What is a shared ownership mortgage?
A shared ownership mortgage lets you part buy and part rent a property. This means you’ll own a percentage of your home and pay rent to a landlord on the rest.
The headlines
- Shared ownership is a government-backed scheme in the UK that helps people who can’t afford the full deposit or mortgage payments get on the property ladder.
- All shared ownership properties have leasehold agreements.Â
- You can choose to buy larger shares of your property later down the line, which is known as staircasing.
With shared ownership, you only own part of the property. You'll then pay rent on the part owned by the housing association, local authority or private provider.
You can usually buy 25% to 75% of the property, though some providers might let you buy a 10% share.
You could use a shared ownership mortgage to pay for your share. You’ll still need to put down a deposit for the mortgage, but this is often less than you’d need to buy the whole property.
As part of your shared ownership arrangement, you’ll enter into a leasehold agreement with the landlord and the mortgage lender. It’s important that you fully understand this and any potential restrictions or conditions.
These might include:
- the cost of future rent and maintenance payments
- what you can or can’t do to the property
- what happens if you can't keep up with your mortgage or rent payments.
Find out more about shared ownership scheme on the GOV.UK website.
Staircasing is when you buy extra shares in your home over time. This increases the amount of the property you own, which could help lower your rent payments.
Say you start with a 50% share. In a couple of years, you could ask to increase your share to 75%. You might use a mortgage or savings to help with the extra costs.
If you choose to buy the remaining amount, you’ll own 100% of the property and won’t pay any rent. At this point, the property is all yours.
Pros
- Help getting on the property ladder. Shared ownership could help buyers afford their first home with a smaller mortgage.
- Could offer more stability. You could stay in the property for as long as the lease agreement says. This might offer more long-term stability than some rental arrangements.
- Potential to own more of the home than you started with. You might be able to buy more shares over time and work towards owning 100% of the property.
Cons
- You’re still a tenant. You’ll have to pay rent on a portion of the property. And you could be evicted if you miss your rental payments.
- You might have to pay stamp duty. If you’re not a first-time buyer, you usually pay stamp duty on your property purchase.
- There might be service charges. You may have to pay a service charge to cover the maintenance of the building’s communal areas.
If you’re wanting to make the most of the shared ownership scheme, we can help.
- Check you can apply for shared ownership in your region.
- Call us to apply for a mortgage.
- Find a property and make your offer.
- Complete your shared ownership mortgage application.
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No, you can’t usually rent out a shared ownership property. But there are some exceptions to this, so it’s best to speak with your landlord if you have any questions. They might give permission in very rare situations.
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It’s usually possible to live with another person in a shared ownership home, if they can legally pay rent in England. Check the terms of your lease to be sure.
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You might be able to paint, decorate and refurbish a shared ownership home. But any larger home improvements or structural changes will need to be approved by your landlord. Check the terms of your lease to see what you’re able to do.
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The cost of owning a shared ownership property usually depends on:
- the value of your property
- the size and value of your share
- your mortgage payments
- your monthly rental payments
- the cost of service charges and ground rent.
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Yes, it is possible to buy more shares in your home after you become the owner. This is called ‘staircasing’. The more shares you buy, the less rent you pay.
Eventually, you could own the whole property, but this depends on the lease agreement with your landlord.
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Yes. Each time you buy a share of the property, you must pay stamp duty. This can either be paid as a one-off lump sum based on the total market value of the property or in stages.
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Lloyds supports a range of government housing schemes, including:
- First Homes Scheme, only in England
- Right to Buy
- Help to Buy: Equity Loan.
Other options include:
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