Pros and Cons of a Shared Ownership Mortgage

Many first-time buyers feel that homeownership is increasingly out of reach. Factors like rising property prices, higher living costs and stagnant salaries stop people from being able to buy a house. Alternative mortgage options are becoming more popular. 

Shared ownership mortgages are a practical, alternative mortgage option designed to make purchasing a home more accessible. It does this through letting people purchase only part of a property and pay subsidised rent on the remaining part. 

This can be helpful, but it isn’t the best approach for everyone. There are benefits and risks of shared ownership, and just like any home-buying scheme, understanding the details is vital. 

Speaking with our team at SBMS can help you decide whether the shared ownership approach is right for you. 

What is a Shared Ownership Mortgage?

Shared ownership lets home buyers purchase a portion of their home, usually between 25% to 75%. You will then pay rent on the remaining portion of the home. This is usually subsidised rent. This will make the overall costs of the home more accessible. 

The buyers only need to get a mortgage on the portion of the house that they are buying. This reduces the deposit and monthly payments. For many people, this makes it the most helpful alternative mortgage option.  To explore repayment mortgages further, our in-depth guide breaks it down. 

As time passes, the owners can increase their shares through something called staircasing. This is where you gradually increase your shares by purchasing additional shares to increase your ownership to 100%. Therefore, eliminating rent payments. Throughout this process, understanding the risks of shared ownership is essential. 

What Are The Benefits of Shared Ownership?

• Lower deposit requirements, as you are only buying part of the property the upfront costs are more manageable. 
• Smaller loan size, as you are only getting a mortgage on the portion that you own. Making your payments manageable and predictable. 
• Allows first-time buyers to get on the property ladder sooner due to reduced borrowing requirements. 
• Through owning a share, you are no longer affected by rising rental prices. 
• Many homeowners remortgage during staircasing to gain access to better rates.
• Shared ownership provides more stability than renting, and you often receive a long-term lease. 

To get a clearer picture of what you can borrow and the required deposit, contact us. 

What Are The Risks of Shared Ownership?

While there are advantages, there are also several considerations and risks of shared ownership that you should understand:

• It lowers the upfront costs of buying a house, but you must pay rent on the part you don’t own. This rent can increase annually with inflation. 
• You may face service charges for communal maintenance, building insurance and estate management. 
• These expenses can sometimes make your monthly costs quite high. 
• You only own a portion of the house, but you tend to be responsible for all the maintenance and repairs.
• Staircasing comes with costs such as valuation fees, legal fees and admin costs. These are charged by the housing association. 
• As the property value increases, the share price increases. This makes staircasing more difficult. 
• If you want to sell the property during shared ownership, it can be complex.
• You may experience a smaller buyer pool because purchases must meet the eligibility criteria. 
• A shorter lease can affect mortgage eligibility and resale value.
• Many shared ownership homes are leasehold. This involves ground rent, lease extension cost and potential restrictions on alterations or subletting. 
• The housing association has a ‘right of refusal’. This means that they can market the property before you list it on the open market.

You should always make sure to fully consider the risks of shared ownership before making a decision. 

If you are planning the move in a few years, here at SBMS, we can help you weigh up whether shared ownership will be the right option for you.

Who Does Shared Ownership Suit Best?

Shared ownership is best suited to first-time buyers. These are often people looking to build equity but lack sufficient savings to cover a full deposit. It is ideal for households that have a stable, reliable income. This is because they need to be able to manage the combined costs of mortgage payments, rent and service charges. 

It will also benefit buyers who want to live in expensive or in-demand areas. As purchasing shares in properties which are in expensive locations will be far more accessible. As well as this, it suits individuals who prefer long-term living arrangements. This is because it offers more stability than renting and keeps your upfront costs manageable. 

FAQs For a Shared Ownership Mortgage 

How Do You Calculate the Total Monthly Cost?

Add together your mortgage payment, rent on the unowned share, service charges and home insurance. This allows you to understand your monthly commitment. Remember that service charges can vary based on building type and communal facilities. Always factor in these costs when considering a shared mortgage. 

If you aren’t sure how to estimate these costs, we can guide you through a full affordability breakdown. 

What Should You Look For When Checking The Lease?

• Review the staircasing rules.
• Check the rent review schedule, which outlines how and when your rent may increase. 
• Pay attention to the remaining lease length; shorter leases can affect mortgage eligibility and resale value.

How Do Rent Increases Work?

Usually, rent is reviewed annually. This is usually in line with inflation or a set formula. This can affect long-term affordability. To understand any potential future rises, reviewing past rent changes can help. 

Why Should You Plan for the Future Before Applying?

• Think about whether you would like to staircase in the future and consider associated costs.
• Understand long-term affordability, including potential interest rate changes or life-event adjustments. 
• Plan ahead as you may need to remortgage if you staircase or if your fixed rate ends. 

Why Work With Stuart Brown Mortgage Services for Shared Ownership?

This mortgage type comes with unique rules and criteria. We have expert experience handling these applications from start to finish. Our team understands how shared ownership schemes operate. This includes lease conditions, affordability assessments and staircasing. This means you will be able to get guidance from someone who understands the process and who can help identify alternative mortgage options when needed.

We provide personalised affordability support. This will help you work out what you can borrow, monthly costs and which lenders will accept your application. We also tailor our advice to your situation.

SBMS has experience arranging shared ownership mortgages across a wide range of lenders. We help buyers understand eligibility and secure competitive deals. 

Is Shared Ownership the Right Choice For You?

Shared ownership can be a good route onto the property ladder. Especially if you need lower upfront costs and long-term stability but aren’t ready to fully buy a property outright. This scheme suits people comfortable managing rent and mortgage payments and who want the option to increase their ownership gradually.

It is less suitable for people looking for flexibility, avoiding leasehold rules or expecting to move again soon. It is important to understand whether the structure aligns with you and to consider the risks of shared ownership 
Get in touch with SBMS today for clear, friendly advice tailored to your next steps.