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What is a Shared Ownership Mortgage in London?

The UK government designed the Shared Ownership Scheme with the intention of helping individuals to purchase own property. This type of mortgage is available to permanent UK residents, including both first time buyers in London or former homeowners who are finding it difficult to purchase a new home.

In order for you to be able to qualify for a Shared Ownership mortgage in London, your household income must be less than £90,000. This may differ in other areas of the country.

Additionally, you will almost always be purchasing your property on a leasehold basis, which means you will be purchasing it for a set period of time.

Under the Shared Ownership Scheme, you are able to purchase a portion of your homes value, via your Shared Ownership mortgage in London. The percentage that you purchase will typically be between 25-75% of the property value.

The remaining portion that you don’t purchase will be paid as a rental cost, including any service charges or ground rent, which will be charged at a lower cost than market value and is paid to a local housing association.

Updates to The Shared Ownership Mortgage Scheme

The Shared Ownership Scheme went through some fairly significant changes in April 2021, as part of the UK government’s Affordable Homes Programme. These changes are particularly noteworthy if you’re familiar with how the scheme once worked.

Among the changes to this, the minimum percentage that is required for a property share purchase was lowered, meaning in some cases, you can purchase as low as 10%, down from the previous 25%.

Furthermore, it is now possible to purchase shares in 1% increments, as opposed to previously where you could only purchase 5-10% minimum.

In addition to the latter, the fees that typically come along with purchasing these extra shares has also been reduced, with maintenance and repair costs typically now being covered for the first 10 years of your home ownership, by the landlord, rather than yourself.

If you had previously taken out a Shared Ownership mortgage in London before these changes took effect, it is entirely possible that these new rules could actually now apply to you, but it’s always recommended you check with your mortgage lender first, as this may still vary per case.

How do I apply for a Shared Ownership mortgage in London?

Before you look at taking on the mortgage side of your process, you will first need to make sure that you can even qualify for Shared Ownership in London. In order to do this, you’ll first need to contact with an agent in the area you wish to purchase your home in.

When you speak to this agent, you will usually need to provide them with various bits of information, such as what your income is, the amount of budget you have, which area your preferred property would be in and your credit history.

Once your eligibility is confirmed, it’s time to make a start on your mortgage.

A trusted and experienced mortgage broker in London would most likely be your best port of call when it comes to this, as not every mortgage lender offers deals on a Shared Ownership in London. The amount you can borrow typically depends on things like income and other fees included, such as rent.

Pros & Cons of Shared Ownership Mortgages in London

As is often the case with most mortgages, there are both pros and cons to having a Shared Ownership mortgage in London. To give this a balanced view, it’s worth noting as said above, that not all mortgage lenders will offer mortgage deals to those using a Shared Ownership in London.

That being said, there are still more than enough mortgage lenders out there, including ones we have on panel, that can offer these types of mortgages. Furthermore, Shared Ownership mortgages in London can offer a sense of long-term stability, as you become both owner and occupier, simultaneously.

Deposits may often be an area of concern, especially for first time buyers in London, as saving for one can be challenging. Thankfully, deposits for Shared Ownership mortgages are typically much lower than they would be for open market purchases.

Whilst your deposit may still need to be, for example, 5%, it’ll only be 5% on the shares you’re purchasing. If you only want to purchase a 50% share, you’d be paying 5% on whatever 50% of the property value is.

Shared Ownership mortgages in London also make mortgages more accessible to those who are perhaps on a lower wage bracket.

Whilst these positives sound good, you have to remember that you would also be you would be paying for ground rent and service charges. Typically speaking, you can take part in “staircasing”, where you buy more shares as time goes on, when you come into the funds.

In most cases, you will be able to purchase up to 100% of the property price, where at this point, you would no longer need to pay a monthly rent. That said, your mortgage, ground rent and service charges would still apply. In other cases, you may only be allowed to purchase up to 80%.

Further to the last point, once you hit the 80% mark or higher, you will have to pay stamp duty land tax, though if you’re a first time buyer in London, this may not apply, depending on where in London you’re going to be living. Speak to a mortgage advisor in London to learn more.

Even though stamp duty can prove to be quite a costly addition to the other fees you will already have, your monthly mortgage payments can still be much cheaper than paying for an outright mortgage. It can also even be cheaper in some regards, than privately renting.

Speaking of privately renting, you will also benefit from having a tenure security, unlike you would going private. So long as you maintain all of your monthly mortgage payments, you will be able to remain within your home for your lease’s duration, which is typically between 99 and 125 years.

Because your home will be part owned by someone else, you will need to obtain permission from the appropriate housing provider prior to making any structural changes to your home. This can take away a sense of freedom you would otherwise have, by owning it outright.

Can I sell my home if I have a Shared Ownership mortgage in London?

After you have owned your home for a while, you may eventually decide that you do not wish to remain there and look to sell the property, before you look at moving elsewhere. With the majority of mortgage types, this would be fairly simple, so long as you have gone through your fixed period.

When it comes to Shared Ownership in London, it works a little differently.

Your ability to sell a home with a Shared Ownership mortgage in London will entirely depend on how much of the property you actually own, from the shares you have purchased. You’ll typically need to own 100% of the property, before selling the property can be an option for you.

It is important that you remember, however, that the housing association generally receives ‘first refusal’ rights, for the first 21 years after you have purchased your home. This means they are, by law, able to make a property purchase offer to you, before you put it on the open market.

If you do not own 100% of the property, you will have to look at purchasing all of the remaining shares, before you can look at selling the property.

Is a Shared Ownership Mortgage in London right for me?

A Shared Ownership mortgage in London can be great for first time buyers in London, who have been dreaming of getting their own property, but only have a smaller deposit to work with. Using a Shared Ownership in London can help you to achieve all of your goals.

That being said though, having a Shared Ownership mortgage in London can often prove to be a complicated journey and there can be a lot for you to work with, especially when you include all the potential fees. You must make sure that you are fully prepared and aware of all the contract details.

At the end of the day, it all comes down to personal preference. By booking in for a free mortgage appointment with a trusted and dedicated mortgage broker in London, you’ll get to speak with an expert mortgage advisor in London, with plenty of time to prepare!

You can learn more about a Shared Ownership mortgage in London by visiting the government OwnYourHome website.


Date Last Edited: February 19, 2024

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