What is shared ownership and how does it work?

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What is shared ownership?

Shared ownership is a government scheme designed to help people get on the property ladder when buying a home outright feels out of reach. It’s popular among first time buyers but can also help those who used to own a home or earn below a certain amount.

Rather than buying 100% of a property upfront, shared ownership allows you buy a portion of it (usually between 10% and 75%) and pay rent on the rest to a landlord. Over time, you can choose to buy more of the property, until you own it all. This is known as staircasing.

Julies' story

Julie didn’t think she’d ever be able to buy her own home until she started researching shared ownership.

How it works

1. Choose how much you want to buy

Decide how much of the property you want to buy based on your budget. The more you buy, the less rent you’ll pay.

2. Get a mortgage

You can take out a mortgage for the portion you’re purchasing. The deposit needed is based on this portion only and not the full property value, making it more affordable.

3. Pay rent and charges

You pay rent to the landlord on the remaining portion of the property. You may also need to pay service charges and ground rent, particularly in flats.

4. Buy more of the property

When the time's right, you might want to buy more of the property (staircase). Each time you staircase, your rent will go down as you’ll be paying it on a smaller portion of the property. If you want, you can eventually own all of it.

Example

Let’s say you’re buying a 2-bedroom house valued at £240,000 through shared ownership and want to buy 40%.

Your portion will cost £96,000.
You'll need a £4,800 deposit (5% minimum deposit of the portion you’re buying).
You'll need to borrow £91,200 from a mortgage lender.
You’ll pay rent on £144,000 (60%).

This means, your monthly mortgage and rent costs would roughly be:

£560 for your mortgage¹
£330 for your rent²

Total monthly cost: £890 (this excludes any service charges or ground rent that you may have to pay).

This could be more affordable than buying a home outright, or renting privately. Plus, you’re building equity in your home. It isn’t always cheaper, so it’s worth comparing all of the costs.

¹This is based on our standard variable rate (SVR) on a 30-year term, but a fixed rate mortgage may be less.

²This is based on 2.75% annual rent.

Is it right for you?

Shared ownership offers lower upfront costs and a pathway to full ownership. But it also comes with responsibilities like maintenance, leasehold rules and staircasing fees. It's important to understand the full picture before you commit.

Take a look at our shared ownership pros and cons to see if this could be the right scheme for you.

Pros of shared ownership

You own a portion of your own home without over stretching yourself.
Your monthly repayments are typically lower than if you took out the full mortgage for your home.
You can put down as little as 5% deposit.
It’s an option to get out of renting if saving for a larger deposit is difficult.
If your portion of the home is less than 80% you don’t have to pay stamp duty on the total value of the home.
You’ve got the option to buy more of your home in the future via a process known as ‘staircasing’. In most cases, you can buy all of your home if you wish too, which would mean you wouldn’t have to pay any rent.
As long as the rent and mortgage repayments are made, you can live in the property for the duration of your lease.
You may be able to organise an extension of the lease with the housing provider.

Cons of shared ownership

You need to do your research as not all lenders offer shared ownership mortgages.
The size of deposit you need may differ from lender to lender.
There’ll be ground rent and service charges on your home, on top of your mortgage and rent. So make sure you do your sums.
If your portion of the home equals or exceeds 80% you’ll have to pay stamp duty on the total value of the property.
Shared ownership homes are sold on a leasehold basis; leasehold ownership is a long tenancy where your lease will give you the right to occupy and use the home for a long period. However, some houses can become freehold if you eventually own them outright. This will need to be agreed with the housing provider.
While you’re free to add a splash of colour to the inside of your home, there may be restrictions on what home improvements you can do. You may need to get permission from the relevant housing provider before you make any structural changes.