Shared Ownership Mortgages

Shared Ownership Mortgages Explained

Shared ownership mortgages are part of a government scheme that makes it easier to buy a home if you are a first time buyer, or have insufficient income to get a big enough mortgage to get onto the housing ladder. 

shared ownership

Essentially, you can take out a mortgage on the share you own (usually between 25% and 75%) and pay rent on the rest.

How it works, in simple terms, is that if you can’t afford a mortgage on 100% of a property, and you meet any other qualification criteria, you can take out a shared ownership mortgage.  These come from shared ownership mortgage lenders and can be used to buy between 25% and 75% of a home.  A housing association owns the rest of your home, and you pay rent to them on the remaining percentage of the value of the property.

This information is based on the English scheme. The rules differ in Northern Ireland and the scheme is no longer available in Scotland or Wales.

Your home may be repossessed if you do not keep up repayments on your mortgage.

What types of mortgages are there?

Fixed rate mortgages

A fixed-rate mortgage is a home loan where your interest rate is guaranteed to stay the same for a set period of time, giving you peace of mind because you know exactly how much your payments will be every month.

Variable rate mortgages: Tracker mortgages

In short, a tracker mortgage is a home loan where your interest rate will ‘track’ the Bank of England’s base rate, plus a set percentage. This can mean your payments will reduce as the interest rate reduces, but it can also mean they increase too.

The base rate is currently at a record low of just 0.1%, due to changes caused by the COVID19 pandemic. So, if the interest rate on a tracker mortgage was the base rate +1%, the amount of interest you would pay is 1.1%. If the base rate went up, the interest rate on your tracker mortgage would also rise.

Variable rate mortgages:
Discount mortgages

With a discount mortgage you pay the lender’s standard variable rate, with a fixed amount discounted. For example, if your lender’s standard variable rate was 5% and you had a 1.5% discount, you’d pay 3.5%.

Repayment mortgages

A repayment mortgage means as long as you meet all your payments every month, you will be repaying off part of your capital (the money you borrowed) and part of the interest rate. At the end of your mortgage term the property will be fully repaid and will be fully owned by yourselves.

Interest-only mortgages

Unlike a repayment mortgage, you only pay off the interest portion of your loan. This means you have to make sure that at the end of your mortgage term you have enough money saved to pay off the outstanding capital in one lump-sum in order to complete your mortgage agreement and own your home.

Schemes available to you as a first-time buyer

A Help to Buy: Equity Loan makes it possible to buy a home with only a 5% deposit, meaning first-time buyers are able to get themselves on the property ladder more easily.

With the government’s Help to Buy: Shared Ownership scheme you can buy your first home from as little as 25% or as much as 75%, and pay rent on the remaining percentage.

Try our mortgage calculator to get an idea of what you could borrow. No credit checks required.