Shared Ownership Mortgages
Shared ownership lets you buy a genuine share of a property, rather than the whole thing, paying rent on the remainder – a route onto the property ladder worth understanding fully, including the real costs and restrictions that come alongside the lower upfront barrier.
How Shared Ownership Actually Works
You buy a percentage share of a property, typically between 10% and 75%, and pay subsidised rent to a housing association or council on the share you don’t own. Your mortgage is taken out on your specific share of the property’s value, not the full purchase price, which is exactly what makes the deposit and mortgage more accessible than buying outright.
Worked Example
On a property valued at £300,000, buying a 40% share means your mortgage is based on £120,000, not the full £300,000. With a 10% deposit on that share, you’d need £12,000 upfront, considerably less than the £30,000 a 10% deposit on the whole property would require, alongside monthly rent payable on the remaining 60% share.
Who Can Apply
Eligibility generally requires a household income of £80,000 or less, or £90,000 or less in London, and you must typically be a first-time buyer, a previous homeowner who can no longer afford to buy again, or an existing shared owner looking to move. You’ll also need to demonstrate you genuinely can’t afford a suitable home on the open market, and some schemes prioritise military personnel or apply local connection requirements.
The 2021 Reforms: Why Newer and Older Properties Differ
From April 2021, new shared ownership homes in England came with updated terms: the minimum initial share dropped from 25% to as low as 10%, the landlord became responsible for repairs and maintenance during the first ten years, and staircasing became available in smaller increments, sometimes as low as 1%. It’s worth understanding these reforms don’t automatically apply to older shared ownership properties, so the terms available to you genuinely depend on when your specific property was built and sold under the scheme.
Staircasing: Buying Further Shares Over Time
Staircasing is the process of buying additional shares in your home after your initial purchase, gradually increasing your ownership and reducing the rent you pay on the remainder. Most properties allow you to buy shares in increments of 5% or 10%, though some newer schemes permit smaller 1% purchases.
Why Staircasing Is Priced at Current Market Value, Not Your Original Price
Each time you staircase, the additional share is valued at the property’s current market value via a RICS valuation, not the price you originally paid. If property values have risen since your initial purchase, further shares cost proportionally more; if values have fallen, they cost less. This is worth understanding clearly, since it means staircasing isn’t simply a matter of paying your original price again for a bigger slice.
Costs of Staircasing
Beyond the cost of the share itself, staircasing typically involves a RICS valuation fee, your own legal fees, and potentially a new mortgage arrangement fee if you’re extending your existing mortgage or remortgaging to fund the purchase. As a rough guide, these additional costs commonly run to around £2,000, though this varies by property value and location.
Staircasing Caps Worth Checking
While most shared ownership properties allow staircasing all the way to 100%, some in designated protected areas cap ownership at 80%, and Older Persons Shared Ownership properties typically cap at 75%. It’s worth checking your specific lease before assuming full staircasing to outright ownership will eventually be possible.
Stamp Duty: Two Genuinely Different Approaches
At your initial purchase, you have a choice about how Stamp Duty is handled. You can pay based on the property’s full market value upfront, meaning no further Stamp Duty becomes due regardless of how much you staircase in future. Alternatively, you can pay Stamp Duty only on the share you’re initially buying, though this means further Stamp Duty typically becomes payable once your cumulative ownership reaches 80% or more, calculated using a specific HMRC formula. This is a genuinely complex area worth discussing with a qualified adviser before your initial purchase, since the right choice depends on your realistic staircasing plans.
Service Charges: A Common Source of Confusion
It’s worth understanding this clearly before committing: as the leaseholder, you’re typically responsible for the full service charge on the property, regardless of what percentage you actually own. Owning 25% of a property doesn’t mean paying 25% of the service charge – you pay the whole amount, and the same applies to major works costs, which are charged in full to the leaseholder rather than pro-rated to your share.
Selling a Shared Ownership Property
Until you reach 100% ownership, you generally can’t sell your share freely on the open market – you must first offer it back to the housing association, giving them a window to find a buyer at the agreed valuation before you’re able to market it externally yourself. This right of first refusal can genuinely delay a sale, worth factoring into your planning if you think you might need to move relatively soon.
Reaching 100%: What Changes
Once you’ve staircased to full ownership, you become the outright leaseholder, stop paying rent entirely, and gain access to the full standard mortgage market rather than being limited to shared ownership-specific products, which can often mean better rates and a wider choice of lenders.
Not Every Lender Offers Shared Ownership Mortgages
Fewer lenders offer shared ownership products compared with standard residential mortgages, and those that do often have specific requirements around the particular housing association or scheme involved. It’s worth working with a broker experienced in this specific market, given the narrower lender pool involved.
Funding a Staircasing Purchase
Most buyers fund additional shares either through a further advance from their existing mortgage lender, or by remortgaging to a new lender entirely, sometimes securing a better rate in the process now that their loan-to-value has effectively improved. It’s worth comparing both routes with your broker rather than assuming your existing lender automatically offers the best deal for a staircasing purchase.
Comparing Shared Ownership to Other Routes
If you’re weighing shared ownership against other affordable homeownership schemes, our First Time Buyer Mortgages page covers the wider landscape of current schemes, including the Mortgage Guarantee Scheme and First Homes, worth comparing against shared ownership’s specific structure.
Frequently Asked Questions
How much deposit do I need for a shared ownership mortgage?
Typically 5-10% of your share’s value, not the full property price, which is what makes shared ownership more accessible upfront.
What is staircasing?
The process of buying additional shares in your home over time, priced at current market value, which increases your ownership and reduces the rent you pay.
Do I pay the full service charge even if I only own a small share?
Yes – as the leaseholder, you’re typically responsible for the full service charge and major works costs, regardless of what percentage of the property you actually own.
Can I sell my shared ownership property whenever I want?
Not freely until you reach 100% ownership – you generally must offer it back to the housing association first, which can delay a sale.
What happens once I reach 100% ownership through staircasing?
You become the outright leaseholder, stop paying rent, and gain access to the full standard mortgage market rather than shared ownership-specific products.
Get in touch with details of your circumstances and the property you’re considering, and we’ll help you understand whether shared ownership genuinely suits your situation.
