shared ownership

Shared ownership – how the homebuying scheme works

Including who can apply and how big a deposit you'll need

Buying part of a property through shared ownership is one way of getting a foot on that first rung – something that has become more challenging as property prices continue to soar. While the concept of shared ownership is straightforward, in practice it can be both complicated and expensive. This guide sets out how the scheme works in England, who can take part and what to look out for.

With thanks to Aaron Strutt and Richard Forgione of Trinity Financial and Ray Boulger of John Charcol for their contributions to this guide.

Living in Wales, Scotland or Northern Ireland?

This guide focuses on the Government's shared ownership scheme in England. There are similar devolved government schemes available for those looking to buy in Scotland, Wales and Northern Ireland:
 

  • Co-ownership in Northern Ireland. Here you can buy between a 50% and 90% share of a property (max property price £165,000) and pay rent on the share you don't own. See more on the NI Government website.

  • Shared ownership in Scotland. This scheme is aimed at first-time buyers and other priority groups. You buy between a 25% and 75% share of a property and pay an occupancy charge on the share you don't own. See more on the Scottish Government website.

  • Shared ownership in Wales. This scheme works similarly to the one in England and Scotland, though your total income can be no more than £60,000/year. See more on the Welsh Government website.

Tip Email

FREE Weekly MoneySaving email 

For all the latest deals, guides and loopholes simply sign up today - it’s spam free!

Shared ownership: The 13 need-to-knows

woman surveying property

Shared ownership, sometimes referred to as 'part-rent, part buy', is one of a number of Government initiatives in England – including Help to Buy equity loans and 95% mortgages – aimed at helping want-to-be homeowners who are struggling to get on to the property market.

As the name of the scheme suggests, by using it you'll initially own a share of your home, as opposed to owning 100% of it, with the option to purchase some or all of the remaining share in the future. For the share you don't own, you'll need to pay rent on it. Before we go into greater details on how the scheme works, in short, there are three main costs to be aware of:

  • The mortgage repayments on the share that you own (along with your deposit!).
  • The rent on the share you don't own.
  • The monthly property service charges, which typically apply to these type of properties.

Shared ownership has existed since the 1980s, and currently there are more than 150,000 households in England living in shared ownership homes – that's around 1% of all households. Changes to the scheme were introduced in April 2021 to make it more accessible, including reducing the minimum initial share available for purchase to 10%.

Have a read of our shared ownership need-to-knows below to learn more:

  1. Shared ownership isn't limited to first-time buyers

    shared ownership sticky note

    There are different categories of people eligible for shared ownership, first-time buyers being among them. A first-time buyer is someone who's never owned a property at any point in the past, be that in the UK or abroad (although some banks might also class you as a first-time buyer if you've not owned a property in the past three years).

    Shared ownership is also open to previous homeowners who are now struggling to get back on the property ladder, as well as existing shared owners, ie, people moving from one shared ownership property to another.

    Whichever category you fall into, your total income needs to be less than £80,000 a year if you're looking to apply (£90,000 a year if buying in London). So that means:

    • Your individual income can't be greater than £80,000/year (£90,000/yr in London) if you're buying on your own. Or...

    • Your combined income can't be greater than these caps if you're buying as a couple.
    While exact eligibility criteria varies by property and area, when you apply you'll likely be required to demonstrate that you're unable to afford a property which is suitable to your needs on the open market. You'll also need a good credit history and not to be in any form of mortgage or rent arrears.
  2. With shared ownership you won't own 100% of your home (at least not initially)

    The purpose behind shared ownership is to help want-to-be homebuyers who can't afford to buy a whole property at its full market value by allowing them to buy a part of it instead. This contrasts with a traditional sale, or purchasing via other Government initiatives such as the Help to Buy equity loan, where you purchase the property in its entirety.

    With shared ownership, you'll be purchasing a share of a property instead, for instance a 50% or 75% share. As you won't be buying 100% of the property, what you are purchasing is deemed more 'affordable'. There are some restrictions though:

    • The minimum initial share of a property that you can buy is typically 25% – though in some cases you might be able to buy as little as 10%. While the minimum share has traditionally been 25%, since April 2021 it's now sometimes possible to buy a share worth as little as 10%. If buying a shared ownership resale property, the minimum share possible has to be greater than 25%.

      On a £300,000 property, a 10% share would be equivalent to £30,000, while a 25% share would be equivalent to £75,000.

    • The maximum initial share purchase is typically 75%. On the same property, a 75% share would be equivalent to £225,000.

    The exact minimum and maximum shares available for purchase vary, and very much depend on which property and where you're looking to buy. An assessment of your financial circumstances – which you'll need to undergo when you apply for shared ownership – might also impact exactly how big or small a share you're able to purchase.

    Once you've bought a share, the share you don't own will belong to either a housing association, local authority or private developer. However, you'll still be responsible for maintenance and repair of the ENTIRE property (more on this in point 10).

  3. A deposit will be required – though it's based on the share you're buying and NOT the entire property price

    With shared ownership you'll need to put down a deposit as part of the purchase. Like many aspects of shared ownership though, the minimum deposit required will depend on which property and where you're looking to buy.

    When browsing a particular shared ownership property, the ad should state the minimum deposit required. Typically though, you'll need to put down a deposit worth at least 5% or 10% of the share you intend to buy. So if you're buying a 50% share of a property worth £300,000, then a 10% minimum deposit would be equivalent to £15,000 (that's 10% of £150,000).

    Remember though, the bigger the deposit you can afford to put down, the smaller the mortgage you'll need to apply for. A smaller mortgage often means better interest rates, which in turn means you'll pay less in mortgage interest overall. So don't assume you should just put down the minimum deposit required. Read more about why the size of your deposit is important.

    The average deposit put down by those who buy through shared ownership is £12,800.

  4. Properties are available up and down the country – but you'll need to register with the Help to Buy website first

    for sale sign

    You can find properties available via shared ownership across the whole of England, though some areas such as the south have greater availability. Before beginning your search, you'll likely need to sign up and register an interest in shared ownership with your regional Help to Buy agent.

    You will then be invited to go through an affordability assessment with an on-site adviser, or with a recommended mortgage broker, who will check your eligibility and ensure that the share that you wish to purchase is affordable to you. Once you know how big a share you'll likely be able to buy, you can begin your property search in earnest on the Help to Buy website.

    The regional agents are:

    • Help to Buy Agent for the South. Areas include Cornwall, Devon, Somerset, Gloucestershire, Hampshire, Essex, Kent, Suffolk, Surrey, Norfolk, Oxford, Cambridge, Bedfordshire and Buckinghamshire.
       
    • Help to Buy Agent for the North. Areas include Merseyside, Lancashire, Greater Manchester, Cumbria, Cheshire, Durham, Yorkshire and Tyne & Wear.

    • Help to Buy Agent for the Midlands and Greater London. Areas include Nottinghamshire, Northamptonshire, Lincolnshire, Leicestershire, Derbyshire, Worcestershire, Warwickshire, Staffordshire, Shropshire, West Midlands and Greater London.

    • If you want to apply for shared ownership in London, you can register an interest via the Greater London Assembly's Homes for Londoners portal.

    By registering your interest with a Help to Buy agent or Homes for Londoners, they'll also able to support you with the application process if necessary. Property portals Share to Buy and Keaze also advertise shared ownership homes, though you'll likely still be required to register with your Help to Buy agent or Homes for Londoners.

  5. You'll need to be accepted for a mortgage – and these can be more expensive than regular home loans

    Like most people stepping on to the property ladder, you'll need to apply for a mortgage. It's best to apply once you've passed the shared ownership eligibility checks and reserved a property (reservation fees are typically between £250 and £500). However, you should consider getting a mortgage agreement-in-principle beforehand if you're unsure whether you'd be accepted. When it comes to picking a mortgage, try speaking to a mortgage broker, as they'll be able to advise you on the mortgages available.

    The mortgage you'll need will be equivalent to the value of the share of the property you're buying, minus the amount you're putting down as a deposit. Here's an example:

    • You buy a 50% share of a £300,000 property. This is equivalent to a purchase price of £150,000.
    • You put down a 10% deposit. This means stumping up £15,000.
    • You'd have to get a mortgage for the remaining 90%. That'll mean applying for a mortgage worth £135,000.

    Unfortunately, shared ownership mortgages are more expensive than normal mortgages. That's because lenders see you as more of a risk (even though this might not be true). Plus not many of the UK's biggest mortgage lenders offer mortgages on shared ownership properties, and this lack of competition means rates are higher too.

    Standard mortgages can be up to 0.5% cheaper than shared ownership mortgages, even where the loan-to-value and fee are the same, eg, 3.84% compared to 4.39% when it comes to 95% mortgages. Also standard mortgages sometimes come with cashback for first-time buyers, something you won't find with shared ownership.

    Generally, smaller building societies offer the most shared ownership mortgages. To see which lenders offer them, it's best if you speak to a mortgage broker, as they'll have ready access to this information. When choosing a mortgage broker, ask them whether they've got expertise in shared ownership mortgages.

    The checks you need to pass

    When assessing your mortgage affordability, lenders will carry out their normal rigorous checks – plus they will also make extra checks because you're using the shared ownership scheme. Have a read of our Boost your mortgage chances guide for top tips on getting accepted, but in brief lenders will look at:

    • Your salary
    • Any debts you may have
    • Your spending habits
    • Any faults or red flags on your credit file
    • Just for shared ownership: How much rent you'll be paying (more in point six)
    • Just for shared ownership: How much maintenance charges you'll be paying (more in point seven)
  6. You'll pay rent on the share that you don't own – and it can be expensive

    As mentioned earlier on, the outstanding share of the property not bought by you will typically be owned by a housing association (in some cases it'll be a local authority or building developer). So if you bought a 60% share of a property, the housing association will own the other 40%.

    For the time that you don't own this share you'll have to pay rent on it, and what you pay can be expensive. While the exact level of rent you'll face varies by which property and where you're buying, typically the rate is around 2.75% a year on the unowned share (a property ad should state clearly how much the rent is equivalent to). Here's how it would work:

    Let's say you'd bought a 40% share of a £300,000 property, and you paid 2.75% rent on the remaining £180,000 share, the rent to the housing association would cost you £4,950 a year, or £412.50 a month.

    The rent you pay will be on TOP OF the mortgage repayments you need to make, as well as your monthly service charge. This means that overall your costs could become very expensive, so it's important you think carefully about what you'll be paying.

    If and when you buy a bigger share of your property, the rent you pay will reduce. And if you ever reach 100% ownership of your property (ie, you buy all of the outstanding share), you'll no longer need to pay any rent.

  7. Shared ownership properties are ALWAYS leaseholds and often come with extra charges

    high rise building

    Properties in England are normally sold either on a freehold or a leasehold basis. When it comes to shared ownership though, the properties available to buy are always sold as leasehold.

    There are some crucial distinctions between freehold and leasehold. In brief:

    • As a leaseholder, you own the property but not the land on which it is built. With a freehold on the other hand, you own both the property and the land on which it is built.

    • Ownership of a leasehold property is also set for a defined period. This can be for a number of years, decades or centuries, depending on the length of your lease. It may become necessary to extend the length of your lease, something which can cost £1,000s.

    For a full explanation on the differences between these two forms of tenure, see our Leasehold versus Freehold guide.

    Watch out for leasehold fees

    Leasehold properties are also subject to fees that freehold properties wouldn't be. These fees normally apply to shared ownership properties too, so watch out for them:

    1. Service charge. Also known as a maintenance charge, this is paid for the upkeep and repair of communal areas, such as hallways and gardens. For example, all flat-owners in a block might pay a certain amount into a "sink fund", which covers maintenance of areas that everyone uses, like a stairwell. This fee does not go towards repairs of your actual property.

      This fee is normally paid monthly, and often with shared ownership you'll be looking at paying at least £100 a month – and in many cases nearer to £200 per month.

    2. Ground rent. This is normally an annual fee paid to your freeholder (all leasehold properties have someone who owns the property's freehold). Some ground rents are for a peppercorn (ie, £1) amount, but others can be £100 or even £250+ per year. In the worst case scenario, some lease properties have ground rents that double in value over time.

      Details of the level of ground rent, and whether it will increase over time, should be in the property's deeds. Ask your conveyancing solicitor if you want a clearer explanation of how much ground rent you might be liable to pay.

    When browsing for shared ownership properties online, a listing should make clear how much you'll need to pay for your service charge. Use your estimated mortgage and rent payments, plus the stated service charge, to get an idea of how much you'll be looking at paying overall per month.

    Ads online may also indicate whether you'll need to pay a ground rent, though this isn't guaranteed. If you're unsure about whether there's a ground rent or how much it is, speak to your solicitor.

  8. It's mainly new-build homes that are sold through shared ownership (though they might've been lived in before)

    Homes sold via the shared ownership scheme are typically new-build properties. Some have been lived in before, while others are fresh off the building block. Previously-occupied homes are referred to as shared ownership resales. The property listing should make clear whether the property has been lived in before.

    You're unlikely to find an Edwardian or Victorian property through shared ownership.

  9. You can buy more shares in your property – all the way up to 100%

    moving furniture

    In the future, you may be in a position where you want/can afford to buy an additional share of your property. For instance, you might want to increase your ownership from 50% to 75%, or from 75% to 100%. This process of buying more shares is known as staircasing.

    There's nothing stopping you sticking with the share you initially bought if you're not in a position to staircase, but these are the ways of staircasing if it's something you think you'll consider:

    • You may be able to increase your share by as little as 1% each year. This option to increase your share annually by 1% was introduced in April 2021, and is more likely to be available on shared ownership homes launched since then. It allows you to buy an additional 1% share each year for the first 15 years of owning your home (this option can't be rolled over after the 15-year period is up). It's envisaged that you'll use cash to pay for this, and not have to borrow more on your mortgage.

      You won't be charged valuation fees if you're buying a 1% share, but the cost of the share can go up or down depending on the current value of your property.

    • There's also the option to purchase a share worth 5% or greater. If you're looking at buying a greater share than an additional 1% – or your housing association simply doesn't allow 1% share buys – you'll typically need to be buying at least a 5% share, maybe even a minimum of 10%. You're unlikely to be able to buy a share worth 2% or 3%, and the exact minimum will depend on the housing association you're buying from.

      However, when buying a bigger share than 1%, you will be charged valuation costs (valuation is carried out by a RICS surveyor, organised by the housing association). If you don't have the money upfront to pay for the share, you'll have to think of other ways to finance it – such as remortgaging (which comes with its own costs).

      Again, the cost of buying a share worth 5% or more can go up or down depending on property prices.

    Some housing associations have limits on the number of times you can staircase upwards (the reason why is unclear), while others don't. For instance, some housing associations will only allow you to staircase three times, while others might only allow you to staircase for a third time if it takes you up to 100% ownership. As there is no hard and fast rule, it's best to check with your housing association what its rules are.

    According to a 2020 Government report, around 4,000 shared ownership homes staircased to 100% ownership in 2018/19.

  10. You'll be responsible for ALL home repairs, regardless of how much of the property you own

    under sink cabinet

    Even if you only own a share of your home initially – possibly as little as a 10% share – you'll still be responsible for the repair and maintenance of the entire property. Boiler finally conked it? It's your responsibility to get it fixed and pay for it.

    If you've bought a new shared ownership home since April 2021, you should be able to claim some repair costs – worth up to £500 a year – for the first 10 years of owning the property. These costs can be claimed from your housing association/landlord, and are in addition to any snagging costs that might be covered by the homebuilder.

    For work that needs doing in any communal areas, this will be covered by the maintenance charge that you pay monthly or yearly.

  11. You'll have to pay stamp duty, but you have a choice of whether to pay it just on your share or the whole property

    Paying stamp duty is more complex when it comes to buying a shared ownership property. Unlike with a normal homebuy, you get to choose how you'd like to pay it, the choice being:

    1. Paying stamp duty on the market value of the entire property. (Even if you're only purchasing a share of the property). Or...

    2. Just paying stamp duty on the specific share of the property that you're buying. With the possibility of having to pay more stamp duty if you staircase upwards in future.

    By choosing option one and paying stamp duty on the entire property, you could be paying more upfront, but you won't have to worry about paying stamp duty on that property again in future.

    By choosing option two, your costs might be smaller upfront (as you'll only be paying stamp duty on the share of the property you're buying), but if you staircase in future you might be liable to pay stamp duty again – and what you pay can increase if property prices have gone up. 

    Here are some things to consider when weighing up your decision:

    • Stamp duty is only payable when the property you're buying is above a certain value. Because of the stamp duty holiday, there is currently no stamp duty due on the first £500,000 of a primary residential property. When the holiday ends – it's becoming less generous on 1 July 2021 and ending completely on 1 October 2021 – it'll be the first £300,000 of a property for first-time buyers, and the first £125,000 if you're not a first-time buyer.

      So whether you opt to pay stamp duty on the entire property or just the share you're buying, stamp duty will only become due in the first place if you've passed these thresholds. See more on the thresholds in our Stamp Duty Calculator guide.

    • Don't think you'll ever own 80% or more of the property? Then just paying stamp duty on the share you're buying is probably the best option. For those who opt to just pay stamp duty on the share of the property they're buying, you'll only be liable to pay stamp duty again if you staircase to 80% ownership of your property or above.

      For example, if you own 50% and bought a share in future which took you to 75% ownership, you wouldn't be required to pay stamp duty again, but if you bought a share which took your ownership to 80% (and any further share purchases – all the way up to 100% ownership), then you would be liable to pay stamp duty.

    • Think you will own at least 80% of your property in future? Then it's a gamble which option is the best one. As explained above, if you choose to pay stamp duty in stages, you'll only need to pay stamp duty again if you staircase up to at least 80% ownership (and any further share purchases – all the way up to 100% ownership). Though the amount of stamp duty due will be impacted by property prices.

      That's because if your property has increased in value, the more costly the extra share you're buying will be. And the amount of money you spend overall on buying your property directly affects the level of stamp duty you pay.

    The exact method of calculating how much stamp duty you'll pay if you decide to pay it in stages (ie, option two) is complicated. A detailed explanation can be found on the Government website.

    It's worth noting that if your shared ownership property comes with a high annual rent, this can sometimes increase the amount of stamp duty you'll pay too.

  12. Selling a shared ownership property can be complicated

    moving to a new place

    Selling your shared ownership home can be complicated if you've not staircased up to 100% ownership by the time you come to sell. If you only own a share of your home, selling will typically involve the following steps:

    1. You'll need to give formal notice to your housing association of your intention to sell. This may also be the case even if you've staircased to 100% ownership (check what the rules are with your housing association if unsure).

    2. The housing association typically has first refusal. This means the housing association has the right to try and sell the property itself, normally to another prospective shared ownership buyer. This first refusal normally lasts for between four and eight weeks.

    3. If the housing association is unable to find a buyer within the defined period, the responsibility of selling will pass back to you. You'll then be able to put the property on the market or advertise it via an estate agent, but you might still be restricted to selling the property to someone who fits the shared ownership eligibility criteria (check the rules with your housing association if unsure).

    The exact selling process varies by housing association, so it is always worth talking to your housing association about what steps are involved and whether there are any restrictions when it comes to selling your home. Normally your property can't be sold for less than what it's been valued, but it can be sold for more – which means you'd get more money for your share than you paid for it.

    What fees are involved if my housing association sells my property for me?

    If you're able to sell your home on the open market, you can get a sense of how much it'll cost you to do so in our How to sell your home guide. On the other hand, these are some of the fees you'll likely face if your housing association ends up selling your home for you:

    • Marketing fee. This covers the housing association's advertising costs. This can be in excess of £300.

    • Valuation fee. Your property will be valued by a surveyor provided by the housing association. This can be in excess of £250, and will depend on the size of your property.

    • Legal fees. You'll need to cover your own legal fees and any incurred by the housing association. This will typically cost you around £1,500.

    • Energy Performance Certificate. This shows the energy efficiency of your property, and normally costs at least £50 to arrange.
  13. Additional shared ownership schemes are available for older people and those with disabilities

    In addition to the shared ownership scheme discussed in this guide, there are also other shared ownership options available to those aged 55 and above, and those living with a long-term disability. These schemes vary slightly in terms of how they work, and you can still apply for the main shared ownership scheme if you want to. Here's what you need to know:

    • Older People's Shared Ownership. This scheme is for those aged 55+. You can buy up to 75% of your home, and once you own 75% of your home, you won't pay any more rent on the share you don't own. See Older People's Shared Ownership.

    • Home Ownership for People with Long-Term Disabilities. You can apply for this scheme if other shared ownership properties do not meet your needs – for example, if you need a ground-floor property. With this scheme, you can buy between a 25% and 75% share. See Home Ownership for People with Long-Term Disabilities.

Looking for more first-time buyer mortgage help?

We've got lots of other helpful guides and tools:

Tip Email

FREE Weekly MoneySaving email 

For all the latest deals, guides and loopholes simply sign up today - it’s spam free!

Spotted out of date info/broken links? Email: brokenlink@moneysavingexpert.com