Understanding Shared Ownership

Shared Ownership is another way to get started on the property ladder. You buy a percentage of a property and pay rent on the rest. We own part of it – but you’re living there, you can decorate it and decide when to sell.

Buying a share may mean you need a lower mortgage and deposit than purchasing a property outright. Shared Ownership can be a cost-effective way to start the property ladder and is ideal for first-time buyers. In addition, Shared Ownership may work out less per month than renting privately.

You can buy a home through the shared ownership scheme if you cannot afford all the deposit and mortgage payments for a home that meets your needs. The maximum household income is £80,000.

You’ll buy a share ranging from 10% to 75%; we’ll tell you in the property listing on this website the minimum (and maximum, if applicable) percentage that you can purchase.

You’ll need to be able to get a mortgage or have savings to cover the price of the share. It would be best to remember that you must pay your mortgage, rent and service charges each month and the usual household outgoings. To help you, we’ll carry out an affordability check.

Shared ownership is a form of leasehold where you buy a percentage of the property and pay rent on the share you don’t own. Leasehold means you buy the right to live in a property for a fixed number of years.

The freeholder will own the land on which the property is built. And generally, you’ll have to pay service charges.

The length of the leasehold is recorded on the lease agreement. We’ll let you know the number of years remaining of the Shared Ownership lease. If the lease runs out, the ownership goes back to the freeholder. You can extend the lease, but it can be expensive.

Costs

You’ll need to plan for all the costs when buying a share in your home.

When you’ve found the home you want to buy, we will ask you to contact one of our mortgage brokers. The mortgage broker will assess your income and outgoings to make sure you can afford the payments for your home.


Reservation fee


When you find a home you want to buy, you’ll usually need to pay a reservation fee of up to £500 to us.


When you pay the fee, no one else will be able to reserve the home for a fixed period. We will tell you how long the payment secures the home. We will take the fee off the final amount you pay on the day you buy the home (‘completion day’).


If you do not buy the home, you will get the reservation fee returned minus any costs incurred.


Buying costs


You’ll need to pay a deposit (usually between 5% and 10% of the share you’re buying) when you exchange contracts. When you buy your home, you’ll also need to pay:


  • your solicitors’ fees
  • You may also need to pay stamp duty.

Your solicitor will give you a list of buying costs. They’ll go through it with you and explain what you need to do.


Monthly costs

  • your monthly mortgage repayments
  • monthly rent to us
  • any monthly charges (for example, a service charge to pay for the maintenance of communal areas)
  • Utility bills (electricity, gas, water, broadband)
  • Council tax

Once you own the home, you must pay a monthly service charge. The service charge covers the cost of cleaning and maintaining communal areas, such as communal gardens or the external windows of a block of flats. You can ask us for a summary showing how the charge is worked out and what it’s spent on.


For some homes, you’ll need to pay an estate charge. The estate charge is collected as part of your monthly service charge. This charge covers the cost of maintaining communal areas not covered by the service charge, such as roads. In addition, your service charge includes a fee to us to cover our administration costs.


Repairs reserve fund


You may need to pay into a reserve fund (also called a ‘sinking fund’). The repairs reserve fund is also collected as part of your monthly service charge. The fund covers significant work, like replacing the roof. Reserve funds usually apply to flats, but some house developments have them.


You will not usually be able to get back any money you pay to them. For example, if you move home.


Shared Ownership mortgages 


Mortgages are some of the most significant commitments you’ll make in your financial life. And with all the options, it can be hard to determine what they’ll cost you. Our Shared Ownership mortgage calculator can help.


It’ll give you a simple estimate to show you the monthly payments on a typical Shared Ownership property.


You can also adjust the mortgage term, interest rate and deposit to get an idea of how those affect your monthly payments.


To get started, all you need is the full price of the property you are interested in and the amount of deposit you have available.


Need professional mortgage advice?  You can see our recommended mortgage brokers here.