How the scheme works and what to consider before applying
Buying a home through shared ownership can serve as a stepping stone onto the property ladder. For many first-time buyers, it provides one of the few accessible routes to homeownership when rising prices make buying outright difficult.
Understanding how the scheme operates, its associated costs, and its long-term implications will help you decide if it’s the right choice.
How shared ownership works
Shared ownership is meant for people who cannot afford to buy a home on the open market. You buy a share of a property, usually between 10% and 75%, and pay rent on the remaining part to a housing association. Over time, you can buy more shares through “staircasing” until you fully own the property.
The mortgage you take out covers only the share you buy, keeping repayments lower than if you were to purchase the full property. However, you must also budget for rent, service charges, and maintenance costs.
Who can apply
The scheme is mainly intended for first-time buyers, but it is also accessible to those who have previously owned a home and can no longer afford to purchase one outright. Household income must be £80,000 a year or less outside London, or £90,000 or less within London. You must also prove that buying a suitable home on the open market is not a viable option.
Certain groups, such as serving members of the armed forces, are prioritised. Applicants must also meet the affordability and credit checks required by lenders and the housing association.
Costs to consider
While shared ownership lowers the barrier to entry, several costs still apply. You will need a deposit, usually at least 5% of the share you are purchasing. For example, if the home is valued at £250,000 and you buy a 25% share (£62,500), a 5% deposit would be £3,125.
Monthly costs include mortgage repayments, rent to the housing association, and service charges for communal areas or estate maintenance. Stamp duty may also apply, although you can often choose to pay it either upfront on the full amount or gradually as you staircase.
Benefits and drawbacks
Shared ownership provides an affordable entry, needing smaller deposits and mortgage commitments. Staircasing enables you to increase ownership gradually, making it easier to adapt as your financial situation improves.
There are, however, trade-offs. Rent and service charges continue alongside your mortgage, which can limit savings. Not all lenders offer shared ownership mortgages, so the options may be more limited. Selling can also be more complicated, as housing associations often have the right to find a buyer before listing the property on the open market.
Looking ahead
For many, shared ownership serves as a stepping stone: a way to live in an area that might otherwise be unaffordable or to ease into ownership more gradually. It is important to consider both the present and the future. Rent reviews, increasing service charges, and the cost of staircasing all affect affordability over time.
Shared ownership may not suit everyone, but for many, it provides a practical and flexible way to establish roots.
Your home maybe repossessed if you do not keep up repayments on your mortgage.
