Shared ownership mortgage costs, catches and how it works

A shared ownership mortgage is a mortgage that lets you buy a share of a home, usually between 10% and 75%, while paying rent to a housing association on the part you don't own. It's a government-backed scheme, not a product created by lenders, and it's designed to help first-time buyers and people who can't afford to buy outright get a foot on the property ladder with a smaller deposit.

Housing associations manage the scheme and set the rent, while mainstream and specialist lenders provide the mortgage on your share. If you're weighing shared ownership up against other routes onto the property ladder, our first-time buyer mortgage advice covers the full range of options.

• You buy a share of the property and take out a mortgage on that share only
• You pay rent to the housing association on the share you don't own
• You can buy more of the property over time through staircasing

Shared ownership follows a fairly consistent path from finding a property to eventually owning more of it. Here's how the scheme typically plays out.

Shared ownership eligibility depends on your household income, your buying history, and sometimes your age or circumstances. Rules are set by Homes England and can change, so it's worth checking current criteria before you apply.

Use our mortgage affordability calculator to get a sense of what you might be able to borrow before you start looking at properties.

Shared ownership costs are made up of several separate payments rather than a single mortgage bill, and it's worth understanding each one before you commit.

The shared ownership deposit is calculated on your share, not the full property price, which is one of the main reasons the scheme appeals to buyers who can't save a large deposit. For example, on a 25% share of a £250,000 home (£62,500), a 5% deposit works out at around £3,125, and a 10% deposit at around £6,250.

Stamp duty rules for shared ownership let you choose to pay upfront on the full market value or defer payment until you own 80% or more of the property. Our stamp duty calculator can help you work out what you might owe, and it's worth checking the HM Revenue and Customs stamp duty guidance for current thresholds. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, so it's worth being realistic about the combined cost of mortgage, rent and service charge before you commit.

Shared ownership has genuine benefits for buyers who can't afford to purchase outright, but it comes with some catches that rarely get enough attention. Being aware of these before you apply can save real disappointment later.

• Lease length: shared ownership properties are leasehold, and a lease under 80 years can make the property very difficult to remortgage or sell. Always check the lease length before you apply.
• Service charge and ground rent inflation: these charges can rise significantly over time and are largely outside your control as a leaseholder.
• Restrictions on subletting, pets and alterations: as a leaseholder rather than a freeholder, you'll usually need the housing association's permission for changes like these.
• Nomination periods when selling: the housing association typically has a nomination period, often around 8 weeks, to find a buyer for your share before you can market it more widely.
• Staircasing caps in some areas: properties in designated protected rural areas sometimes cap ownership at 80%, so you may never be able to buy the property outright.

If arrears build up on either your rent or your mortgage, the consequences are serious. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, and a housing association can also start possession proceedings for unpaid rent. If you're struggling with payments, MoneyHelper (moneyhelper.org.uk, 0800 138 7777) offers impartial, government-backed guidance if you need extra support.

Staircasing is the process of buying additional shares in your shared ownership property over time, gradually increasing your ownership until you reach up to 100% on most properties.

Since April 2021, minimum staircasing increments dropped from 10% to just 1% a year on newer shared ownership leases, making it far easier to increase your share gradually rather than saving for a large jump. Single staircasing transactions above 1% are still typically subject to a 10% minimum, so it's worth planning ahead.

Each staircasing transaction brings its own set of costs, separate from your everyday mortgage and rent.

If staircasing means you need to borrow more, you may need to remortgage rather than simply extending your existing mortgage. Our remortgaging advice covers how that process works and when it makes sense.

Shared ownership is one of several first time buyer mortgage schemes designed to make homeownership more achievable, and it isn't automatically the right fit for everyone. Here's how it compares with two of the main alternatives.

Shared ownership

• How it works: buy a share of a property (10-75%) and pay rent on the rest
• Eligibility: household income cap, first-time buyer or specific circumstances
• Deposit needed: 5-10% of your share, not the full property value
• Key benefit: lower deposit and mortgage relative to full ownership
• Key drawback: ongoing rent, service charges and leasehold restrictions

Lifetime ISA (LISA)

• How it works: save up to £4,000 a year and receive a 25% government bonus towards a first home
• Eligibility: aged 18-39 when you open the account, first-time buyer, property under £450,000
• Deposit needed: whatever you've saved, boosted by the government bonus
• Key benefit: builds towards a deposit for full ownership, with no ongoing rent
• Key drawback: takes time to build a meaningful deposit, and withdrawing for anything else incurs a penalty

First Homes scheme

• How it works: buy a new-build home at a discount, typically 30-50% below market value
• Eligibility: first-time buyer, local connection and income criteria often apply
• Deposit needed: based on the discounted price, not the full market value
• Key benefit: full ownership from day one at a reduced price
• Key drawback: limited availability, and the discount is usually passed on to future buyers too

An advisor can talk through which scheme suits your income, deposit and location, since the right choice depends heavily on individual circumstances.

Applying for a shared ownership mortgage follows a similar pattern to a standard mortgage application, with a few extra steps involving the housing association.

A bad credit shared ownership mortgage isn't out of reach, but your options will usually be narrower than someone with a clean credit history. Some specialist lenders consider applicants with missed payments, defaults or a lower credit score, though they'll often ask for a larger deposit on your share or apply stricter income checks.

An advisor with access to specialist lenders can help you understand which options might work for your circumstances. Our bad credit mortgages page covers this in more detail.