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Shared-Ownership Mortgages: A Guide to Part-Buy, Part-Rent Homes

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    Shared ownership is one of many types of mortgage that can be the perfect mortgage option for first-time buyers who are looking to get onto the property ladder. A shared ownership mortgage allows you to purchase a portion of a home while paying rent on what remains – making it an ideal solution for individuals with lower incomes. In this guide, we will explore exactly how shared-ownership mortgages work and provide information about who qualifies for such mortgages, as well as things to consider before taking out one.

    What is a Shared-Ownership Mortgage?

    Shared ownership, also referred to as “part buy, part rent,” is a viable mortgage option that enables people to consider and purchase shared ownership properties. With this approach, you can take out a mortgage on the portion you own (normally between 25% and 75%), while paying rental fees for the rest to an assigned housing association. Through shared ownership, individuals can reduce their deposit requirement significantly in comparison with buying outright.

    Eligibility for Shared-Ownership Mortgages

    To be eligible to purchase shared ownership properties, you must meet certain criteria. Primarily, your household income needssta to be less than £80,000 and you must either qualify as a first-time buyer or an individual who previously owned but can’t afford it anymore. You may also need to show that you are currently renting from the government (e.g., council or housing association). In addition, having a good credit history is required in order for mortgage lenders to consider your application. Lastly military personnel would likely have priority access over other groups when taking advantage of special government-funded programs set up specifically for this type of property ownership opportunity!

    Changes to Shared-Ownership Schemes

    In April 2021, the government launched its new and improved Affordable Homes Programme, which includes a variety of alterations to shared-ownership schemes. Most notably, these changes permit you to purchase as little as 10% initial share ownership in your property with an option of 1% increments when purchasing extra shares. Furthermore, charges for added shares have been significantly reduced while landlords are liable for maintenance and repair costs within the first decade of shared ownership.

    How Shared-Ownership Works

    If you are seeking a compromise between owning and renting, then a shared-ownership mortgage may be the answer. But before applying for shared ownership through your council’s housing team or a housing association, check if it is available in your area and ensure that you can get a mortgage. Moreover, make sure to take into account all of the fees associated with this type of loan such as mortgage fees, stamp duty, moving costs, and insurance – so that you know what financial commitment awaits.

    A shared ownership house offers the ability to own more of your home through “staircasing,” a process by which you can buy additional shares until reaching 100% of the rented portion and therefore owning the property outright. The cost for these extra shares is dependent on the value of your residence at the time of increasing your share ownership as assessed by the housing association. By utilising staircasing, shared owners may eventually become full owners at their desired pace!

    Shared ownership affordability

    In Shared Ownership, the standard income multiples apply as if you were obtaining a normal mortgage. As Shared Ownership requires less borrowing overall, there’s no set minimum for your required income – it all depends on the lender!

    Income multiples

    With the ability to borrow up to 4-4.5x your salary, you can now purchase the home of your dreams or one that would typically be out of budget!

    Our Shared Ownership mortgage calculator allows you to easily determine how much your monthly payments will consist of, including both rent and loan instalments. All you have to do is key in the details such as purchase rate, interest rate, term length, percentage share and downpayment into the respective fields – it’s that simple! With just a few clicks on our calculator page, you can quickly get an idea of what your total repayments should amount up to.

    Affordability Calculator

    Enter your sole or joint income below and see how much you can borrow.

    For a more detailed and personalised mortgage affordability, use our Mortgage Affordability Calculator here >

    Shared Ownership Mortgage Calculator

    Don’t fret about the costs associated with shared ownership of a property, because our calculator has got you covered. All that’s required for an accurate calculation regarding your monthly repayments is to input information on the purchase price, interest rate, term length, percentage share and deposit into their respective boxes and hit calculate. This will give you a rough idea of how much your monthly part rent and pray mortgage payments will be. Following this, feel free to get in touch for fee-free advice on getting you a shared ownership mortgage.

    Monthly rental payments:

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    Monthly mortgage repayments:

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    Total monthly repayments:

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    Let's get you a mortgage for your Shared Ownership property
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    Example calculations

    It is important to work with a broker that knows the best lender for your needs. To give you an idea of how much you can borrow, here are some example calculations based on different income multiples and salaries:

    Salary 3x 4x 5x
    £20,000 £60,000 £80,000 £100,000
    £25,000 £75,000 £100,000 £125,000
    £30,000 £90,000 £120,000 £150,000
    £35,000 £105,000 £140,000 £175,000

    How much of a deposit do you need for shared ownership mortgage?

    When it comes to a shared ownership mortgage, the quantity of deposit required may fluctuate depending on numerous aspects – including your individual circumstances, the percentage of shared ownership being bought, mortgage lender’s requirements, and property value. As a general principle, you should anticipate putting down no less than 5%-10% of the residential as a deposit.

    For example, if you were to purchase a 50% stake in a £200,000 property, the deposit could range from £10,000 -£20,000.

    It is vital to bear in mind that the deposit requirements for shared ownership properties can be more significant than with a conventional home purchase, as lenders are inclined to view such an arrangement as slightly higher-risk.

    To get a clear understanding of the amount you need to save for a deposit, always reach out to a mortgage broker and inquire about their specific requirements.

    Advantages of Shared Ownership

    • Stepping on the Property Ladder: If you’re looking to become a homeowner without breaking the bank, shared ownership is an ideal option. Not only that, but with this route, it’s possible for you to purchase a larger home than what would be within your financial means if going the traditional route.
    • Saving Money: By cutting down on your rental expenses, you may have the opportunity to build up more equity in the property and save a significant amount of money each month.
    • Staircasing: Shared ownership gives you the option to purchase additional shares of your home through a process known as stair casing. Each percentage you buy will decrease the amount and percentage you pay rent on but will increase your mortgage payments.
    • Flexibility to Sell: By deciding to sell your shared ownership property, you have the opportunity to capitalise on any increase in value and potentially gain considerable profits.

    Disadvantages of Shared Ownership

    • Restrictions on Selling: When putting shared ownership properties on the market, certain restrictions may make it more difficult to find a buyer and close the sale promptly.
    • Permission Required: If you don’t own your property, the housing association must approve any structural alterations or improvements to your home. However, if the changes are cosmetic – e.g., painting and decorating – you can likely pursue them as long as it’s covered by yourself financially.
    • Service Charges: If you live in a flat or another type of building with communal areas, expect to pay service charges and possibly legal fees for the upkeep and maintenance.
    • Pets and Tenants: When it comes to shared ownership, there may be limitations by housing associations such as no tenants or animals allowed.
    • Stamp Duty: If you own more than 80% of the property, it is compulsory to pay stamp duty on the entire value of the said asset.

    Is Shared Ownership the Same as Shared Equity?

    Shared equity and shared ownership are two completely different methods. Shared equity offers you a loan with low interest to purchase the part of your home that may otherwise be out of reach, instead of allowing you to rent back only parts at a lower price. Plus, it’s even offered through government programs like Help To Buy.

    Let's get you a mortgage for your Shared Ownership property
    Put the odds of mortgage approval in your favour with the help of a qualified and experienced mortgage broker.

    Selling a Shared-Ownership property

    Selling your shared-ownership house can be done in a variety of ways depending on how much ownership you have. If you are the sole owner, then selling it through an estate agent is an option; however, please note that the housing association has first dibs for 21 years upon the initial purchase of the home. On the other hand, if partial ownership exists, buyers must acquire it as part of a shared-ownership scheme and you will often find that the shared-ownership housing association will insist they sell it through the shared ownership resale scheme on your behalf.

    What Happens if the Property Value Changes?

    Should you choose to put your shared-ownership property up for sale, there are a number of outcomes that could transpire. If the value has increased, then it’s likely you can expect to receive more than what was initially paid. However, if it decreased in value, the price tag may be lessened. All things considered though – market trends, the condition of your home and local demand will always factor into how much buyers are willing to pay when making an offer on your property.

    Prior to making a final decision on selling your shared ownership property, it is essential to carefully read through and comprehend the terms of your agreement. Depending on the circumstances, you may need expert assistance from a solicitor or conveyancer, or estate agent in order to successfully move forward with this process.

    How to Apply for a Shared Ownership Scheme

    Below are a few schemes that help you achieve your shared ownership goals:

    The Help to Buy mortgage scheme provided by the government provides shared ownership opportunities. Unfortunately, this scheme is no longer running.

    The Social HomeBuy program could be for you if you’re renting a council or housing association home. This scheme allows qualifying tenants to purchase a portion of their current residence, with monthly rent paid on the remainder. You must acquire at least 25% and are eligible for discounts ranging from £9,000-£16,000 depending on where your house is located and what size stake you decide to buy. If in future months you want to increase your share even further then more financial incentives may also apply – simply request an application form from your local council today!

    Shared Ownership Mortgages

    If you are looking to purchase a shared ownership property, then you will need a specific type of mortgage – namely shared ownership mortgages. Most lenders require at least 5% deposit upfront. Fortunately, many mortgage lenders offer shared ownership mortgages; some include Kent Reliance, Nationwide, Barclays, Leeds Building Society and Halifax. To receive the best advice for shared ownership mortgages it is recommended to contact an experienced knowledgeable broker who specialises in them.

    Your mortgage will be secured against your home, and failure to make repayments could result in the loss of your property.

    Can you get a fixed rate mortgage on a shared ownership?

    When it comes to shared ownership, you are in luck – a fixed rate mortgage is an option! This type of mortgage ensures that the interest rate remains steady for a predetermined length of time – typically two up to ten years. Through this arrangement, budgeting your monthly payment becomes much simpler and any alterations in the fluctuating market rates won’t cause fluctuations with your interest rate. Additionally, when engaging in shared ownership programs, you will only need 5% deposit on the mortgage share.

    Why Use a Shared Ownership Mortgage Broker?

    Ultimately, the choice of whether or not to use a shared-ownership mortgage broker is yours alone. However, it’s important to recognise that with extensive experience and deep expertise in the mortgage industry, an experienced mortgage broker can guide you towards securing the best deal for your individual requirements and financial situation.

    If you have a low credit score or an income that doesn’t meet the industry standard, mortgage brokers will be able to point you in the direction of specialist lenders that are more likely to accept your application. Moreover, they possess extensive knowledge and expertise when it comes to lender criteria and eligibility requirements which can prove invaluable while navigating this process – so don’t hesitate to take advantage of their assistance!

    If you’re looking for assurance that your mortgage is the best possible option, using a shared-ownership broker is an astute choice. What’s more, YesCanDo Money can assist by performing thorough research and comparing many deals to ensure you obtain great value. Once we understand your household income we will be able to give you an idea of any local housing association offering a shared ownership scheme. We will calculate the mortgage repayments as this will need to be affordable as you will need to pay rent on the rest.

    Let's get you a mortgage for your Shared Ownership property
    Put the odds of mortgage approval in your favour with the help of a qualified and experienced mortgage broker.

    Find the right shared-ownership mortgage for your needs

    Are you curious about the shared ownership scheme options that are available to you? YesCanDo Money is here to help! We compare mortgage products from over 90 lenders, so we can locate the most cost-effective deals for your situation. All it takes is a few details related to yourself, your plans and your property – then leave the rest up to us. We’ll be sure you get what’s best suited for both your budget and needs.

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    Grant Humphries (CeMAP)
    Grant Humphries (CeMAP)

    Grant Humphries (CeMAP) is a proficient Mortgage & Protection Adviser at YesCanDo Money. With a career spanning since 2001, Grant has honed his expertise in understanding lenders' criteria, complex financial situations, and the nuances of the mortgage market. His deep knowledge enables him to provide tailored solutions, especially for professionals and those with unique financial profiles. At YesCanDo, Grant's commitment to excellence is evident. He takes pride in guiding clients through their mortgage journey, ensuring they feel confident and informed at every step. From first-time buyers to seasoned investors, Grant's analytical approach and dedication make him a trusted adviser in the financial landscape

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