Shared ownership scheme (An Ultimate guide)

In this brief guide, we will discuss the shared ownership scheme, the eligibility criteria and how to get a shared ownership mortgage.

What is the Shared Ownership scheme?

The shared ownership scheme is a first time buyer scheme which allows first time buyers and previous homeowners who cannot afford to purchase in any other way to buy a minimum 25% share in any eligible shared ownership home provided by a shared ownership home provider. 

You will then have to pay a subsidized rent to the shared ownership provider (usually a housing association) on the remaining share of the property but you can always increase the shares you have in the property through a process known as staircasing. You can usually staircase all the way to 100% and hence own the property outright. Whenever you want to staircase the value of the home will be independently verified.

With the shared ownership scheme you can either buy new build homes or shared ownership resales which are shared ownership homes which were previously owned by another eligible buyer.

You will also need to repay a mortgage on the shares of the property which you own. You can see what this may look like by using a shared ownership calculator.

Because you will need a mortgage for the share of the property which you will own you fill find that the mortgage deposit requirement is significantly less than usual. Shared ownership mortgages are currently provided by Barclays, Lloyds TSB, Halifax and Santander.

Shared Ownership properties are always leasehold properties so there may be other charges involved such as ground rent etc.

Shared ownership Priority applicants

Priority for shared ownership is given to applicants who are:

Armed Forces personnel (serving military personnel and former members of the British Armed Forces discharged in the last two years) and/or

those who live or work in the local area

The criteria may vary across each housing provider and development.

The scheme operates in Wales as the shared ownership in Wales and in Scotland as the shared ownership in Scotland. In Northern Ireland, it operates as the co-own scheme by co-ownership.

Should you buy a  shared Ownership home?

Yes, there are many reasons why you should consider buying a shared ownership home. We have compiled a list of pros and cons of the shared ownership scheme but we will provide you with a few reasons why you may want to consider buying a shared ownership home.

• If you currently cannot afford to save up the full mortgage deposit needed for a normal home then a shared ownership may be the best choice for you as you don’t need to save for a mortgage deposit which will qualify you for the full share of the home due to the fact that you are only buying a share of a home.

Example: If you wanted to buy a £500,000 home and needed just a 5% mortgage deposit you will need to put down a mortgage deposit of £25,000 which may be very difficult for you.

If the £500,000 home was a shared ownership home then you will simply need to buy a minimum share of 25% of this home which is £125,000% and a 5% mortgage deposit requirement will now be £6,250.

• You can get better mortgage rates with a shared ownership. The reason why you can get better mortgage rates with a shared ownership home is comparative to if you had to put down your mortgage deposit on the full price of the home. When you only have to put it down on a smaller share of the home you may be able to significantly reduce your loan to value and hence the mortgage rate being charged.

Example: if you had a mortgage deposit of £10,000 and wanted to buy a house with £200,000 hence a 5% mortgage deposit you will have a loan to value rate of 95% which will mean you will face some of the mortgage lenders most expensive rates as you have a high loan to value.

If you only needed to buy 25% of the £200,000 home through shared ownership which is £50,000 then your mortgage deposit of £10,000 will now get you a loan to value rate of 80% which may qualify you for cheaper mortgage rates.

• The rent charged on the property is subsidized. This means it is usually less than the market rate being charged. The rent on shared ownership properties is usually around 2.75% of the property value per annum.

• The mortgage deposit you need is usually 5% of the shares of the property you want to buy not the whole property.

• You can now pay your stamp duty based on the shares you own and be eligible for first-time buyer stamp duty relief. You may also be able to defer stamp duty until your share of the property reaches 80%.

• The minimum share of the property you need to buy is usually 25%.

• Due to the way the planning permission works (by requiring most developments to cater for shared ownership units) you may find shared ownership properties in some of the best Lindon postcodes.

Shared ownership eligibility requirements

As with any other government scheme the shared ownership eligibility requirements are there to ensure that the benefits of the scheme are mainly received by those who are eligible.

To be eligible for the shared ownership scheme you must:

Some shared ownership providers (such as housing associations) will have their own shared ownership eligibility criteria but the above are the minimum requirements. You should check with the shared ownership provider to ensure you meet their eligibility requirements.

FAQs about shared ownership eligibility

Below we answer some of the most frequently asked questions about the shared ownership eligibility.

Buying a shared ownership property without a mortgage

Yes, it is very possible to buy a shared ownership property without a mortgage. The shared ownership scheme does not make any requirement that states that you are required to buy a shared ownership property with a mortgage.

How to buy a Shared Ownership home

Buying a shared ownership home may seem like a long and stressful process but it is usually worth it.

Check you are eligible

Before you start the buying process you should check that you are eligible for a shared ownership home. As mentioned prior, some housing associations will actually set their own eligibility criteria upon those set by the Government. You should, therefore, check with the housing association of housing providers to ensure you meet their requirements.

Get a mortgage in principle

The next thing you will want to do is get a mortgage in principle for a shared ownership mortgage. A mortgage in principle will let the housing provider know that you are a serious candidate and that you can afford a mortgage.

Find a shared ownership home

You should now search the market to see which shared ownership homes you like. There are many portals including Rightmove which display shared ownership properties. Once you find a property you like contact the housing provider and they will invite you to a financial assessment. 

They will use a calculator provided by the Homes and Communities Agency to assess what share in the property you can afford to purchase. This is usually only done for new build properties.

If you are trying to buy a shared ownership resale property then you will generally need to buy out the current owners share at the very minimum based on the current property value.

At the end of the assessment you will know how many shares you will buy in the property and how much rent you will likely pay.  This will allow you to go get a mortgage offer from a shared ownership mortgage lender.

You can see what your mortgage options could be by using a mortgage calculator or a shared ownership mortgage calculator.

If getting a mortgage offer sees a daunting task then you can use a shared ownership mortgage broker to help you get a mortgage offer.

You will need a conveyancer (solicitor) who will carry out the legal work on the property to ensure there are no major issues which you should be concerned about e.g new developments nearby which may risk your properties value etc

There are conveyancers who specialise in shared Ownership.

Once the financial assessment is done you would have also received a memorandum of sale through your solicitor. This document states the details of your purchase.

Once you have your mortgage offer and have agreed on the sale with the housing provider you can then exchange contracts with the housing provider. At this point you are now legally bound to the sale and backing out will likely cost you.

You will also set your ‘completion date’, or find out when your ‘completion on notice’ would be if you have bought an off-plan property.

On the day of completion, the shared ownership mortgage lender will give your conveyancer the mortgage funds for the mortgage you took out. Your conveyancer will then pay the housing provider with these funds. If it is a shared ownership resale then these funds will then be sent to the current homeowner.

You are now the owner of a shared ownership property. You should arrange to pick up your keys, set up your electricity and gas accounts and redirect your post. You can do this with the royal mail redirection service.

Examples of some of the most desirable shared ownership properties

Below are some of the examples of desirable shared ownership property

Royal Arsenal Riverside

1 – 3 bedroom homes for sale in 2 Thunderer Walk, Greenwich, SE18 6NS

bedrooms	1-3
bathrooms	1-3

L&Q @ Acton Gardens

1 – 2 bedroom homes for sale in Newton Avenue, Ealing, W3 8AJ

bedrooms	1-2
bathrooms	1

Weavers Quarter

2 bedroom homes for sale in Mast Streert, Barking and Dagenham, IG11 7FY

bedrooms	2
bathrooms	1

Liberty at Crossharbour

1 – 3 bedroom homes for sale in 7 Limeharbour, Tower Hamlets, E14 9NQ

bedrooms	1-3
bathrooms	1

The Waldrons – Shared Ownership

1 – 2 bedroom homes for sale in 34 THE WALDRONS, Croydon, CR0 4HB

bedrooms	1-2
bathrooms	1

Dockside at Millharbour

1 – 2 bedroom homes for sale in 41 Mastmaker Road, E14 9XS, E14 9XS

bedrooms	1-2
bathrooms	1-2

The properties above may no longer be available so check with the housing providers before proceeding.

The pros and cons of shared ownership

Pros of shared ownership

Shared Ownership allows you to get on the property ladder as an owner-occupier, offering long-term stability without overstretching yourself.

The mortgage deposit requirement is much less as you only buy a share of the property.

The shared ownership mortgage is much easier to get as it is usually a smaller mortgage size than normally required.

You can sell your shares at any time.

You can staircase at any time

You get to pay subsidized rent

Some of the shared ownership homes are in very good locations

You don’t have to pay stamp duty upfront and if you do you qualify for the first time buyer relief if you are eligible.

You can sell the property when you want

You can live in the property for as long as you want

You can decorate the house as you please but anything that might alter the value of the property such as home improvements should be approved by the housing association or property developer who owns the rest to ensure they agree.

The Shared Ownership scheme is not exclusively run by the Government but by Banks and building societies as well.

The Shared Ownership scheme is not unique to those on housing benefits or council tenants.

Anyone can purchase a shared ownership home as long as you earn less than £80,00 outside London(£90,000 in London) and don’t own a property.

Shared ownership does not mean you share your home with another person. Shared Ownership does not mean this but rather it means that you share the ownership with your landlord, this could be a bank, housing association or a company. You can then buy bigger shares in your shared ownership property by a process called staircasing.

Shared ownership can allow 100% ownership or not:

You are not required to buy out your landlord’s share in the property. You can simply own your shares and continue paying rent on the rest for as long as you want without any restrictions. The other option is of course that you slowly buy out your landlord’s share of the property. Be aware that you buy your landlords shares at market value so timing the market might be the best chance of you getting a discount.

Cons of shared ownership

Shared ownership mortgages may be harder to find as there are very few mortgage lenders who offer them. This means the mortgage rates may also not be very competitive.

Once you reach 80% ownership you would have had to pay stamp duty on the whole value of the property but this has now been phased out and you can now make proportional stamp duty payments.

All shared ownership properties are leasehold properties. You may be able to convert the home to a freehold after buying 100% of the shares in the property.

You have to pay rent on the percentage of the property you don’t own.

You will also have to pay a monthly service charge and ground rent as you will do in a lease.

You will also be able to sell your share of the property but of course, you will still benefit in any rise in property value since you bought it.

Your housing association or property developer might place restrictions on how and when you can purchase extra shares in your shared ownership home.

You can’t just sell the property to anybody, the person must be approved by the Shared Ownership scheme.

You won’t be allowed to rent or sub-rent your shared ownership home.

Increasing your ownership can be costly because you essentially have to get another mortgage to cater for the cost of buying more shares in the property. The mortgage fees as well as other costs you need to put into consideration when staircasing can amount to a lot. 

You might be liable for further stamp duty, Solicitor costs (These will prove essential to understand your current obligations and then amend the agreement once the staircasing is complete) and valuation costs(You will need to get a property valuation from a qualified surveyor registered with the Royal Institute of Chartered surveyors)

It might be difficult to sell your property due to it being a shared housed home. Your housing association or property developer will likely have the right of first refusal on your property (even if you have purchased 100% of the property). This will insist you wait a certain period of time for them to find a buyer before you can sell it on the open market.

You could also face being in a position of negative equity as new homes usually include an extra premium on the sale price. If house prices fall, you may fall into negative equity.

You don’t have greater protection under shared ownership

Your rights have not increased due to shared ownership so make your payments on time and follow the terms of your agreement.

From 21years since you got 100% ownership of the property, the housing provider may have the first right of refusal if you want to sell.

Frequently asked questions about the shared ownership scheme

Below are some of the most frequently asked questions about the shared ownership scheme.

Can I take a lodger or sublet my shared ownership house?

No, you cannot sublet your shared ownership usually but you should clarify this with your housing provider as there may be some circumstances in which they will allow you to take a lodger or sublet. You must get written approval from your housing provider before taking in a ledger or subletting the property.

Most shared ownership leases should allow you to take a lodger but you should still check with your housing provider. You won’t be able to use the income from taking in a lodger when doing your financial assessment for a shared ownership home.

I am over the age of 55, can I use  Shared Ownership?

Yes, for people aged over 55 there is the old people shared ownership which may be very beneficial to you. It works in the same way as the typical shared ownership but you can only buy up to 75% of your home. 

Once you have purchased 75% of your home you won’t have to pay rent on the remaining 25% share. 

Can I purchase any home with Shared Ownership basis?

No the home you want to purchase must be listed as a shared ownership home and provided by a registered provider.

Can I increase my share in my Shared Ownership property to 100%?

Yes, you can increase your shared ownership holding to 100% but you should be aware that different housing providers may have varying criteria for how you can do this so be sure to check with them. Some housing providers may cap the limit to which you could staircase to e.g 95%. This Is Known as staircasing. You may need another mortgage for whenever you staircase so consider all the costs involved.

Usually you will need to staircase with a minimum of 10% of the outstanding shares being purchased at any one time.

When you staircase you’ll be buying new shares based on the current price of the home. The home will be independently valued.

Does Shared Ownership mean sharing with another person?

No shared ownership does not mean that you have to share the home with another person.

It simply means that you buy a share of the property and pay subsidised rent on the other shares of the property.

How many bedrooms can I  purchase?

With a shared ownership home there is no restriction on how many bedrooms you can purchase.

What is a resale Shared Ownership property?

A resale shared ownership property is property that was recently owned by someone else.

 Unless they are ‘fixed equity’ you will have to purchase the shares on offer and can then purchase more shares if you wish.

How long does it take to get a property via Shared Ownership?

It can take as long as 2 months to get a home on shared ownership but this is dependent on many factors such as how long it takes you to get a mortgage offer and if the building is an off-plan property or not.

Can I decorate my Shared Ownership home?

Yes you can decorate your home but if you want to make major changes you should seek the permission of the housing provider.

What shares can I purchase in a Shared Ownership property?

You will usually need to purchase a minimum 25% of the available shares in the property but some housing providers may have a much higher limit.

When purchasing a shared ownership resale you will usually have to purchase the amount of shares the previous owned had at the very minimum.

What is a Shared Ownership lease?

A shared ownership lease is a document which sets out your rights as a leaseholder. It also sets out the rights and obligations of the landlord.

The housing association has a contractual right to ensure that the shared owner complies with the terms of the lease. A Shared Ownership lease is where the leaseholder has purchased a share in the equity and pays rent on that share retained by the landlord.

What shares can I purchase in a Shared Ownership property?

This is all dependant on the housing provider but the minimum amount of shares you can initially purchase is 25% as defined by the UK government. Some housing providers may have a higher threshold than this.

Who pays for the repairs of my Shared Ownership home?

You are responsible for paying for the repairs to your shared ownership home. Most new homes will have a 1-year warranty but some may even have a 10-year warranty. These are things you should check for if you are concerned with rising costs. The warranty will usually cover defects and any structural problems.

You won’t have to pay for repairs on the communal parts of the building as it is a leasehold and this is the responsibility of the freeholder. The service charge you pay for your leasehold will be used to cover the cost of any communal repairs.

Alternatives to the shared ownership scheme

Aside from the shared ownership scheme there are also various first-time buyer schemes which you may be eligible for. These schemes could help you get on the property ladder quicker.

These government schemes include:

• Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
• Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
• Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.

• Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
• Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
• Right to buy- allows you to buy your home at a discount price.
• Preserved right to buy– same as above.
• Right to acquire- same as above but for housing associations.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

How do I apply for Shared Ownership?

Where you go to apply depends on where you want to buy within the UK.

• If you are looking in England, you will find properties for sale at Property Booking.
• If you are buying within London specifically, Homes for Londoners offers a variety of affordable housing options.
• If you are buying in Scotland, visit the Scottish Government’s website.
• If you are buying in Wales, you will need to speak directly the relevant housing association.
• If you are buying in Northern Ireland, visit this website.

Using a shared ownership mortgage broker

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your  mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide we have discussed the shared ownership scheme. If you have any comments or questions please let us know below.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.