Shared ownership can help you buy a home sooner than you could on your own. But it is not a simple shortcut, and the small print really matters.

So, is shared ownership worth it? For some buyers, absolutely. For others, the ongoing costs and restrictions come as an unwelcome surprise.

In this guide, we explain how shared ownership works in the UK, weigh up the pros and cons, and show you which legal checks to make before you commit.

Contents

The Short Answer

Shared ownership is more likely to be worth it if:

•       You cannot afford to buy a suitable home outright in your area

•       Your income is steady, and you could cope with rising rent and charges

•       You plan to stay in the home for at least five years

•       You are happy living in a leasehold property with rules attached

It is less likely to be worth it if:

•       You expect to move, change jobs or start a family soon

•       You want the option to rent the home out

•       You are close to affording a standard purchase

•       A sudden rise in costs would leave you stretched

The best way to think about it is this: shared ownership works as a long-term home, not a quick stepping stone.

What Is Shared Ownership?

Shared ownership is a government-backed scheme that helps people buy a home when the full price is out of reach.

You buy a share of the property, usually between 10% and 75%. You then pay rent on the share you don't own. The landlord is normally a housing association or a private developer.

You live in the whole property, and you can buy more shares over time. Every provider sets its own terms, so reading your lease carefully is essential.

How Does Shared Ownership Work?

Because you only borrow against your share, you need a smaller deposit and a smaller mortgage. The deposit is usually at least 5% of the share you are buying.

Here is a simple example:

Item

Amount

Property value

£280,000

Your 40% share

£112,000

5% deposit on your share

£5,600

Mortgage needed

£106,400

Landlord's 60% share

£168,000

 

Each month you will then pay your mortgage, your rent and, in most cases, a service charge. You will also need money upfront for legal fees, searches and possibly stamp duty. Our guide to calculating the cost of a house purchase shows how these add up.

How Is Shared Ownership Rent Worked Out?

On a new-build shared ownership home, your starting rent is a percentage of the value of the share you don't own. The cap is 3% a year, and many landlords charge around 2.75%.

Using our example above:

•       Landlord's share: £168,000

•       Annual rent at 2.75%: £4,620

•       Monthly rent: £385

If you buy a resale property, the rules are different. Your starting rent usually carries on from what the previous owner paid, rather than being worked out again.

As you buy more shares, the rent you pay goes down.

Who Can Apply for Shared Ownership?

Each scheme has its own checks, but in general you must:

•       Be a first-time buyer, a former homeowner who can no longer afford to buy on the open market, or an existing shared owner

•       Be aged 18 or over

•       Have a household income of under £80,000 (or £90,000 in London)

•       Have no mortgage or rent arrears

•       Have a good credit history and show you can afford the regular costs

A good first step is to get a mortgage agreement in principle. It shows how much a lender may be willing to offer.

The Pros of Shared Ownership

•       Lower upfront costs. You need a smaller deposit than for a full-price purchase.

•       A smaller mortgage. You only borrow against the share you buy.

•       A route onto the ladder. It can work when open market prices are out of reach.

•       More security than renting. You have a long lease and a stake in your home.

•       Room to grow. You can buy extra shares over time.

•       Shared gains. If the value of your home rises, your share rises with it.

The Cons of Shared Ownership

These are the points buyers most often underestimate.

1. Service Charges Can Climb

Service charges are not capped in the same way as rent. They tend to be higher in flats, where lifts, hallways and shared areas all need upkeep.

Ask your solicitor for service charge estimates covering the next five years. Also ask them to confirm whether you will pay any estate charges or ground rent. Ground rent has been limited on most new long leases, but older leases may still include it.

2. Repairs Can Fall to You

On older-style shared ownership leases, you are responsible for all repairs, even if you own only 30% of the home.

Newer leases offer more help. For the first 10 years, the provider covers structural repairs, and you can apply for support with essential internal repairs. After that, the responsibility rests with you.

3. Rent Increases Are Out of Your Hands

Your rent is reviewed at set times, usually once a year. If you signed your lease on or after 12 October 2023, increases are capped at CPI plus 1%, or RPI plus up to 0.5%, depending on your lease. Older leases are capped at RPI plus 0.5%.

That sounds modest, but when inflation is high, the rise can still hurt. If inflation hit 10%, a rent of £385 a month could rise to around £425.

4. You Can't Simply Rent It Out

Unless you own 100% of the property, you generally cannot let the whole home without your landlord's permission. That is rarely given. If your plans change, you may need to buy the remaining share or sell.

5. Home Improvements Need Approval

Most leases require written permission before you make structural changes. Some also ask for consent for redecorating. Check your lease before you plan any work.

6. Selling Can Be Slower

When you sell, your landlord usually gets a set period, often four to eight weeks, to find a buyer first. That can add time to your sale. The buyer pool is also smaller, because purchasers must meet the scheme's rules.

7. Fewer Mortgage Options

Fewer lenders offer shared ownership mortgages, and rates can be higher than on standard deals. It pays to speak to a broker who knows the market.

8. You Are Still a Tenant

A government-backed scheme does not give you extra protection from your landlord. Because you pay rent on part of the home, serious arrears could put your home at risk, and getting back what you have paid in is not guaranteed.

9. Lease Length and Extension Costs

Leases on newer shared ownership homes run for 990 years, so this is rarely a worry. Older leases may be as short as 99 years. Once a lease gets short, extending it can be costly, and some lenders may refuse to lend. Ask your solicitor to check the lease length and your obligations under it. Our guide to the deed of covenant explains one document you may come across.

What Is Staircasing?

Staircasing means buying extra shares in your home. Each time you do, you own more, pay less rent and move closer to full ownership.

But it comes with costs. You will usually need to pay for a valuation and legal fees, and possibly stamp duty. On newer leases you can buy as little as 1% at a time, while some older leases set larger minimums. Some providers also cap the total share you can own, so check your lease.

Shared Ownership and Stamp Duty

You may not pay any stamp duty at all, depending on the value of the property and whether you are a first-time buyer. Thresholds can change, so use HMRC's stamp duty calculator for the latest figures.

If stamp duty is due, you can choose one of two options:

•       Pay a single bill based on the full market value of the home

•       Pay tax on the share you buy now, and pay nothing more until your ownership goes above 80%

Your solicitor can explain which route suits you better.

You will also pay full council tax, even if you only own a small share.

Could You Wait and Buy Outright Instead?

If you are not in a rush, waiting can sometimes give you more freedom and lower long-term costs. A few ideas to consider:

•       Saving a larger deposit, for example with a Lifetime ISA, which offers a 25% government bonus

•       Buying with a partner, friend or family member to boost your budget

•       Looking at other first-time buyer schemes

That said, if shared ownership is the only realistic way to get a suitable home now, it can still be a sound choice, provided you understand the commitment.

Shared Ownership Conveyancing: What to Expect

Buying a shared ownership home involves the usual conveyancing steps, such as property searches, raising enquiries and transferring ownership. But there is extra work too, because your solicitor must deal with the housing provider and review a more detailed lease.

In practice, your solicitor will typically:

•       Read the lease and explain your rights and responsibilities in plain English

•       Check service charges, ground rent and repair obligations

•       Confirm the rent review terms and any staircasing rules

•       Check the rules on selling, subletting and alterations

•       Liaise with your mortgage lender and the landlord

•       Advise on your stamp duty options

Because of this added work, shared ownership legal fees can be a little higher than for a standard purchase. Our guide to shared ownership solicitor fees gives a breakdown, and our article on the hidden costs of conveyancing helps you avoid surprises.

Choose a solicitor who is comfortable with shared ownership leases. Our guide to finding the right conveyancer can help, and first-time buyers may also like our first-time buyer's guide to conveyancing.

Questions to Ask Before You Buy

Before you commit, make sure you can answer these:

•       What will my total monthly cost be, including mortgage, rent and service charge?

•       How is my rent reviewed, and which inflation measure applies?

•       What are the service charge estimates for the next five years?

•       Who pays for repairs, and for how long does the provider help?

•       How much can I staircase, and what will it cost?

•       What happens if I need to sell in five years?

•       How long is the lease, and is there any ground rent?

•       Have I had independent legal advice from a solicitor who understands shared ownership?

If you can't answer them, pause and ask your solicitor or mortgage adviser.

How HouseLegal Can Help

Shared ownership is more complicated than a standard purchase, so the right legal support really matters.

With HouseLegal you can:

•       Compare conveyancing quotes from regulated solicitors and licensed conveyancers

•       See clear pricing, with no hidden costs

•       Choose a firm that suits your budget and your needs

•       Save time by getting instant quotes online

Click here to get multiple conveyancing quotes instantly.

Overview

Is shared ownership a good idea?

It can be, if you can't buy outright, can afford rising costs and plan to stay for several years. It is less suitable if you want flexibility or expect your circumstances to change soon.

What are the main disadvantages of shared ownership?

The biggest drawbacks are rent increases, service charges, repair costs, restrictions on letting and altering the home, and a slower sale.

Is it hard to get a shared ownership mortgage?

There are fewer lenders, so choice is narrower. You will need a good credit history and to pass affordability checks. A mortgage broker can help you compare options.

Do I need a solicitor for shared ownership?

Yes. You need a conveyancer to check the lease, deal with the housing provider and complete the legal transfer. Independent legal advice is well worth having.

Do I pay full council tax on a shared ownership home?

Yes. You pay the same council tax as if you owned the whole property, although you may qualify for a discount or reduction.

Can I sell a shared ownership home?

Yes, but the process can take longer. Your landlord usually has a set period to find a buyer first, and your lease will explain the rules.

Is Shared Ownership right for me?

Shared ownership can be a great way to start owning your own home, but only if you go in with your eyes open. Look beyond the lower deposit, work out the full monthly cost, and read your lease carefully.

With the right preparation and an experienced conveyancer by your side, you can make a confident decision.

Get your free conveyancing quotes with HouseLegal today.