How do shared ownership mortgages work?

With shared ownership mortgages a home-owner buys only a share of a property which usually between 25 and 75 per cent. Often aimed at first time buyers who want to buy a home but can’t afford to, shared ownership schemes were designed help those wanting to get on the property ladder.

Shared ownership properties are always leasehold, meaning the home-owner 'owns' them for a fixed period of time, usually 99 years. A housing association will own the remaining share and the home-owner will pay rent on that share which is generally up to 3 per cent of the share’s value. The housing association will grant a lease for the fixed period setting out both the home-owner's and landlord's rights and responsibilities.

Home-owners, who purchase with shared ownership mortgages, are responsible for repairs inside the property while the housing association will take care of the outside. To cover the costs for any outside repair the home-owner pays a service charge each year.

Borrowers purchasing through shared ownership mortgages can buy more shares until they own the whole of the property, this is known as staircasing. A home-owner is required to write to their housing association advising what share they own and what additional share they wish to buy. The housing association then arranges an up to date property valuation and advises the cost of the new share to the home-owner, who is responsible for paying the valuation fee. Usually three months are allowed to arrange a mortgage and complete buying the new share.