Shared Ownership: Is It Right for You?
Shared ownership has become a popular route into homeownership, particularly for first time buyers in expensive parts of the country. It allows you to buy a share of a property, typically between 10% and 75%, and pay rent on the remainder. Over time you can buy more shares in a process called staircasing, eventually owning the property outright.
It sounds straightforward but it's a more complex purchase than a standard sale, with implications for your finances, your future flexibility, and the costs of ownership. Here's what to know before you commit.
How shared ownership works
You buy a share of a leasehold property from a housing association or registered provider, typically using a mortgage for the share you're purchasing and saving a smaller deposit than you would for a standard purchase. You then pay rent to the housing association on the share you don't own.
For example, on a property valued at £300,000, you might buy a 40% share for £120,000 with a mortgage. You'd then pay rent on the remaining £180,000 of value, typically at a rate of around 2.75% of the unsold share per year, which would work out at roughly £412 per month in this example.
You also pay a service charge on top of this, covering the maintenance of communal areas and the building.
Who is shared ownership for?
Shared ownership is aimed at buyers who might not be able to afford to buy a home outright initially. To be eligible you typically need to have a household income below £80,000 (or £90,000 in London), be unable to afford to buy a similar property outright and meet the local connection criteria for some schemes.
It can be a useful route into homeownership for first time buyers, particularly in expensive areas where buying outright isn't realistic. But it's not necessarily a cheaper route to owning your home outright in the long run.
Staircasing
Staircasing is the process of buying additional shares in your property over time. Most schemes allow you to staircase up to 100% ownership eventually, although some have restrictions.
There are costs involved each time you staircase, including a valuation fee, legal fees, mortgage arrangement fees if you're borrowing more, and stamp duty in some cases. The price of additional shares is based on the property's current market value, not what you originally paid, so if property values have risen the additional shares cost more than you might expect.
Some schemes now allow gradual staircasing in 1% increments through a programme called New Model Shared Ownership, which can make staircasing more affordable.
The hidden costs to be aware of
Beyond the rent and service charge, there are several costs that often catch shared ownership buyers off guard.
Even though you only own a share, you're typically responsible for 100% of repairs and maintenance inside the property, the fact that you don't fully own it yet doesn't mean the housing association covers anything. Some newer schemes include a 10-year repair contribution from the housing association, but most don't.
Selling a shared ownership property can be more complex too. The housing association usually has the right to find a buyer first, called a nomination period, which can take several weeks. You may also be selling into a smaller buyer pool because not everyone can qualify for shared ownership.
If you're considering a shared ownership purchase, our guide to the conveyancing process covers what to expect from the legal side, with the addition that your solicitor will definitely need experience specifically in shared ownership.
Questions to ask before you commit
There are specific questions worth asking before proceeding with a shared ownership purchase. What share is available and what does it cost? What are the rent and service charges and how do they typically increase year on year? What's the lease length and have any other shareholders staircased to 100%? What restrictions are there on selling? What does the lease say about pets, alterations and subletting?
Is it right for you?
Shared ownership works well for some buyers and not for others, but it can be one of few routes into homeownership in expensive areas. The ongoing costs of rent, service charges and maintenance, plus the complexities of staircasing and selling, mean it's not always a straightforward "stepping stone" to full ownership though.
Speak to a mortgage adviser who specialises in shared ownership and a solicitor with relevant experience before committing. Make sure you understand the full long-term costs, not just the upfront affordability.
The full checklist
The Home Truths Guide includes a dedicated checklist for shared ownership purchases, alongside checklists covering every other stage of buying a home in the UK.
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