Compare shared ownership mortgages

What is shared ownership?

Shared ownership mortgages are part of a government scheme designed to help people get on the property ladder. Under the scheme, you buy between 10% and 75% of a home from a housing association and pay subsidised rent on the rest. Your mortgage only covers the share you buy, which means a far smaller deposit and lower monthly repayments.

Over time, you can incrementally increase your share in the property, so that you gradually own more and more of your home. This is known as “staircasing”. It reduces your rent and allows you to work your way up to full ownership slowly.

The government recently made a raft of changes to the shared ownership scheme to try and make it more affordable and accessible to homeowners. Under the new model, buyers can start from as little as 10% ownership, whereas previously, you had to buy at least 25%.

New shared owners can buy additional shares in their home in 1% increments for up to 15 years, with heavily reduced fees. Before the changes, you usually had to buy an extra 10% each time. It is possible to buy more of your home in larger increments.

How do shared ownership mortgages work?

Shared ownership properties are bought from a housing association and arranged by a local Help to Buy agent.

To access the scheme, you’ll need a deposit and a lender who offers shared ownership mortgages. The minimum deposit required is 5% of the share you want to buy.

For instance, if you wanted a property worth £200,000, you’d normally need a minimum 5% deposit worth £10,000 and a £190,000 mortgage. But if you were buying 25% of the home under shared ownership, you’d need a deposit of just £2,500 and a mortgage of £47,500. As the mortgage is so much smaller, the monthly repayments are also far less.

Of course, you have to pay rent on the remaining share, but this is lower than market rates. The maximum rent you can be charged is 3% of the unsold share but some landlords charge less. In the example above, you would expect to pay £375 per month in rent at most.

At the end of the mortgage, you would own 25% of the property outright, and the housing association would own the remaining 75%. You can choose to buy a bigger proportion from the outset – with schemes running from 10%-75%.

You can also choose to buy more shares of your home in the future. Each time you buy an extra chunk, your monthly rent payments will drop accordingly. You have to buy the new shares at the current market rate, not the value when you first purchased the home.

You’ll also need to factor in other fees before you buy. Housing associations recommend that you have between £3,000 and £5,000 available to cover all the costs of moving, which includes the surveys, solicitors and broker fees.

Can you buy a bigger share of your property over time?

You can buy additional shares of your home, through staircasing. Each time you buy a new chunk, you will need to pay your housing association to carry out a mortgage valuation. The landlord may charge an administration fee if you buy a share of 5% or more – this can vary from around £150 to around £500.

The more you buy, the less rent you will pay, although your mortgage payments could go up if you need to borrow extra cash from a lender.

Different associations have different rules, but many say you need to increase your share by 10% each time. Some have limits on the total number of times you can buy extra chunks.

Some older leases only allow you to buy shares of 25% or more, while more modern leases let you increase by increments of 5%. New government rules mean if you bought your home after 2021 you may be able to buy 1% extra of the house at a time. 

Before you buy a shared ownership home, ask the landlord for the ‘key information document’ to check the rules around what shares you can buy and when.