Talk of the Town! Shared Ownership

Q1: What is Shared Ownership?

A:
Shared ownership is a government-backed scheme designed to help people, especially first-time buyers, get onto the property ladder.

Instead of buying the entire property outright, you purchase a share of it jointly with a Housing Association. The Housing Association owns a portion of the property, and you own the rest.

Because you are not buying the full property at once, you only need a smaller deposit — making it more affordable to start. Over time, you can purchase more shares until you own the property outright.

Q2: Do I Have to Pay Rent to a Landlord Under Shared Ownership?

A:
No, there is no landlord living in the property. You pay rent to the Housing Association, not to an individual landlord.

Although the Housing Association technically owns part of the property, they don’t live there. The arrangement is purely designed to make homeownership more accessible.

Eventually, the goal is for you to either become the 100% owner of the home or sell it and use the equity to buy another property.

Q3: How Much Deposit Is Required?

A:
Let’s take an example: If a property costs £200,000, and you decide to purchase a 25% share, your share is £50,000.

You’ll need a deposit on that £50,000 share — usually around 10%. So, 10% of £50,000 = £5,000.

Effectively, that means you only need a 2.5% deposit of the full property value (£5,000 out of £200,000).

This is much lower than a typical residential mortgage where you might need a full 10% deposit (£20,000).

Q4: What Are the Perks of Shared Ownership?

A:

• Low Deposit Requirement: You need a much smaller deposit because you’re only buying a share of the property.
• Couple with a Lifetime ISA (LISA):
  • You can save up to £4,000 each year and receive a £1,000 government bonus.
  • If you’re buying with a partner, both can use a LISA — together you could receive £2,000 from the government.
  • This further reduces the effective deposit needed.
• Easier to Get on the Property Ladder: You only need a mortgage for a portion of the property value.
• Access to New Properties: Many shared ownership homes are new builds with modern fittings and warranties.

Q5: Can I Rent Out My Shared Ownership Property?

A:
No, you generally cannot rent out a shared ownership property.

The scheme is designed for first-time buyers and owner-occupiers, not for investors.

If you wish to move and rent it out, you would first need to buy the remaining shares of the property (become the full owner). Once you own 100%, you can rent it out freely or move to another home.

Q6: What Are the Drawbacks or “Catches” of Shared Ownership?

A:

• Limited Availability: Not all properties are eligible for shared ownership — it’s usually only available on selected new developments or specific resale homes.
• You Don’t Own the Full Property: You’ll still pay rent on the share owned by the Housing Association.
• Rent May Increase: The rent portion can rise over time.
• Restrictions: You cannot rent out the property unless you own it fully.
• Eventual Buyout Required: To own the home entirely, you’ll need to purchase additional shares later, which may involve extra costs like valuation and legal fees.

Q7: How Does a Shared Ownership Mortgage Work?

A:
You can get a shared ownership mortgage much like a regular one — for example, a 2-year or 5-year fixed-rate deal.

After the initial deal period, you can remortgage just as you would with a standard mortgage.

If you want to increase your share in the property (called staircasing) during or after your mortgage deal, you can. This involves:

• Contacting your Housing Association
• Getting a property valuation
• Involving a solicitor for the legal process

Each Housing Association may have slightly different rules, but the process is generally straightforward.

Q8: Final Thoughts

Shared ownership has both advantages and limitations. It’s an excellent way for first-time buyers to get onto the property ladder with a smaller deposit and a lower mortgage amount.

However, it’s important to understand the restrictions, costs, and long-term implications before committing.

It’s advisable to speak to a qualified mortgage advisor or your bank’s mortgage team for personalized guidance before proceeding.

Closing Note

It was great having this discussion — now, let’s go enjoy those two cups of warm coffee waiting for us!