The Shared Ownership Scheme was introduced by the UK government to help people (like you!) get on the property ladder.

As the name suggests, shared ownership is when you buy a share of a property (between 10% and 75%) and the rest is owned by a housing association, local council, private company or developer. You get to live in the house and decorate it as you like — the main difference is that your monthly repayments are part mortgage, part rent.

So, is the Shared Ownership Scheme a good idea for first-time home buyers? Let’s look at both sides.

Pros of the Shared Ownership Scheme

Buy a home sooner

On a typical home, your deposit is a percentage of the full property price. But on a shared ownership home, your deposit is a percentage of your share only.

Let’s say you buy a 50% share of a £280,000 house. That’s £140,000.

Your 20% deposit is £28,000.

If you wanted to buy any other house at £280,000 with a 20% deposit, you’d need £56,000 to pay upfront. But with the Shared Ownership Scheme, you can buy with a much smaller deposit (that’ll take way less time to build).

Buy more shares in the future

One of the main advantages of the Shared Ownership Scheme is this thing called staircasing. It means you can buy a bigger share of your home as time goes on. Before, you could only staircase by 5% or 10%, but now you can buy back 1% every year.

How much and how often you can staircase varies per scheme, but the law in England & Wales means you can buy back 1% every year. In some cases, you can staircase 'til you own 100% of your property and pay no rent at all - check this before you buy though! 🔥🔥🔥

Get a discount on rent

When you pay rent on a shared ownership home, it doesn’t cost the same as renting-from-a-landlord-renting.

Typically, the housing association (or whoever owns the other percentage of your home) will charge 2.75% of the value they hold. The max they can charge is 3%.

So, if they own a share of your home worth £100,000 — you can expect to pay around £2,750 a year on rent (that’s £229-ish a month) plus your mortgage repayments.

The more you staircase, the less rent you have to pay.

Cons of the Shared Ownership Scheme

You can only buy a Shared Ownership Scheme property

Unfortunately, you can’t buy just any home with the Shared Ownership Scheme. So if you have dreams of restoring a Victorian townhouse to its former glory, this won’t be right for you.

Shared Ownership Scheme houses are typically new builds that are box-fresh, or were previously owned by someone who also bought their home through the Shared Ownership Scheme. They are also typically  ‘leasehold’ rather than freehold, which means you won’t own the land that the property is on.

P.s. If you have a long-term disability and you’re unable to find a shared ownership home that meets your needs, you could buy any type of home on the market with shared ownership terms. Check this link out for more info on that if you’re looking to buy in England.

You don’t have the same freedom

Because another party owns a share of your home, they can have a say in what happens. For example:

  • You might need permission before you make any structural changes (*hides plans for swimming pool*)
  • Subletting is usually a no-go.
  • When you want to sell your home, the organisation that part-owns your property often gets first-dibs, or they arrange for someone else to buy it. That means you might not be able to sell on the open market.

You pay maintenance fees

On top of your mortgage repayments and rent, you’ll also pay for service fees.

This pays for the upkeep of communal areas (e.g. shared green spaces or hallways) but you are responsible for any maintenance or repairs in your home.

Other things to know about the Shared Ownership Scheme

You can use your Lifetime ISA

If you have a Lifetime ISA you can use money from it towards your initial share of the Shared Ownership property. Buuuuut if down the line you want to use more money from your Lifetime ISA to staircase (aka purchase a larger share of the property), you'd need to pay the 25% government withdrawal charge.

It’s different in every country

Even though it’s a UK-wide initiative, every country has their own version of the Shared Ownership Scheme.

Check if you’re eligible

To apply for the Shared Ownership Scheme, you have to be over 18 and have a household income that sits within a certain bracket. Again, it’s different in every country, so check the links above based on where you want to buy.

The cost of staircasing can go up (or down)

Just like the value of a share in a company can go up or down, the same goes for a share in a property.

If you buy 10% of your £200,000 home for £20,000 in 2022, then 5 years later, your home is worth £230,000, it’ll then cost you £23,000 to buy 10%.

Inflation and the economy can have a huge impact on how much you pay. That’s why the government now allows you to buy back 1% every year.

The same ol’ stamp duty rules apply

As with any home in the UK, first-time buyers in shared ownership homes pay zero stamp duty on the first £300,000 of any home that costs up to £500,000.