Shared ownership explained

Shared Ownership is a government-backed scheme that lets you buy between 10% and 75% of a property from a housing association. You take out a mortgage on the share you buy and pay subsidised rent on the remaining share to the housing association.

The minimum share you buy varies by scheme and housing association. Some allow 10%, others require 25% as a minimum. Check the specific property listing for the minimum share available.

The costs involved

When you buy through Shared Ownership you pay a deposit on your share only, not on the full property value. On a £300,000 property where you buy a 25% share (£75,000), a 10% deposit is £7,500, not £30,000. That is the main appeal.

But your monthly costs include two things: the mortgage on your share and the rent on the housing association's share. The rent is typically set at around 2.75-3% of the unsold share per year. On a £225,000 unsold share at 2.75%, that is around £516 per month in rent alone, on top of your mortgage payment.

Add the service charge, which covers maintenance, insurance, and management of communal areas, and the total monthly outgoing can be higher than you expect. Run the numbers for the specific property and compare them against buying outright at the same price with a conventional mortgage.

Staircasing

Staircasing is the process of buying additional shares in your property over time. Most schemes allow you to buy shares in tranches of 10% or more until you reach 100% and own the property outright. At that point rent stops.

Each time you staircase, the value of the additional share is based on the current market value of the property, not what you paid originally. In a rising market, staircasing gets more expensive over time. You also pay stamp duty and legal fees each time you staircase, which adds to the cost.

Some older Shared Ownership leases require the housing association to have a chance to buy back the property before you can sell on the open market. Check the terms of any specific property carefully.

The leasehold issue

All Shared Ownership properties are leasehold. That means you own a lease on the property, not the property itself. Service charges, ground rent (on older leases), and major works costs can all apply. Check the lease length: anything under 85 years creates problems for resale and remortgage. For new build Shared Ownership the lease is typically 990 or 125 years.

Who Shared Ownership suits

Shared Ownership works best for buyers who cannot afford to buy on the open market in their target area and who accept that ownership through this route is more complex and potentially more expensive on a monthly basis.

It works less well for buyers who assume it is a straightforwardly cheaper path to ownership. The monthly costs often match or exceed equivalent renting costs, and staircasing adds legal fees each time. The benefit is building equity and security of tenure, not lower monthly costs.

If you are considering Shared Ownership, calculate the total monthly cost including mortgage, rent, and service charge. Compare it to renting a similar property and buying outright with a high-LTV mortgage. Make the decision with those numbers in front of you.