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What is shared/low-cost ownership?

This content applies to England & Wales

Shared and low-cost home ownership schemes, how they work, and their costs.

Background

Shared ownership and low-cost home ownership schemes have been set up to help people who cannot afford to buy a home outright, either because they do not have enough money for a deposit or because they are unable to afford full mortgage repayments. Most shared ownership schemes are set up and managed by private registered providers of social housing (PRPSHs). Some schemes cater for the needs of first-time buyers, with priority for an offer of a shared ownership or low-cost home-ownership scheme often being given to PRPSH or local authority tenants.

Shared ownership

Shared ownership schemes involve an applicant buying a share in a property, with a PRPSH owning the remainder. The applicant usually pays rent on the part of the property owned by the PRPSH.

Low-cost home ownership

Low-cost home ownership schemes usually involve applicants being offered a loan to help them buy a property on the open market, or some form of guarantee for the lender to enable them to offer high loan to value mortgages. Examples of both are the Help to Buy equity loan scheme and the Help to Buy mortgage guarantee scheme.

Availability of schemes

Some schemes are only available on a local or regional basis, and some may prioritise a particular group of people such as key workers (see the Key Worker Living page for more information about who is a key worker), or members of the armed forces.  programme page for more information about who is a key worker), or members of the armed forces.

The government website Own your home provides a useful on-line tool to assist potential home buyers to find an appropriate shared ownership or low cost home in England, with links to sources of information on home ownership in the rest of the UK.

Types of scheme

There are three principal types of low-cost home ownership scheme: shared ownership, shared equity, and mortgage guarantee.

Shared ownership schemes

These are schemes where occupiers part-buy and part-rent their home from the housing provider. The part-owner becomes the leaseholder to the part of the property s/he owns, with the housing provider retaining the freehold. The part-owner can buy additional shares over time (known as 'staircasing'). Information on the main shared ownership schemes can be found on the following pages:

  • Social HomeBuy
  • Help to Buy shared ownership (previously NewBuild HomeBuy)
  • Home ownership for people with long-term disabilities

Shared equity schemes

These schemes enable people to buy a property on the open market by providing an equity loan, which supplements a standard mortgage loan that they have obtained from a qualifying lender (eg bank or building society). The main shared equity scheme is the Help to Buy equity loan scheme.

Mortgage guarantee schemes

These schemes enable people with a smaller deposit than is normally required to purchase a property by providing the lender with a government-backed guarantee of up to 15 per cent of the purchase price. This enables lenders to offer high loan to value mortgages. The main mortgage guarantee scheme is the Help to Buy mortgage guarantee scheme

Costs of buying

When buying a shared ownership or low-cost home-ownership property, the prospective purchaser should take into account the cost s/he will have to pay. S/he will not always have to put down a cash deposit, but s/he may have to pay legal fees, survey fees and stamp duty, although in some cases these may be covered by the mortgage loan.

Housing benefit and help with housing costs

An occupier of a shared ownership scheme property where rent is payable on a percentage of the property can claim housing benefit to cover her/his rent payments, provided s/he meets the usual eligibility criteria. An applicant may also qualify for assistance in paying the interest on the mortgage in the same way as any other home owner. However, applicants who take out a mortgage whilst receiving certain benefits may not get help, and many applicants in receipt of benefits may find it difficult to get a mortgage.

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