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Understanding How Shared Ownership Mortgages Work

In this guide, we will explain what shared ownership mortgages are, the different types of shared ownership mortgages, and what factors to consider when qualifying for a shared ownership mortgage.

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For many aspiring homeowners, the traditional route of purchasing a property seems daunting. However, shared ownership mortgages can provide a solution to this problem.

Essentially, shared ownership mortgages allow multiple parties to hold ownership of a property, with each party contributing towards the deposit and mortgage payments. This can make the process of purchasing a property more manageable, particularly for those who may not have enough funds to buy their own home outright.

By sharing the costs, home ownership becomes a more affordable and accessible option. Understanding how shared ownership mortgages work can be complex, but with a little guidance and research, it could be the key to unlocking your dream of owning a home.

What is a Shared Ownership Mortgage?

When it comes to buying a home, one of the biggest hurdles is often the deposit. Shared ownership mortgages are a type of mortgage that allows you to purchase a portion of a property while sharing ownership with another party, typically a housing association.

This means a smaller initial deposit, and you only need to take out a mortgage on the portion of the property you are buying. It’s a great option for those who may not have the means to purchase a home outright, as it allows you to work your way into homeownership over time.

Shared ownership mortgages can be complex, but with the right guidance, they can help make the dream of owning a home a reality for many.

Overview of How They Work

This type of mortgage allows you to buy a portion of the property and pay rent on the remaining percentage.

Essentially, you're sharing ownership of the property with another party, which can be a great option for those just starting out, or those trying to get into the housing market in an expensive area.

It's important to note that you'll still be responsible for upkeep and maintenance on the property, but this can be a small price to pay for the opportunity to own a home that would otherwise be out of reach. Overall, share ownership mortgages can be a great choice for those looking for a more affordable way to become a homeowner.

Shared ownership is an excellent option for those looking to get onto the property ladder but can’t quite afford it on their own.

Here's an example of how shared ownership works:

  1. Suppose you decide to purchase a 50% stake in a £200,000home, which would amount to £100,000.
  2. Assuming a deposit of 5%, which is £5,000, for the 50% share of £100,000, you'll be required to obtain a mortgage of £95,000.

Types of Shared Ownership Mortgage Agreements

Essentially, this type of agreement allows you to purchase a portion of the property (usually between 25% and 75%) and pay rent on the remainder to a housing association or private developer.

There are several types of shared ownership agreements available, including the standard agreement, where you purchase a share in the property and pay rent on the rest, and the shared equity agreement, where you buy a share of the property and pay back the remaining equity when you sell.

- Joint Tenancy Agreement

If you're considering sharing a property with someone else, whether it's a friend or family member, it's wise to consider setting up a joint tenancy agreement.

This type of agreement can help to protect your individual interests and investments in the property. Essentially, a joint tenancy agreement is a legal contract between two or more parties who agree to share equal ownership of a property. This can provide a clear framework for how things will work in terms of responsibilities, costs, and decision-making.

It's important to ensure that you fully understand the terms of the agreement before signing, and to seek legal advice if necessary. With a joint tenancy agreement in place, you can enjoy the benefits of co-ownership of a property, while also safeguarding your own interests.

- Tenancy in Common Agreement

A tenancy in common agreement is a legal document that outlines the ownership rights of multiple individuals to a single property. This agreement is typically used when two or more people purchase a property together but do not want to own it jointly.

Instead, each owner has a separate share in the property, which they can sell, transfer, or mortgage. As a prospective tenancy in common owner, it's essential to understand the terms of the agreement fully. This includes your rights and responsibilities as a co-owner, as well as any restrictions on the use of the property.

Qualifying for a Shared Ownership Mortgage

To qualify, you typically need to have a household income of less than £80,000 per year or £90,000 a year or less when you’re buying in London, and cannot currently own a property.

You'll also need to demonstrate that you can afford the ongoing costs of homeownership, such as mortgage payments, rent, and maintenance fees.

A shared ownership mortgage can be a great way to get a foot on the property ladder, and our team of experts can guide you through the process to make it as smooth and stress-free as possible.

  1. You must be 18 years of age or older.
  2. If you're outside of London, your household income must be under £80,000 annually.
  3. If you're in London, your household income must be under £90,000 annually.
  4. You cannot currently own another home unless you're in the process of selling it. Shared Ownership is typically for first-time buyers.
  5. You should not be able to afford a suitable home on the open market based on your housing needs.
  6. You must have a good credit history with no bad debts or County Court Judgements, and be able to afford the regular payments and associated costs of buying a home.
  7. You must not be in mortgage or rent arrears.

The Pros and Cons of a Shared Ownership Mortgage


  1. An affordable way to get onto the property ladder
  2. Flexible payment options
  3. Lower rent payments and mortgage costs than purchasing a property outright


  1. Limited flexibility with regards to future purchases on the property such as extensions or renovations
  2. More difficult to sell the property
  3. There will always be a lease involved and homes with a shorter lease can be more different to refinance or sell.
  4. There will be additional legal fees should you wish to staircase
  5. Potentially unpredictable increases in rent payments
  6. Restrictions on who you can sell your share to in the future.

What is staircasing?

Staircasing is the process of buying additional shares in a property. Usually, you can staircase up to 100% ownership.

When you staircase, your rent payments will be reduced accordingly. For example, if you buy an extra 10% share in a property, your rent bill will reduce by 10%.

It's important to remember that when staircasing, you will incur additional mortgage and legal fees. You should also consider the potential impact on your taxes – especially if you staircase to 100% ownership.

How to apply for a shared ownership mortgage?

To obtain a shared ownership mortgage, you must first apply for the shared ownership scheme and get approved. This usually involves providing details about your income, budget, preferred location, and credit history.

After approval, you can proceed with the shared ownership mortgage application. However, not all lenders offer this type of mortgage, so it's important to double-check before applying.

To be eligible for a mortgage, you must provide information about your household income and credit history.

  • Your income
  • Cost of your mortgage
  • Rent
  • Service charges
  • Ground rent


Shared ownership mortgages offer a great way to get onto the property ladder. It means you can purchase part of a property and have lower payments than purchasing a home outright.

However, it's important to understand the pros and cons before applying for a shared ownership mortgage. Consider your eligibility, budget and requirements before making any decisions. Working with an experienced