What is a shared ownership mortgage?

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Who is this page for?

This page is for home buyers who want to know more about shared ownership mortgages and schemes.

Our guide will take you through shared ownership basics, pros and cons. 

What is shared ownership?

Shared ownership is where you own a percentage of a property and a landlord such as a housing association or local authority owns the rest, renting it to you at a reduced rate.

Shared ownership properties are often leasehold, which means you’ll be buying your portion of the house for a set amount of time. Find out more about the differences between leasehold and freehold.

Shared ownership schemes can help those who may otherwise be unable to buy a home, such as people on lower incomes, or want to buy in areas where property prices are high. 

How does shared ownership work?

Shared ownership schemes work by letting you take out a mortgage on part of the property, then pay rent on the rest. This can mean you’ll be able to buy a home with a smaller mortgage.

If you buy a home under a shared ownership arrangement, you will enter into an agreement with a landlord as well as the mortgage lender. It is important you fully understand the implications of this, including any restrictions they may impose on you such as: future costs of rent and maintenance etc, what you can do or cannot do to the property, and what happens if you are unable to maintain either your mortgage or rent payments.

It is recommended you seek independent advice over the suitability of buying via shared ownership as mortgage advisors can only give advice on the mortgage arrangement.

For example:

You buy a 50% share in a house worth £200,000, which is £100,000.

If you put down a 5% deposit of £5,000 on that share of £100,000. You’ll then have a mortgage of £95,000.

You’ll then rent the rest of the property from the landlord.

You will have to afford both your mortgage and your rent payments.

How to apply for a shared ownership mortgage?

Before you take out a shared ownership mortgage, you need to apply for the shared ownership scheme and be approved.

You’ll usually need to provide details of your income, budget, preferred area and credit history to the scheme provider.

Once you’ve been accepted, you can then start your shared ownership mortgage application. Not all lenders offer this kind of mortgage, so double check before applying.

To be accepted for a mortgage, you’ll need to provide the lender with information about your household income and credit history.

How much you can borrow will usually depend on:

  • Your income
  • Cost of your mortgage
  • Rent
  • Service charges
  • Ground rent

Shared ownership: pros and cons

There are pros and cons to using a shared ownership mortgage.

Pros

  • Allows buyers to get a mortgage with a smaller mortgage.
  • Offers more long-term stability than rental agreements. You can stay in the property for as long as the lease agreement states.
  • You may be able to buy more shares over time, allowing you to work your way up to owning 100% of the property. Once this happens, you’ll stop paying rent. This is called ‘staircasing’.

Cons

  • Not every lender offers shared ownership mortgages.
  • You’ll have to pay rent in addition to the mortgage payment.
  • You might have to pay ground rent and service charges.
  • Shared ownership properties are mostly available as leasehold purchases – to find out more, visit our leasehold vs freehold page.
  • There may be limits on the type of home improvements you can make.
  • You may be restricted from renting the property out.

We can’t offer financial advice, so if you’re considering a shared ownership mortgage, we recommend getting impartial financial advice.

  • Can you rent out a shared ownership flat?

    You can’t usually rent out a shared ownership property. There are some rare exceptions to this, but it’s best to speak with your landlord if you have any questions.

    Can you build an extension on a shared ownership house?

    Larger home improvements, like extensions, will need to be approved by your landlord.

    How much does shared ownership cost?

    The cost of owning a shared ownership property will depend on lots of factors, including:

    • Value of your property
    • Size and value of your share
    • Value of your mortgage payments
    • Monthly rental payments
    • Cost of service charges and ground rent

    Can you buy shared ownership outright?

    Over time you may be able to do what’s called staircasing - subject to the rules within the lease agreement with your landlord. This is where you buy more shares in your property and could eventually own the whole property.

The content on this page is for reference and does not constitute finance advice.

For impartial financial advice, we recommend government bodies like the MoneyHelper.

Calculators & tools

We have a range of mortgage calculators to help you:

  • Find out how much you could borrow from Lloyds Bank
  • See how much you could save if you make overpayments on your mortgage
  • Get an idea how a change to the Bank of England Base Rate could effect your monthly payments

Use our mortgage calculator and tools >

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