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 and how to apply for one if and when the time comes. 

In this article

What is shared ownership?

Shared ownership is where you own a percentage of a property and a housing association or the government ‘owns’ the rest, renting it to you at a reduced rate. This often means a lower deposit is needed to buy a house.

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

Shared ownership schemes are available to permanent UK residents who fall into any of these categories:

  • First time buyers.
  • People with a household income of less than £80,000 (or less than £90,000 in London).
  • People who already live in a shared ownership property.
  • Former homeowners who can’t currently afford to buy a home.
  • People who are currently renting a council or housing association property.

Shared ownership mortgages work alongside shared ownership schemes and provide the capital to purchase the rest of the property. 

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 deposit.

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 housing association.

Your total monthly payments will combine your rent and mortgage repayments.

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.

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 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 deposit.
  • 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.

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 housing association 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 housing association.

    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 can do what’s called staircasing. This is where you gradually buy more shares in your property. Eventually, you can build this up to 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.

Related pages

Find out more about mortgages.

Interest only mortgages >

Getting a mortgage while self-employed >

What is a Buy to Let mortgage? >

How much will my mortgage cost? >

Calculators & tools

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Use our mortgage calculator and tools >

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