Shared Ownership Mortgages for First-Time Buyers: Shared ownership allows an eligible buyer to purchase a share of a property and pay rent on the remaining share.
Affordability must include the mortgage, rent, service charge and household costs.
The property, lease, and housing provider requirements must also satisfy the lender.
How Does Shared Ownership Work?
A buyer purchases a percentage of the property.
A housing provider retains the remaining share.
For example:
- Full property value: £300,000
- Share purchased: 40%
- Price of share: £120,000
- Deposit at 5% of share: £6,000
- Mortgage required: £114,000
The buyer then pays rent on the unowned share.
Service charges may also apply.
The lower mortgage amount can reduce the initial deposit requirement. However, total monthly housing costs need careful assessment.
What Costs Should Be Included?
A shared ownership budget may include:
- Mortgage payments
- Rent on the remaining share
- Service charges
- Estate charges
- Buildings insurance contribution
- Council Tax
- Utilities
- Repairs
- Legal fees
- Housing-provider fees
Do not judge affordability from the mortgage payment alone.
Service charges can change. Review the latest accounts and planned works where available.
Does the Buyer Own the Property?
The buyer normally owns a leasehold share.
The lease sets out:
- The purchased percentage
- Rent calculation
- Repair obligations
- Resale procedure
- Staircasing rights
- Restrictions on letting
- Nomination periods
- Service-charge obligations
The solicitor should explain these terms before exchange.
What Is Staircasing?
Staircasing means purchasing a further share later.
The cost is usually based on the property’s value at that time.
Possible costs include:
- Valuation
- Legal work
- Mortgage fees
- Housing-provider administration
- Stamp Duty considerations
A rise in property value can make later shares more expensive.
A fall may reduce the price, although it can also affect mortgage options.
Some properties have restrictions on the maximum share that can be purchased.
What Will a Mortgage Lender Check?
The lender may review:
- Applicant affordability
- Deposit
- Credit history
- Lease terms
- Housing provider
- Property construction
- Remaining lease length
- Service charges
- Rent
- Resale restrictions
- Valuation
Not every lender participates in every shared ownership arrangement.
The property and applicant must both meet policy.
Is Shared Ownership Only for First-Time Buyers?
No.
Eligibility may include former homeowners who cannot currently afford a suitable property.
Scheme rules and income limits may apply.
Current affordable home ownership information is available through GOV.UK.
What Happens When the Property Is Sold?
The housing provider may have a period in which to nominate a purchaser.
The buyer may also need to:
- Obtain a valuation
- Pay marketing fees
- Follow lease procedures
- Repay the mortgage
- Pay legal costs
- Settle service-charge balances
These restrictions can make a shared ownership sale different from an open-market freehold sale.
Choosing an Adviser
Search the Connect Experts first-time buyer adviser directory and review whether advisers have experience with shared ownership.
Ask about:
- Participating lenders
- Housing-provider requirements
- Rent and service-charge affordability
- Lease checks
- New-build shared ownership
- Staircasing
- Resale restrictions
Shared ownership changes the size of the first step. It does not remove the need to understand the whole staircase.
