UK Shared Ownership Mortgages: Co-owning Property with Others

Shared ownership mortgages enable individuals to purchase a percentage of a property, typically ranging from 25% to 75%, with the remaining share owned by a housing association or developer. Buyers secure a mortgage for their portion and pay rent on the remaining share. Over time, individuals can increase their ownership through a process known as “staircasing.” Shared ownership makes homeownership more accessible for those with limited resources, allowing them to enter the property market with a lower upfront investment. This arrangement involves shared responsibilities and expenses, promoting affordable housing solutions while offering a pathway to eventual full homeownership.

Shared Ownership is a government-backed scheme in the United Kingdom designed to help people get onto the property ladder who may not be able to afford a home outright. This scheme allows individuals to buy a share of a property and pay rent on the remaining share.

Shared Ownership mortgages provide a viable path to homeownership for individuals who may face challenges in purchasing a property outright. This scheme allows buyers to enter the property market with a lower deposit, benefit from competitive mortgage rates, and have the potential to increase their ownership over time.

While Shared Ownership offers numerous advantages, prospective buyers should carefully consider ongoing costs, the availability of properties, and the potential challenges associated with staircasing and selling. Working with experienced mortgage lenders, housing associations, and legal professionals can help buyers navigate the process successfully and make informed decisions.

What is Shared Ownership?

• Partial Homeownership:

Shared Ownership allows buyers to purchase a share (usually between 25% and 75%) of a property and pay rent on the remaining share.

• Staircasing:

Over time, buyers can increase their share in the property through a process known as “staircasing.”

Eligibility Criteria:

• Income Limits:

Shared Ownership is generally aimed at first-time buyers or those who used to own a home but can’t afford to buy one currently. There are income limits depending on the region.

• Local Authority Criteria:

Local housing authorities may have additional eligibility criteria.

Property Types:

• New-Builds and Resales:

Shared Ownership properties include both new-builds and existing homes. They are usually offered by housing associations.

Shared Ownership Mortgages:

How Shared Ownership Mortgages Work:

• Mortgage on Share Purchased: Buyers need a mortgage to cover the cost of their share of the property.
• Rent on Unowned Share: Rent is paid on the share not owned, to the housing association or developer.

Mortgage Deposit:

• Deposit Requirements: Buyers will need a deposit, typically based on the percentage of the property they are buying.

Mortgage Rates and Terms:

• Competitive Rates: Shared Ownership mortgages often have competitive interest rates.
• Fixed or Variable: Buyers can choose between fixed-rate and variable-rate mortgages.

Application Process:

1. Finding a Shared Ownership Property:

Housing Associations: Shared Ownership properties are managed by housing associations. Buyers can apply directly or through the Help to Buy website.

2. Mortgage Pre-Approval:

Speak to Lenders: Buyers should speak to mortgage lenders or brokers who specialize in Shared Ownership mortgages to get pre-approved.

3. Affordability Assessment:

Income and Outgoings: Lenders will assess the buyer’s income and outgoings to determine how much they can afford.

4. Legal Process:

Conveyancing: The legal process involves conveyancing, where solicitors handle the transfer of ownership.

5. Ongoing Rent and Mortgage Payments:

Rent and Mortgage Payments: Buyers make monthly mortgage payments and pay rent on the unowned share.

Benefits of Shared Ownership:

• Affordable Entry to the Property Market:

Shared Ownership requires a smaller deposit compared to buying a property outright.

• Potential for Staircasing:

Buyers can increase their ownership by buying additional shares (staircasing) when their financial situation improves.

• Security of Homeownership:

Despite owning only a share, buyers still benefit from the security and stability of homeownership.

• Competitive Mortgage Rates:

Shared Ownership mortgages often come with competitive interest rates, making homeownership more affordable.

Considerations and Challenges:

• Rent Payments:

Buyers must be prepared for ongoing rent payments in addition to their mortgage.

• Limited Property Choice:

Shared Ownership properties might be limited, and buyers may have fewer options in terms of location and property type.

• Staircasing Costs:

There are costs associated with staircasing, including valuation and legal fees.

• Selling a Shared Ownership Property:

Selling a Shared Ownership property involves specific processes and may have restrictions.

UK Shared Ownership Mortgages Providers:

• Halifax:

Halifax is a well-known mortgage lender in the UK and often offers mortgage products suitable for Shared Ownership. They may provide competitive rates and flexible terms.

• Nationwide Building Society:

Nationwide is a major building society that offers a range of mortgage products, including those designed for Shared Ownership. They may have specific offerings for first-time buyers and those looking to enter the property market through Shared Ownership.

• Santander:

Santander is a prominent high-street bank that provides various mortgage options, and they may have products tailored to individuals participating in Shared Ownership schemes.

• Barclays:

Barclays offers a variety of mortgage products, and they may have options suitable for Shared Ownership. Prospective buyers can inquire with Barclays about their offerings for Shared Ownership properties.

• NatWest:

NatWest is a major bank in the UK that commonly provides mortgage solutions. They may have specific mortgage products designed for Shared Ownership, helping buyers with lower deposit requirements.

• HSBC:

HSBC is a global bank with a presence in the UK. They offer mortgage products and may have options for individuals looking to purchase a home through Shared Ownership.

• Metro Bank:

Metro Bank is a newer entrant to the UK banking sector and offers mortgage products. They may have options suitable for Shared Ownership participants.

• Coventry Building Society:

Coventry Building Society is a mutual society offering various mortgage products. They may have options catering to those interested in Shared Ownership.

• Leeds Building Society:

Leeds Building Society is a mutual society that provides mortgage solutions. They may offer products designed for Shared Ownership homebuyers.

• Nottingham Building Society:

Nottingham Building Society is another mutual society in the UK that offers mortgage products. They may have options for those considering Shared Ownership.

• Lloyds Bank:

Lloyds Bank is a major UK bank that provides mortgage services. They may offer mortgage products suitable for individuals participating in Shared Ownership schemes.

• Kensington Mortgages:

Kensington Mortgages is known for providing specialist mortgage solutions. They may have products tailored to individuals with unique circumstances, including those entering Shared Ownership.