What is Shared Ownership?

October 3, 2022 By: Admin0 comments

Shared ownership has been getting a lot of attention lately, and more and more lenders are raising the LTV requirements for newly built homes. Several big lenders now offer 95% LTV shared ownership mortgages on new builds as the market continues to make homes as easy to buy as possible for first-time buyers. Halifax, a big name in the industry, recently started offering shared ownership mortgages, so we look at what you need to know about getting a shared ownership mortgage.

How does shared ownership work?

Shared ownership is a plan you can use if you can’t pay for a full deposit and monthly mortgage payments on a home that meets your needs. It means you buy a part of a property and pay rent for the other part from a landlord. You could be a good candidate for this type of mortgage if you buy between 25% and 75% of a home’s total market value. You would each pay a share of the rent and mortgage payments based on how much of the house you owned. Then, you can buy more homes in the future. This process is called “staircasing” Your rent will go down as the landlord owns less of the whole property.

Who buys homes that a group owns?

Shared ownership is considered affordable housing, so it shouldn’t be surprising that around 80% of shared ownership homes bought in 2020 and 2021 were first homes. Over half (52%) of shared ownership homes were purchased by households with only one adult. This is because the scheme is one of the few ways a single income can afford to buy a first home. 29% of homes were bought by two adults living together, and families bought 13% with kids.

Let’s add up the numbers.

In 2021, the average price of a shared ownership home was £275,100, with an initial equity stake of £109,800 (41%) and an average deposit of £17,700. This information comes from the department of levelling up. The average price of shared ownership homes has increased by 67% in the last 12 years, which is the same rate as the market.

As more and more people look for affordable housing, shared ownership is becoming more and more popular. For example, Leeds Building Society and Halifax offer 95% LTV mortgages. As long as house prices stay high and the cost of living crisis keeps making money tight for millions of families all over the country, you may want to think about how shared ownership could help you or your family.

The mortgages listed were correct when the paper went to press (12.9.2022), but they were subject to change at any time.

Contact your financial adviser immediately if you want to discuss your options.

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• LTV
• Mortgage Scheme
• Shared Ownership