Shared Ownership – how the homebuying scheme works

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

Shared Ownership: 13 need-to-knows

1. It's NOT limited to first-time buyers

   

   Shared Ownership is not just available to first-time buyers.
   
   It's also open to previous homeowners struggling to get back on the property ladder, homemovers and people already living in Shared Ownership.

   To buy via Shared Ownership, your total income needs to be less than £80,000 a year (£90,000 a year if buying in London). So that means:

   • Sole buyers can't have an individual income greater than £80,000 a year.

   • Joint buyers can't have a joint income greater than £80,000 a year.

   While exact eligibility criteria varies by property and area, you'll need to show you're unable to buy a suitable home on the open market. You'll also need a good credit history and not be in mortgage or rent arrears.

2. You won't own 100% of your home (not initially)

   Shared Ownership is designed to help homebuyers who can't afford a property at full market value get on to the housing ladder by buying a part of one instead.

   There are some restrictions though:

   • The minimum initial share you can buy is typically 25%. Though with some properties it can be as little as 10%. It tends to be higher with resale properties.

   • The maximum initial share you can buy is typically 75%.

   So a 25% share of a £300,000 property would be £75,000, while a 75% share of the same property would be £225,000.

   Minimum and maximum shares vary, depending on the property and where you're looking to buy. An assessment of your financial circumstances – carried out by the Shared Ownership organisation – might also impact what size share you can buy.

   Most homebuyers start with a 20-30% share, the Shared Ownership Council says.

3. A deposit will normally be required – though it's based on the share you're buying

   You'll need to put down a deposit. However, this is based on the share you're buying and not the whole property price. 

   A property advertisement should state the minimum deposit required. Typically it'll be between 5% and 10%. So if you're buying a share of a £300,000 property worth 25% (so £75,000), a 10% deposit would be equivalent to £7,500.

   The bigger deposit put down, the smaller mortgage you'll need. This means better interest rates, which in turn mean a cheaper mortgage – see loan-to-value help.

   You might still be able to buy through Shared Ownership even without a deposit, as Skipton Building Society offers a no-deposit, 100% mortgage – though you'd need a Shared Ownership property which doesn't require a deposit (most do).

4. Know how to find Shared Ownership properties

   

   Shared Ownership properties are available across England, though some areas have more of them. First, you'll need to establish which providers offer Shared Ownership homes in your area

   England (excluding London)

   Enter your details into Gov.uk to see which providers offer Shared Ownership homes in the area you want to buy. Contact the relevant provider, which'll check your eligibility and affordability and share details of properties for sale.

   London

   Use Homes for Londoners to see Shared Ownership homes for sale in your area. You can browse properties without registering, but need to do so if you want to buy one. Your details will be sent to the relevant housing provider for eligibility checks.

5. You'll need to be accepted for a mortgage

   Don't forget you'll need to apply for a mortgage.

   It's best to do this once you've passed the Shared Ownership eligibility checks and reserved a property. Beforehand, you could get a mortgage agreement in principle if you're not sure whether a lender would accept you.

   The size mortgage you'll need is equivalent to the value of the share you're buying, minus the amount you've got as a deposit. Here's an example:

   • You buy a 25% share of a £300,000 property. Equivalent to £75,000.

   • You put down a 10% deposit. This means stumping up £7,500.

   • You'd need a mortgage on the other 90%. So you'd need to borrow £67,500.

   Mortgages for Shared Ownership homes are typically more expensive than normal mortgages. That's partly because lenders see Shared Ownership homes as more risky (some lenders won't even lend on Shared Ownership).

   Smaller building societies tend to offer the greatest number of Shared Ownership mortgages. To find out which lenders offer them, speak with a mortgage broker – preferably one with experience of Shared Ownership. 

   The checks you'll need to pass

   When assessing your affordability lenders will carry out rigorous checks, checking:

   • Your salary

   • Any debts you have

   • Your spending habits

   • Any faults or red flags on your credit file

   • Just for Shared Ownership: How much rent you'll be paying

   • Just for Shared Ownership: How much you'll be paying in service charges

   Which broker to use (if any) when getting a mortgage is your decision.

   A housing developer might encourage you to use its in-house mortgage broker or conveyancing solicitor. There's nothing wrong with this.

   But some developers and estate agents can be really pushy about using their in-house services, sometimes bordering on what's known as 'conditional selling' – a practice that's strictly against the rules.

   See our Conditional selling guide for more on what it is and your rights if a developer pressures you to use its in-house services.

   Should I use the developer's in-house mortgage broker?

   Close

6. You'll pay rent on the share you don't own – and this can be expensive

   The share of the property you don't buy will be owned by a housing association (sometimes by a local authority or building developer). So if you buy a 60% share, typically a housing association will own the other 40%.

   You'll pay rent on the share you don't own – and this can be expensive. While the rate varies by property and area, it's typically around 2.75% (a property advert should state how much it is). Here's how it works:

   If you buy a share of a £400,000 property worth 40% and pay 2.75% rent on the 60% (£240,000) you don't own, the rent would cost circa £550/mth (£6,600/yr).

   Or if you buy a share of a £200,000 property worth 40% and pay 2.75% rent on the 60% (£120,000) you don't own, the rent would cost circa £275/mth (£3,300/yr).

   The rent is ON TOP of your monthly mortgage repayments. Plus, you'll likely have to pay a service charge. This means your monthly costs can quickly escalate. 

   Be aware the rate of rent can increase. Though if you buy more shares in your home (known as staircasing) then the amount of rent you pay will decrease. And if you reach 100% ownership, you'll stop being charged rent altogether.

7. Shared Ownership homes are leasehold – so they come with extra regular charges

   

   In England, properties are either freehold or leasehold. But when it comes to Shared Ownership, the properties available are always leasehold.

   Leasehold properties differ to freehold properties in some very important ways. In brief:

   • With leasehold you own the property but not the land it stands on. If the property was freehold on the other hand, you'd also own the land it stands on. 

   • Ownership of a leasehold property is for a defined period. For example, 90 years. This is because, technically, a leaseholder actually owns a lease, permitting them to occupy the property (leases sometimes need extending too, which can cost £1,000s). With freehold, you own the property indefinitely.

   See our Leasehold versus freehold guide for a full explanation of the differences.

   Watch out for 'service charge' and 'ground rent'

   Leasehold properties often come with extra charges. Watch out for:

   1. Service charge (also known as a maintenance charge). This is for the upkeep of communal areas like hallways and gardens. Flat owners might pay into a "sink fund" which covers maintenance of the stairwell, for example.
      
      A service charge is normally paid monthly and can set you back £100s, even £1,000s, a year – a property listing should make clear how much it is. Along with mortgage and rent, the service charge can really add to your outgoings.
      
      Service charges can also – and often do – increase with time. So establish who you'd be paying the service charge to (estate and management is often carried out by private companies), in case you ever want to challenge the amount or complain about the level of service.

   2. Ground rent. This is normally an annual fee paid to the freeholder (every leasehold property has someone who owns the property's freehold). Ground rent might be a nominal amount, or it might be £100 or even £250 a year.
      
      Importantly, ground rent is BANNED on new leases. This means new leasehold properties – or existing homes with a new lease – shouldn't have ground rent. Ground rent could apply though if you're buying an older property with a lease that started before the ground rent ban.
      
      If you have questions about ground rent, speak with your conveyancer.

8. It's mainly new-build homes that are available

   Shared Ownership homes tend to be new-build properties. Some have been lived in before (known as resales), but most haven't – a property listing should say.

   Different property types are available, though mainly it's flats, apartments and houses. Bungalows and maisonettes are less common.

   You're unlikely to find a period property through Shared Ownership.
   

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

   

   You've got the opportunity to buy extra shares in your home after you've become the owner. For example, if you can afford it you might decide to increase your ownership from 25% to 50%, or from 75% to 100%. This process is known as staircasing.

   If you reach 100% ownership you'll no longer have to pay rent on unowned shares.

   The minimum you can increase ownership by tends to vary:

   • The smallest amount is typically 10%. Though increasingly it's possible to staircase by just 5%. With older homes, the minimum can be nearer to 25%. If buying a share of 5% or more, you'll need to pay for a share valuation (carried out by a RICS surveyor). Where you've not got the money for the share upfront, you'll need to think of other ways to finance it – such as remortgaging.

   • In some cases you can increase your share by as little as 1%. This is more likely to be available on newer properties. You won't need a share valuation.

   Do note the cost of a share can go up and down (as it's based on property prices). You may also have to pay an administration cost when buying a new share.

   See Gov.uk for more information about the rules around staircasing.

   Important. Some housing associations limit how many times you can staircase. For instance, some cap staircasing at three times, while others only allow staircasing for a third time if it increases ownership to 100%. Check with the housing association what its rules are, including how much it costs to staircase.

10. You're responsible for ALL home repairs

    

    While you'll only own a share of your home, you'll still be responsible for maintaining the entire property. Boiler finally conked it? It's your responsibility to get it repaired.

    Helpfully, you should be able to claim some repair costs – up to £500 a year – for the first 10 years of home ownership. These can be claimed from your housing association/landlord, and are in addition to any snagging costs covered by the homebuilder.

    Work that's required in communal areas will be covered by the service charge.

    Before reserving a Shared Ownership home, ask about the warranty details (how long it lasts; what it covers) and the rules around reclaiming repair costs.

11. You'll need to pay Stamp Duty – and the process requires more thought than usual

    Stamp Duty is more complicated when it comes to Shared Ownership. That's because you need to decide between:

    1. Paying Stamp Duty on the ENTIRE property. Or...

    2. Paying Stamp Duty on the SHARE you're buying.

    
    With option one, while you'll likely pay more Stamp Duty upfront, you won't have to worry about paying it again if you staircase in future.

    With option two, while you'll likely pay less Stamp Duty upfront, if you staircase in future you might have to pay Stamp Duty again (and that portion of Stamp Duty could be more expensive that the first if property prices have since increased). 

    Here are some things to consider before deciding:

    🏠Stamp Duty is only due if the property/share is over £300,000 (for first-time buyers). In England and Northern Ireland, first-time buyers don't pay Stamp Duty on the first £300,000 of a property. Non-first-time buyers don't pay it on the first £125,000 of a property.

    So Stamp Duty might not even be a consideration if these thresholds aren't passed. See more about Stamp Duty rates in our Stamp Duty guide.

    🏠 Don't think you'll ever own 80% or more of your home? Stamp Duty on the share is probably best. If you pay Stamp Duty on the share, you'll only pay stamp duty again if you staircase to 80% ownership of the property or above.
    
    For example, if you bought an extra share which took your ownership to 75%, you wouldn't need to pay Stamp Duty again, but you would if your ownership reached 80% (and on anything between 80% and 100% ownership).

    🏠 Think you'll eventually own 80% or more of your home? It's a gamble which option is best. You could pay Stamp Duty on the whole property – here you know, from the start, exactly how much Stamp Duty you'll pay overall (and won't have to pay it again). But it's a risk if you're not guaranteed to staircase to 100% ownership (as you might pay more Stamp Duty than is necessary).
    
    If you pay Stamp Duty on the share, you might pay less upfront but you'll need to pay Stamp Duty again if you staircase to at least 80% ownership. And Stamp Duty might be more expensive second time around if property prices have increased since you first bought your home (higher property prices mean more Stamp Duty).

    See Gov.uk for more on how Stamp Duty works in relation to Shared Ownership.

12. Selling a Shared Ownership home can be complex

    

    Selling your home can be complicated (unless you've staircased to 100% ownership, which can make it easier).

    It typically involves the following steps:

    1. Giving notice to your housing association of your intention to sell. You might have to do this even if you own 100% of your home (check what the rules are with your housing association if unsure).

    2. The housing association typically having first refusal. This means the housing association has the right at first to try and sell your share, normally to another prospective Shared Ownership buyer.

    3. You trying to sell the share yourself if the housing association is unable to find a buyer. You'll be able to advertise the property on the open market or via an estate agent, though you'll likely be restricted to selling your share to someone who wants to buy through Shared Ownership.

    The exact process varies by housing association, so it's worth asking what steps are involved and whether there are any selling restrictions. Normally your share can't be sold for less than what it's valued, but can be sold for more.

    If you're really struggling to find someone to buy your share, you might be given permission to sell the property as a whole (in other words, not as a Shared Ownership home). However, this is where selling can become really complicated.

    See Gov.uk for more information on selling a Shared Ownership home.

    What fees are involved when selling a Shared Ownership home?

    To get a sense of what's involved when selling a home, see our How to sell your home guide. If your housing association helps you sell, you might pay:

    • Marketing fee – £350ish. To cover the housing association's advertising costs.

    • Valuation fee – £250ish but can be significantly more. As your property will need to be valued by a surveyor organised by the housing association.

    • Legal fees – circa £1,500. You'll need to cover your own legal fees and any incurred by the housing association.

    • Energy Performance Certificate – £50 to £100. This shows the energy efficiency of your property.

    Housing associations should provide a clear breakdown of the likely fees payable.

13. Different schemes are available for older people and those with disabilities

    Different Shared Ownership schemes are available to older people and those with long-term disabilities (you can use the main scheme, if you'd rather).

    Here's how they work:

    • Older Persons Shared Ownership. For those aged 55+, you can buy up to 75% of your home. If you own 75% (or staircase to it), you won't pay rent on the share you don't own. See Older Persons Shared Ownership.

    • Home Ownership for People with Long-Term Disabilities (HOLD). You can apply for this scheme if other Shared Ownership properties don't meet your needs – for example, if you need a ground-floor property. See Gov.uk for more.

Shared Ownership FAQs