A Guide to Shared Ownership Mortgages

If you’re struggling to save up a large enough deposit to get your foot on the property ladder, using the Shared Ownership scheme could be useful. Here we’ll cover how the scheme works, how your maximum borrowing will be calculated, and where to find the best Shared Ownership mortgage rates and lenders.

What is the Shared Ownership scheme?

Shared Ownership is a government-backed scheme that aims to make it easier for people to begin their home ownership journey. Instead of purchasing a full property, you only buy a specific percentage, usually between 25% and 75%, with a housing association, local council or landlord taking ownership of the remaining share.

This means you’d need a smaller deposit and also a smaller mortgage, making it more realistic to buy a house with a lower income or lower level of savings. However, you pay rent on the remaining portion of the property that you don’t yet own. So, the best way to think of it is a hybrid between buying a house and renting.

What is a Shared Ownership mortgage?

This is the term used for mortgages that work in conjunction with Shared Ownership. Shared Ownership mortgages work pretty much exactly the same way as a standard residential mortgage, except that it’s effectively a mortgage on a specified portion of a property, although some lenders offer exclusive deals for users of the scheme.

If you agreed to purchase 50% of a Shared Ownership property, you’d need to take out a mortgage to cover a 50% share of the full market value (minus your deposit).

Example: If you were buying a 50% share of a property worth £300,000 with a 10% deposit (£15,000), you’d need to get a mortgage for £135,000. Shared Ownership lowers the barrier to entry for buying a property because, in some cases, you’d need just a 5% deposit (95% LTV) based on the initial portion you’ll own.

How shared ownership mortgages are calculated

Here you can take a quick look at the amount you might be able to borrow and also what your repayments might look like with a Shared Ownership mortgage.

How much you can borrow

To calculate how much you can borrow with a Shared Ownership mortgage, you should start by using the average salary multiple, which is 4.5 times your salary. This will give you a rough idea of how much you can borrow.

Once you have this figure, it will mean you can work out an estimate of what portion of a Shared Ownership property you might be able to purchase. However, you’ll also need to factor in other costs like rent, service charges, and ground rent.

You can use our calculator to get an idea of your initial maximum borrowing amount, simply enter your total household income into the input field:

Calculating your repayments

You can use our calculator to see how much your repayments might be for the portion of the property that you’re going to own.

However, where things get slightly more complex is that for Shared Ownership, you also need to think about the cost of the rental portion (usually calculated as a percentage of the rented share). So remember to add that on afterwards.

Nevertheless, the calculator below will let you work out how much your repayments will be if you enter the cost of your desired share along with a mortgage term and rate:

Shared Ownership rules and lending criteria

Here are some of the key factors looked at when it comes to eligibility criteria for Shared Ownership mortgages:

• Deposit: Most lenders will require a deposit for the purchase. However, some lenders will accept 5% or 10% deposit, and this is based on the portion you’re buying, which means you might be able to save up a deposit quicker.

• Household income: To qualify for Shared Ownership, your household income must be under £80,000 (or £90,000 in London), and you should not be able to afford the home outright.

• Property ownership: Typically, you need to be a first-time buyer. However, there are exceptions. For example, if you owned a home but can’t afford to buy one now or you’re forming a new household after a breakup. You can also buy if you’re an existing shared owner and want to move.

• Location: There can be different regional rules depending on if you’re in England, Wales, Scotland or Northern Ireland. And, some housing providers or local authorities may have additional criteria like needing a connection to the property location.

• Credit history: With most lenders, you’ll need a good credit score and a clean credit history, but it can still be possible to get a Shared Ownership mortgage with bad credit. However, it depends on the age and severity of the adverse credit - you may need to approach a specialist bad credit lender.

• Minimum ownership share: You must buy a share of between 10% and 75% of the home’s market value. You can buy more shares in the future through a process called ‘staircasing’.

• Age and residency requirements: You must be at least 18 and a British or EU citizen (or have right to remain in the UK). If you’re over 55, you might qualify for the Older Persons Shared Ownership (OPSO) scheme where you don’t have to pay any rent once you own 75%.

How we can help you get a mortgage through the scheme

Getting a Shared Ownership mortgage can be similar to a standard mortgage. So, depending on your situation, you’ve got a few options. The recommended route usually involves speaking with an experienced broker, as it's often the surest way to get the best rates, especially if your circumstances are even slightly complex.

However, if your situation is more straightforward, you can gather your personal documents (proof of address, ID, 3 months’ payslips and bank statements) and any details about Shared Ownership properties you're interested in. Then, you can start comparing rates yourself.

You can compare Shared Ownership mortgage rates for free on Teito. Select the 'Choose Your Own Mortgage' option below to browse rates from 90+ lenders in real-time, or select 'Speak To An Adviser' if you’d like specialist advice first:

Compare Shared Ownership mortgage rates for FREE

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Shared Ownership mortgage lenders

Here’s a quick comparison of mainstream lenders that offer Shared Ownership mortgages:

• Nationwide: You need to buy at least a 25% share and Nationwide will let you borrow up to 90% of the value, which means you’d need a 10% deposit (of the share value). They will accept builder cashback and the rent portion will be included in your affordability calculation.

• Halifax: They’ll consider a share purchase of between 20% and 85% for a new build or 25% to 85% for resale properties. Halifax will allow a 95% LTV, meaning just a 5% deposit on your share (minimum £4,000 and excluding any deposit provided by a builder or HA). Some regional Shared Ownership restrictions also apply.

• Barclays: You can borrow up to a 90% LTV (meaning a 10% deposit) with Barclays on a property share of at least 25%. Providers and landlords must be registered and regulated by the Home and Communities Agency for Barclays to consider a Shared Ownership mortgage.

Keep in mind, high street banks might not necessarily be the best Shared Ownership lenders to approach. Some, like NatWest, aren’t even willing to offer Shared Ownership mortgages.

So, it’s worth comparing the whole market to see your options. In some cases, it might make sense to get some guidance from a specialist broker.

Types of properties you can buy

Here’s a quick overview of the types of properties that could be eligible for Shared Ownership:

• New build homes (including flats, apartments, and houses)

• Second-hand homes (resale as part of the Shared Ownership scheme)

• Homes that meet the needs of people with long-term disabilities

All Shared Ownership properties (whether a house or flat) will be a leasehold. However, this could change if you staircase to 100% ownership.

Are the rates different?

The rates for Shared Ownership mortgages should, in most cases, be the same as a standard residential product with that lender, but not always.

Usually, your deposit size and LTV along with your credit history will impact your Shared Ownership rates. Also, the lender you approach and whether you decide to opt for a fixed rate for a specific period will partially dictate the rates you get.

Why choose Teito for your Shared Ownership mortgage?

As a whole-of-market mortgage brokerage, our advisors can find you the best deal for your Shared Ownership mortgage - regardless of your circumstances and the size of the share you’re looking to purchase.

Whether you want to maximise how much you can borrow or secure the best rates, we can help you find the right solution for your situation and home ownership goals.

Here are some more of the reasons people choose us to help them get the best Shared Ownership mortgage:

• You can compare Shared Ownership mortgage rates and deals online for free

• We can introduce you to specialist lenders with more flexibility

• Our mortgage brokers are 5-star rated on leading review sites

• Your first chat is free, with no obligation to proceed

Ready to compare rates for free and take advantage of a free, no-obligation chat with a broker who specialises in Shared Ownership mortgages? Get started here.