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What is shared ownership?

Shared ownership is a government scheme put in place to help people who cannot afford to buy their home on the open market. It gives first time buyers - as well as those who used to own a home but can’t afford to buy one now or are an existing shared owner looking to move - a chance to purchase a share of between 25% and 75% in a new build or resales property. The buyers will then pay rent to a housing association for the rest of the shares.

So, in simple terms, the shared ownership scheme lets you part buy, part rent. You will pay a mortgage on the share you own and pay below-market-value rent on the rest, to the person that owns the remaining share.Firstly, you work out what percentage of the property you can afford to purchase - this can be anything between 25% and 75%. You will then have to pay a deposit, much like a normal house purchase, which is often at least 5% of the share that you are buying.

This means that if the property is worth Ł600,000 overall and you buy a 25% share - equating to a worth of Ł150,000 - you would pay a deposit of Ł7,500.

The monthly repayments on a shared ownership home

Each month you make repayments on your mortgage (much like a normal property), and then pay the extra rent on top. Both the mortgage and rent will depend on the value of the property and the share you buy. In basic terms, your mortgage repayments depend on the mortgage you've negotiated with your bank, and the rent will depend on the value of the property overall.

What is shared ownership? Here’s everything you need to know

Other than service and other moving charges such as solicitor fees, mortgage broker fees and insurance, that is all you will have to pay when it comes to your new home.

The great thing about having a shared ownership home is that you can also increase your share after a certain period of time. Also known as ‘Staircasing’, this allows you to own more of your home, pay less rent and have the opportunity to buy the full share of the property at some point. (However, this is not a necessity). For example, if you start by owning 25% of your property and and renting 75%, later down the line, you may have the capital to put a deposit down on another 25%, and end up paying mortage on 50% / rent 50%.

The benefits of shared ownership

Other than actually being able to own some of your home at a much cheaper price than buying it outright, shared ownerships have plenty of benefits:

The deposit is much smaller than a usual house deposit.
Your monthly payments are often cheaper than what they would be if you had an outright mortgage (or if you were renting privately).
You can buy more shares if you want to/can afford to and can end up owning the whole property later down the line
You can sell your shares whenever you want
You can decorate a shared ownership home
You don’t have to increase your shares if you don’t want to/can’t