With house prices remaining high and deposits difficult to save, many first-time buyers in London are turning to alternative ways to get onto the property ladder.
One of the most popular government-backed schemes is shared ownership, but how does it actually work, and is it the right choice for you?
At The Mortgage and Protection Hub, we help buyers across London explore their options, from traditional mortgages to shared ownership properties.
If you’re struggling to afford a home outright, this guide will walk you through the shared ownership scheme in full so you can make an informed decision.
What Is Shared Ownership?
Shared ownership allows you to initially buy a share (usually between 25% and 75%) of a property and pay rent on the remaining portion, which is owned by a housing association or local council.
You only need a deposit and mortgage payments based on the share you’re purchasing, making it more affordable than buying a home outright.
Over time, you can choose to buy more shares in your shared ownership home, a process known as stair-casing, until you own the whole property outright.
How Does Shared Ownership Work?
Here’s a quick breakdown of how shared ownership works in most cases:
- You purchase a share in a property, typically between 25% and 75%, based on what you can afford.
- You pay rent on the portion you don’t own to the housing association.
- You’ll also be responsible for monthly payments, which include your mortgage on the share you’ve bought and rent on the rest.
- You can increase your ownership over time by buying additional shares — often in 10% increments.
- Eventually, you may own the whole property, at which point you’ll no longer need to pay rent.
Who Is Eligible for Shared Ownership?
To qualify for shared ownership in London, you’ll need to meet certain criteria:
- You must be a first-time buyer or no longer own a home.
- Your household income must be less than £90,000 in London.
- You must have a deposit saved, typically 5% to 10% of the share you’re purchasing.
- You’ll need to show you can afford the mortgage payments, rent, and service charges.
If you meet these requirements, shared ownership could be a practical way to buy your first home and enjoy long-term housing stability.
The Benefits of Shared Ownership
There are several reasons why shared ownership may be the right choice for you:
- Lower Deposit: Since you’re only buying a share of the property, your deposit is based on that share’s value, not the full market value.
- More Affordable Monthly Payments: Your monthly costs are typically lower than renting or buying outright on the open market.
- Step Onto the Property Ladder: Shared ownership helps first-time buyers move into homeownership sooner.
- Option to Buy More Later: If your financial situation improves, you can purchase more shares and reduce the rent you pay.
- Government Backed Scheme: Shared ownership is supported by local councils and housing associations, providing added reassurance.
What Are the Drawbacks?
While shared ownership can be a helpful stepping stone, it’s important to understand the limitations:
- You don’t own the property outright unless you staircase to 100% ownership.
- You still pay rent, even after putting down a deposit and paying a mortgage.
- Maintenance and repairs are your responsibility, just like with full homeownership.
- Selling can be more complex, the housing association usually has the first refusal, meaning they get the opportunity to find a buyer before you can sell on the open market.
- Leasehold only, shared ownership properties are always leasehold, not freehold.
Shared Ownership Example
Let’s say you’re buying a £400,000 shared ownership property in London. You decide to initially buy 25%, meaning your share is worth £100,000.
- Your deposit might be just 5% of £100,000 = £5,000
- You’ll need a mortgage for £95,000
- You’ll pay rent on the remaining 75%, which is owned by the housing association
- You can staircase later on, buying more shares when your savings allow
This approach helps reduce upfront costs while still allowing you to benefit from property ownership and any increase in market value over time.
Can You Sell a Shared Ownership Property?
Yes, but it works slightly differently.
If you haven’t stair-cased to full ownership, the housing association has the right to sell your share on your behalf for a set period (usually 8–12 weeks). After that, you can list the property with an estate agent on the open market.
Keep in mind that you’ll sell the percentage you own, and the property’s value will be reassessed before sale.
Stamp Duty on Shared Ownership Homes
In most cases, first-time buyers are eligible for stamp duty relief on shared ownership purchases up to £425,000. You can choose to pay stamp duty only on the share you’re buying or on the whole property, your solicitor or mortgage adviser can explain the pros and cons of both options.
Is Shared Ownership Right for You?
Shared ownership might be the right choice if:
- You’re struggling to save a large deposit
- You want to get onto the property ladder sooner
- You can afford the monthly mortgage and rent payments
- You’re happy to start with partial ownership and build over time
However, it may not suit everyone. If your household income is high enough or you have substantial savings, a traditional mortgage could offer better value and more flexibility.
Get Expert Advice from The Mortgage and Protection Hub
At The Mortgage and Protection Hub, we specialise in helping first-time buyers across London explore shared ownership options.
Whether you’re looking to buy a home, understand the ownership work, or navigate the full application process, our experienced mortgage advisers can offer clear, personalised advice tailored to your financial situation.
We’ll walk you through the benefits, potential pitfalls, and help you decide if shared ownership is the right choice for your future.
Start Your Journey with The Mortgage and Protection Hub
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