Buying a shared ownership property can be a good idea for some buyers, particularly those who struggle to afford a full mortgage on the open market. It allows you to buy a share of a home and pay rent on the remaining portion, but it also comes with specific rules, costs, and long-term considerations that are important to understand before committing.
Shared ownership is often promoted as a stepping stone onto the property ladder, especially for first-time buyers. However, it is not suitable for everyone. This guide explains how shared ownership works, the potential benefits, the things to consider carefully, and how to decide whether it may be right for your situation.
What Is Shared Ownership?
Shared ownership is a government-backed scheme designed to help people buy a home with a smaller deposit. Instead of buying 100% of a property, you purchase a share, usually between 25% and 75%, and pay rent on the remaining share owned by a housing association.
You take out a mortgage on the share you own and make monthly payments that include:
- Mortgage repayments on your share
- Rent on the remaining share
- Service charges, where applicable
Over time, many shared ownership schemes allow you to buy additional shares in the property, a process known as staircasing.
Why Do People Consider Shared Ownership?
Shared ownership is often considered by buyers who find it difficult to buy on the open market.
Common reasons include:
- Lower deposit requirements compared to buying outright
- Smaller mortgage needed for the initial purchase
- Access to properties that may otherwise be unaffordable
- A structured route into home ownership
For some buyers, shared ownership can provide stability compared to renting, particularly where rental costs are high.
How Mortgages Work With Shared Ownership
Shared ownership mortgages work in a similar way to standard residential mortgages, but they are only taken out on the share you are buying.
Lenders assess affordability based on:
- Your income and outgoings
- The mortgage payments on your share
- The rent payable on the remaining share
- Service charges and other commitments
Not all lenders offer shared ownership mortgages, which can make lender choice more limited compared to standard purchases.
Potential Benefits of Shared Ownership
One of the main benefits of shared ownership is accessibility.
Because you are buying a smaller share, the deposit required is often lower than for a full purchase. This can make home ownership achievable sooner for some buyers.
Shared ownership can also offer more security than renting, as you usually have a long-term lease and more control over your home.
The option to staircase can be appealing for buyers who expect their income to increase over time, allowing them to gradually move towards full ownership.
Ongoing Costs to Be Aware Of
While shared ownership can reduce the upfront cost of buying, it is important to understand the ongoing costs.
In addition to your mortgage, you will usually pay rent on the portion you do not own. This rent can increase over time, typically in line with inflation or a set formula.
Service charges can also apply, particularly for flats. These cover maintenance of communal areas and can change year to year.
Understanding the full monthly cost is essential when deciding whether shared ownership is affordable long term.
Is Shared Ownership Easier or Harder to Sell?
Selling a shared ownership property can be different from selling on the open market.
Housing associations often have nomination periods where they can try to find a buyer before the property is marketed more widely. This can affect how quickly a sale progresses.
If you have staircased to 100%, selling may become more straightforward, depending on the terms of the lease.
Resale rules vary, so it is important to understand them before buying.
Can Shared Ownership Be a Long-Term Option?
For some buyers, shared ownership is a short-term step. For others, it becomes a long-term home.
Whether it works long term depends on factors such as:
- How affordable the rent increases are
- Whether staircasing is realistic
- How your income changes over time
- The terms of the lease
Shared ownership is not automatically a temporary solution, but it does require forward planning.
Who Might Shared Ownership Suit?
Shared ownership may suit buyers who:
- Have a stable income but a limited deposit
- Are priced out of their local open market
- Want more security than renting
- Are comfortable with the scheme’s rules and costs
It is particularly common among first-time buyers in areas with high property prices.
Situations Where Shared Ownership May Not Be Ideal
Shared ownership may be less suitable for buyers who want complete flexibility, plan to move frequently, or are uncomfortable with shared responsibilities and restrictions set out in the lease.
Understanding the lease terms, staircasing costs, and resale conditions is critical before proceeding.
Is Advice Helpful When Buying Shared Ownership?
Because shared ownership involves both a mortgage and a lease with a housing association, the process can be more complex than a standard purchase.
For first-time buyers considering shared ownership, speaking to an adviser who understands how these schemes work can be helpful. Our Best First-Time Buyer Mortgage Advisers Guide highlights advisers experienced in shared ownership mortgages and other first-time buyer options, making it easier to explore what may be available and how the process works.
Conclusion
Buying a shared ownership property can be a good idea for buyers who are struggling to buy outright and understand how the scheme works. It can offer a practical route onto the property ladder with a lower upfront cost and the potential to increase ownership over time.
However, it is not a one-size-fits-all solution. Ongoing costs, resale rules, and long-term affordability all need to be considered carefully. Taking time to understand the structure of shared ownership and how it fits with your plans can help you decide whether it is the right choice for you.
