Shared Ownership mortgage guide

We explain what it is, how it works, and whether Shared Ownership is suitable for your circumstances.

In this guide:

What is Shared Ownership?
How does Shared Ownership work?
Who does Shared Ownership suit?
Will I be eligible for a Shared Ownership mortgage?
Selling a Shared Ownership property
Is Shared Ownership a good idea?
Shared Ownership vs. Help to Buy
Shared Ownership (Wales)
Co-Ownership (Northern Ireland)

What is Shared Ownership?

While Shared Ownership isn’t so common in the UK right now, its popularity is expected to rise, and could be a suitable solution for prospective buyers with a limited budget.

Shared Ownership schemes allow you to purchase a share in a property, and pay rent on the remaining share.

It’s a way for first-time buyers, or others who can’t currently afford to buy a home, to get on the property ladder, with a much smaller deposit than they‘d usually need.

Buyers can purchase between 25% and 75% of the property, with the option to buy a bigger share at a later date.

Shared Ownership properties are offered on a leasehold basis, and the majority of Shared Ownership homes are new builds, although increasingly housing associations offer resold properties.

How does Shared Ownership work?

Shared Ownership homes are offered through housing associations as part of a government initiative to help people who would usually find it impossible to buy a home of their own.

The rules are slightly different in each country within the UK, but generally it’s possible to put down a small deposit of around 5% of the property’s value. Then you take out a mortgage to cover the rest of your share in the property.

You’ll co-own your house with the housing association and will pay both your mortgage repayments and a certain amount in rent each month.

You can later increase the percentage of the home that you own, with the option to eventually own the whole property.

Once you own the property, you can continue to live there or sell it on, although your housing association will have “first refusal” for 21 years from the initial purchase. This means that you’ll have to give them the opportunity to buy it first before you can offer it for sale to anyone else.

You can also sell the share of your home that you own, even if you haven’t purchased 100% of the property. Then the housing association will still own a share in the property and can choose to buy back your share or find its own buyer.

Who does Shared Ownership suit?

Shared Ownership is ideal for those with low incomes and families who are looking to get on the property ladder but who lack the means to secure a large mortgage from a lender.

You can buy a property through Shared Ownership if your combined household income is lower than £80k (or £90k in London), and you meet any of the following conditions:

You’re a first-time buyer
You already have a Shared Ownership agreement
You used to own a home, but can no longer afford to

Who doesn’t Shared Ownership suit?

Shared Ownership generally works out more expensive in the long term than getting a regular mortgage. So if you have the financial means, you may not want to consider Shared Ownership.

Will I be eligible for a Shared Ownership mortgage?

Not everyone is eligible for a Shared Ownership mortgage. Here are some criteria to consider if you think you could be eligible.

Income

You may be eligible if you have a household income of less than £80,000 (or £90,000 in London) and are a first-time buyer or a previous homeowner who can’t afford to buy a property now.

Council and housing association tenants

If you’re currently renting a council or housing association property, then you may be eligible for the scheme.

Credit history

You’ll also need a good credit history, with no rent arrears, and you may have to submit financial details to prove that you can afford the costs of a Shared Ownership house.

Over 55s

If you’re over 55 you might want to look into the Older People’s Shared Ownership scheme. Similarly, if you have a long-term disability, then you could be eligible for a the Home Ownership for People with Long-term Disabilities scheme (HOLD).

Military personnel

Lastly, although it doesn’t matter what your job is, military personnel will be given priority over other applicants.

Selling a Shared Ownership property

As mentioned above, there are restrictions when it comes to selling Shared Ownership properties, but many potential buyers aren’t put off by these.

It simply means that you’ll have to work with the housing association you purchased through when it comes to selling your home.

They’ll usually have first refusal on the property, even if you now own it outright. If you don’t own the whole house, your housing association may want to buy your share back from you, or find their own buyer.

While these issues may slow down the process, you’ll still be able to sell whenever you want to, and realise the equity you have in the house, whatever that might be.

Is Shared Ownership a good idea?

There are some great reasons to consider Shared Ownership, as well as some not-so-good factors to bear in mind.

If you think you meet the criteria, it’s worth discussing it further with a mortgage broker.

Pros

Good for lower incomes

A big advantage of Shared Ownership schemes is that they allow people on lower incomes to get on the property ladder, or buy a bigger property than they’d otherwise be able to afford.

Gradual buy

Shared ownership also lets you purchase a home gradually, by buying a bigger share if and when your finances change and you’re able to afford it.

Could be cheaper than rent

Plus, depending on your deposit amount and mortgage terms, your monthly outgoings may be cheaper than when just paying rent.

Cons

Selling and home improvement restrictions

The down-sides include the restrictions on selling your home, which could prevent you from getting a quick sale in the future. And as you won't own your home outright, you might need permission to make improvements or changes to it.

Tenants and pets

With Shared Ownership, you might find that pets, or renting a room to another tenant, aren’t allowed.

Could be costlier

There’s also the chance that the combination of rent as well as mortgage end up being the same or more than the rent you would be paying, and you may find yourself liable for service charges if you’re in a flat or other shared community of properties.

Shared Ownership vs. Help to Buy

How does Shared Ownership compare to Help to Buy?

If you use Help to Buy, you get a mortgage to buy 75% of the property. Then the government tops that up with a 20% loan, so you only have to find a 5% deposit.

With Shared Ownership, you can purchase as little as 25% of the property. That means the amount you borrow is much less.

Finally, Help to Buy is only available on new build properties, whereas Shared Ownership is available on different types of homes.

Is Shared Ownership a better idea?

Choosing between Help to Buy and Shared Ownership schemes really depends on your individual circumstances.

If you’re a first-timer looking to buy before 2023, Help to Buy is a ‘leg up’ that will help finance your new home.

But people on low incomes will likely prefer Shared Ownership, as it offers the freedom to buy as much or as little of a property as you can afford.

Here’s an example:

Under Help to Buy, you’d need a 5% deposit of £12,500 on a home that costs £250,000.

With Shared Ownership, you could buy a 25% share in a £250,000 home, and your deposit would be £3,125.

That explains why Shared Ownership is the right choice for many, and is definitely something to consider if you need some help to buy your own home.

Find out more in our Help to Buy guide.

Shared Ownership (Wales)

In Wales, the Shared Ownership scheme works in mostly the same way as it does in England.

Who's eligible?

The Welsh Government has set its own criteria you’ll need to meet to qualify for this scheme:

You must be buying your first home (or forming a new household - eg. after a divorce - or be moving to an area for work that you’re unable to afford a suitable home)
You must take out a repayment mortgage (not interest-only) for the share of the home purchased
The home must be bought from a participating landlord
Your annual household income must be less than £60,000
You can’t own another home
You can’t afford to buy a suitable-sized property for your family on the open market
You’ll need to pass a financial assessment

Further details on the scheme can be found on the Welsh Government website.

What is the Co-Ownership scheme?

Co-Ownership is a scheme available in Northern Ireland for those who can’t afford to buy a house without financial help.

It can help first time buyers, as well as those who have owned a home before, to purchase a property bit-by-bit.

There is the possibility of not needing a deposit, and co-owning rates could be more affordable than buying outright.

Similarly to Shared Ownership scheme, you buy a share of the house and pay rent for the remaining share to Co-Ownership.

How does the Co-Ownership scheme work?

With co-ownership, you can buy a home up to the value of £165,000, and you buy a share of between 50% and 90%, depending on how much you can afford.

Whatever share is left of the property will be owned by the housing association Co-Ownership, and you’ll pay rent on the share that they own.

So, if you buy a 60% share of the property, you pay the mortgage on that percentage and pay rent to Co-Ownership on the remaining 40%.

If and when you’re able to, you can choose to increase your share of the property gradually in 5% amounts.

Who is eligible for a Co-Ownership scheme?

Most people who use the Co-Ownership scheme tend to be first time buyers, but the scheme can also be used by those who have been homeowners before.

In order to be eligible for Co-Ownership, you should:

Be over 18 and live in the UK
Not be the existing owner of property and/or land in Northern Ireland or anywhere else (there’s an exception for Co-Ownership Portability cases)
Have the right to live in Northern Ireland
Aim to be living in the property as your only residence and not use it for business purposes
Not have had any Payday Loans or Home Credit in the last 12 months
Have completed any Debt Relief Orders, bankruptcies or Individual Voluntary Arrangements at least 6 years prior to applying for Co-Ownership
Have no outstanding adverse credit when making an application for Co-Ownership. I.e. CCJ’s or Defaults
Be willing to have Co-Ownership assess your credit history using Experian

You’ll also need to show that you’ll be able to afford to make the necessary payments involved in the home buying process and that you don’t have any other unassisted way to own a property.

How do you apply for the Co-Ownership scheme?

Applications for Co-Ownership are done online, and a non-refundable £100 assessment fee is payable in order to progress with the application.

Before you apply to Co-Own, you should ensure that you have all the necessary information and documentation. Details of the documentation you need to provide are on the Co-Ownership website.

They also recommend that you check your own credit score before starting an application.

After you receive and Approval in Principle, you’ll be asked to upload the property you intend to buy. At this point you’ll be asked to pay a £450 property fee.

Paying for a Co-Ownership mortgage

Renting

The cost of your rent will depend on how much of the home you own (your share) and the value of the property.

Rent costs and any annual increases are set by the Department for Communities (DfC).

Buying

You’ll buy and pay a mortgage on as much of the property as you can afford (between 50% and 90%). You’ll be responsible for this side of things, and will arrange the mortgage and lender yourself.

Your lender may ask you for a deposit, but Co-Ownership won’t.

Costs such as insurance, ground rent, maintenance and repairs will be your responsibility as owner occupier of the property.

For more details, see the Co-Ownership website.