Buying a home can feel out of reach for many, especially with rising prices and high deposits. That’s where shared ownership comes in. It’s a way to get on the property ladder without needing to buy the whole property at once.

So, what is a shared ownership mortgage? It’s a type of loan that helps you buy a share of a home, usually between 10% and 75%, while paying rent on the rest. You take out a mortgage only on the part you own, making the monthly costs more affordable compared to buying the entire property outright.

This scheme is mostly aimed at first-time buyers or those who can’t afford to buy a home in the traditional way. You still need a deposit, but it’s smaller since it’s based only on your share of the property. Over time, you may be able to increase your share, depending on the lease terms and your budget.

Who can get a shared ownership mortgage?

You don’t need to be a first-time buyer to apply, but the scheme is mainly designed for those who’d struggle to afford a full mortgage.

So, who can get shared ownership? You may be eligible if your household earns less than £80,000 per year (or £90,000 in London) and you don’t already own another property. It’s also open to people who previously owned a home but can’t afford to buy one now, and to those in rented council or housing association homes.

Many key workers, such as nurses, teachers, or care staff, also use this option to buy in areas where house prices are high. Shared ownership may help them stay close to work without being priced out of the market.

Local councils and housing associations usually have their own rules too, such as giving priority to people who already live or work in the area.

How do shared ownership mortgages work?

Shared ownership mortgages work a little differently from traditional ones. You buy a share of the home and take out a mortgage for that portion. A housing association owns the rest of the home, and you pay them rent each month for the share you don’t own.

For example, if you buy 40% of a home worth £200,000, your mortgage is only for £80,000. You’ll then pay rent on the remaining 60%. You’ll also need to pay service charges and ground rent if the property is in a block of flats.

As your financial situation improves, you can buy more shares in the home. This is called staircasing. Eventually, you may be able to own 100% of the property, depending on the terms of your lease.

Understanding shared ownership further helps you understand how this type of mortgage is set up and what to expect.

Pros and cons of shared ownership

Shared ownership is a helpful option for those who can’t afford to buy a home outright. It’s a useful path for many, but it’s important to weigh up how it fits into your long-term plans.

Here are some crucial shared ownership pros and cons to consider.

Pros

  • Lower deposit: You only need a deposit on the share you’re buying, not the full property value
  • Smaller mortgage: Your mortgage is based on your share, which means lower monthly repayments
  • Staircasing option: You can increase your share over time, eventually reaching full ownership if your lease allows it
  • Chance to get on the property ladder: Ideal for first-time buyers or people on a lower income

Cons

  • Rent is still required: You’ll pay rent on the share owned by the housing association, in addition to your mortgage
  • Extra costs: You may need to pay service charges, maintenance fees, and ground rent
  • Limited control: Some changes to the property (like home improvements or subletting) may need approval
  • Selling restrictions: When selling, the housing association may have first refusal or need to approve the buyer

Things to remember with shared ownership

The scheme can help make homeownership more affordable, but there are rules and extra costs to consider:

  • You don’t fully own the property – You’ll need to follow the housing association’s rules, which may include getting permission for changes or limits on who can live there.
  • Extra costs can apply – You may have to pay service charges, ground rent, and maintenance fees, especially if you’re buying a flat or leasehold property. These costs can increase over time.
  • Monthly payments may be higher than expected – Although your mortgage is smaller, adding rent and other charges can bring your total payments close to a standard mortgage.
  • Staircasing isn’t always straightforward – Buying more shares over time is possible, but each step may involve extra costs such as legal fees, valuations, and sometimes stamp duty.

Understanding these points early can help you plan better and avoid surprises later on.

Can you buy a shared ownership house outright?

Yes, in many cases, you can buy more shares in your property over time, eventually owning it fully. This process is known as staircasing. Once you own 100%, you stop paying rent to the housing association. It allows you to start small and buy more shares over time, but not all leases offer the option to reach 100%. That’s why it’s important to check your agreement before making plans. Legal fees, valuations, and other costs may also apply as you buy more shares.

Can you make home improvements in a shared ownership house?

Home improvements are usually allowed, but you’ll often need written permission from the housing association. This includes changes like fitting a new kitchen, changing flooring, or installing double glazing.

Even if you fund the work yourself, it may not increase the value of your share. This is one of the crucial aspects to consider before making major upgrades.

Can you build an extension on a shared ownership house?

Extensions involve more planning and nearly always need permission from both your local council and the housing association. Your lease may also limit major structural changes until you own a larger share of the property.

This is where understanding the full pros and cons of shared ownership becomes important. While the scheme offers flexibility in buying, it may place limits on how much you can alter the property.

How does shared ownership work when you sell your home?

When you decide to sell, the housing association usually has first refusal. This means they get a set period, often four to eight weeks, to find a buyer who meets shared ownership criteria.

If they don’t, you can list your share on the open market. You’ll only be able to sell the part you own unless you’ve staircased to full ownership. The price is based on current market value, and fees such as valuations or legal costs may apply.

For those selling under a shared ownership mortgage, it’s useful to understand the housing provider’s process and timeline. This ensures a smoother experience from start to finish.

Conclusion

Shared ownership is a valuable option if you can’t afford to buy a whole home straight away. You start by buying a share and then paying rent on the remaining shares. Later, you can buy more if your budget allows.

It’s essential to understand the rules, additional costs, and the process involved when you’re ready to sell. By understanding shared ownership pros and cons, you’ll be better prepared to decide if it’s the right choice for you.