancing fees, and surveyor fees.

Insurance and Maintenance Costs

As a shared ownership homeowner, you will be responsible for insuring the property and maintaining it. You will be required to take out buildings insurance to cover the structure of the property, as well as contents insurance to cover your belongings. You will also be responsible for maintaining your portion of the property, including any repairs and maintenance work.


Shared ownership mortgages offer a viable option for those who cannot afford to buy a property outright. However, it is essential to understand how the scheme works, the eligibility criteria, and the costs involved. By taking the time to research and plan, you can make an informed decision about whether shared ownership is the right option for you.