In this guide, we explain:
- how shared ownership schemes work
- who can buy through the schemes, and the pros and cons of doing so
- what staircasing means
- how to get a shared ownership mortgage
Click a link below to jump to the relevant section:
- What is shared ownership?
- How does it work?
- Who can buy through a shared ownership scheme?
- What are the pros and cons of shared ownership?
- What is staircasing?
- Are shared ownership mortgages available? How do I get one?
- What’s the difference between shared ownership and Help to Buy?
- Can I buy through shared ownership if I already own a house?
- Can I sell my shared ownership property and buy another?
- Can I buy the freehold of my shared ownership property?
- Will I pay stamp duty land tax on a shared ownership property?
- What is older people’s shared ownership?
What is shared ownership?
Shared ownership means buying a share of a home you live in while paying rent on the rest. You then have the option of buying a bigger share—or buying the property outright—later. You do this through a shared ownership scheme.
The schemes are aimed mainly (but not exclusively) at first-time buyers who want to own a home but can’t afford to buy one in full.
Many shared ownership homes are on new-build estates, where the developer was obliged to provide a certain number of these properties in return for a government subsidy. The schemes are typically run by local housing associations.
How does it work?
With a shared ownership property, you:
- buy a 25% to 75% share and pay a mortgage on it
- pay a reduced rent to a housing association for the rest (plus a service charge and any buildings insurance)
Because you’re buying the property in part, you’re considered an owner-occupier—not a tenant—with all the legal rights and responsibilities that brings. You sign a lease that shows you own a share in the property, making you the leaseholder. Although the housing association is the landlord, you are named as the legal owner on the title deeds.
What size share can I buy?
Most housing associations will set a minimum initial share of 25% and a maximum of 75%, although they will assess your financial situation to determine what you can most afford to buy. Over time, however, you may be able to staircase to own 100% of the property.
If you’re buying a resale property—a property someone owns through shared ownership but is now selling—you’re limited to whatever share that person purchased, as a minimum. So, if they had a 60% share, you’ll have to buy at least 60% too.
Who can buy through a shared ownership scheme?
Only certain people can buy shared ownership homes. You’re eligible to apply to a shared ownership scheme as long as you:
- are 18 or over
- have an annual household income of less than:
- £80,000—outside London
- £90,000—within London
- don’t already own a home—or, if you do, currently have it up for sale
- lack the funds to purchase a property suitable for your housing needs on the open market
- aren’t behind on any existing rent or mortgage payments
- have a good credit history and can afford the regular payments involved with buying/owning a home
- have enough money to put down as a deposit—which is generally 5%–10% of the share you’re buying
These are general criteria and can vary between housing associations, so always check with your housing association first.
What are the pros and cons of shared ownership?
Buying a house through a shared ownership scheme has both its benefits and its drawbacks. You need to weigh these up when deciding whether the scheme is right for you.
Pros and cons of shared ownership
What is staircasing?
Once you’re living in your property, you can increase the size of your ownership by buying a bigger share. This is known as staircasing.
It’s a useful way to work up to fully owning your home, as it allows you to put money aside gradually or wait until your household income increases.
When you buy more shares:
- your rent payments will fall to reflect the increase
- you must buy at least 10% of the property at a time—so if you own 30%, you’ll need to up your share to a minimum of 40%
- the shares will be based on the current value of the property—so if prices have risen over the years, you’ll pay more for each share than you did originally
- you’ll need to have been in the property for 12 months or more
In most cases you’ll be able to increase your share until you own 100% of the property, but check with your housing association that this is the case.
Remember that staircasing involves some costs, so factor these in when you’re deciding whether to buy a larger share in your home. These costs include:
- a valuation fee—the housing association will pay a surveyor to value the property and determine what it’s worth at that time
- legal expenses—your conveyancer will need to deal with the legal aspects of staircasing
- mortgage fees—these apply if you’re changing mortgage lenders or increasing your existing mortgage to buy the new share
Are shared ownership mortgages available? How do I get one?
Yes, there are mortgages for people who buy homes through shared ownership. These are available from normal banks and lenders—any independent financial adviser can direct you to the one that’s best for you.
How the mortgage works depends on which type you’re offered—is it repayment, for example, or is it interest-only? These mortgages are explained in more detail on this page.
You won’t need to arrange a mortgage until you’ve found the home you want to buy. The housing association can put you in contact with someone who can provide the appropriate financial advice.
Can I buy a shared ownership home with cash?
Yes, if you have enough money available to buy your share.
However, if you have plenty saved, you might want to consider using it as a deposit to buy a house on the open market. However, be aware that this might disqualify you from the shared ownership scheme.
Can I remortgage on a shared ownership property?
Yes. You can apply to remortgage a shared ownership property just as you would a normal property.
You might want to remortgage if:
- you’ve already paid off a significant amount of your mortgage
- you now own the property outright (i.e. you hold 100% of the shares)
- the value of your home has increased since you bought it
This is something you would need to discuss with your mortgage lender.
What’s the difference between shared ownership and Help to Buy?
Shared ownership is one part of the government’s Help to Buy scheme and it gives you the chance to own a home on a part-buy/part-rent basis, as explained above.
There are various other schemes under the Help to Buy programme which aim to help people get on the housing ladder. One other such scheme is the Equity Loan Scheme, which allows you to buy a new-build home with the help of an equity loan (also known as shared equity). Under this scheme:
- the government loans you up to 20% of the value of the home (40% in Greater London)
- you raise a deposit of only 5%
- a 75% mortgage (55% in Greater London) makes up the rest
There is also the Help to Buy ISA, which helps you save towards your deposit. You can use a Help to Buy ISA to buy a home through a shared ownership scheme providing you meet the scheme’s conditions for eligibility.
Can I buy through shared ownership if I already own a house?
Only if you’re in the process of selling your home as you apply for shared ownership. If not, you wouldn’t qualify.
If you’re selling your existing home to buy another through shared ownership, you’ll need to demonstrate that your current home isn’t suitable and get written support for your application from your local council. The housing association you are buying through can help you with this.
Can I sell my shared ownership property and buy another?
Yes, as long as you still meet the eligibility conditions for shared ownership.
Can I buy the freehold of my shared ownership property?
Yes, but only in the following circumstances:
- You have ‘staircased’ to 100%—i.e. bought all the shares in the property
- The housing association has made it a condition of your lease that the freehold transfers to you as soon as you’ve increased your share to 100%
Be aware that not all housing associations allow leaseholders to staircase to 100%, so in those instances there would be no route for you to have full ownership of the home.
Will I pay stamp duty land tax on a shared ownership property?
Yes—shared ownership homes are no different to other properties when it comes to stamp duty.
You’ll pay the normal rates of stamp duty on properties above £125,000—the rates are set out on this page. However, you have two ways to pay:
- Lump sum—if you intend to staircase up to 100%, you can make a ‘market value election’ and pay stamp duty on the full value of the home at the time you buy, regardless of the actual share you’re buying. This is a one-time payment, and you won’t pay any more stamp duty after that.
- In stages—make one payment based on your initial share (if it’s above £125,000), then another once you’ve staircased over 80%.
You may also pay SDLT on the total rent over the life of the lease if that total is over £125,000 (also known as the ‘net present value’)
If you’re a first-time buyer, you can claim relief from stamp duty, but only if you pay a one-off lump sum based on the total market value of the property.
What is older people’s shared ownership?
Older people’s shared ownership schemes are intended for homebuyers over the age of 55. They are generally the same as other shared ownership schemes, but you can only buy up to 75% of the property and once you get to 75% you don’t pay any rent on the additional 25%.