Shared ownership is a scheme whereby you buy a portion of a property from a local authority or housing association – usually with the assistance of a mortgage – and rent the remaining part.
Normally you start off with buying 25% to 50% of the property, increasing to 75% or even 100% (if the housing association allows it) over time. This process, of buying a small amount of your property and then buying another stake later on, is sometimes referred to as ‘staircasing’.
The combined mortgage payment and rent of a shared ownership property should be less than the mortgage payment you may have faced had you secured a mortgage on the whole property (less your deposit). Therefore, this type of mortgage is suitable for those on lower incomes, unable to get onto the housing ladder in the usual way.
Another advantage of shared ownership is that you don’t have to provide so much of a deposit, which is why this type of scheme is popular with first-time buyers.
You only need to put up a percentage (normally 10% to 20%) of the stake in the property you are taking. So, if you were taking a 50% stake in a property worth £150,000, for instance, a 10% deposit represents £7,500, as opposed to the £15,000 if you were to buy the property outright with the help of a 90% LTV mortgage.
However, not all mortgage lenders allow shared ownership mortgages. Where they are offered, most lenders will generally let you choose from their full product range, although some may have products specifically for shared ownership.
Housing associations or house builders will often have special arrangements with a particular mortgage lender, giving you access to exclusive mortgage deals as well.
Lenders offering shared ownership mortgages:
- Barclays Bank
- Cambridge BS
- Cumberland BS
- Dudley BS
- Ecology BS
- First Trust Bank (NI)
- Furness Building Society
- Hanley Economic
- Holmesdale BS
- Ipswich BS
- Kent Reliance
- Leeds BS
- Lloyds Bank
- Mansfield BS
- Melton Mowbray BS
- Nationwide BS
- Newbury BS
- Penrith BS
- Teachers BS
- Tipton & Coseley BS
- Ulster Bank
Some of these lenders may have additional criteria and can be quite small building societies. Smaller lenders may restrict their mortgage business to certain postcodes or areas, with others being limited to customers working in certain professions.
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