shared ownership calculator

Buying a home is one of life's biggest financial milestones, but for many, especially first-time buyers, the traditional route can seem out of reach. High property prices and the struggle to save a substantial deposit often create significant barriers. This is where Shared Ownership comes in, offering a unique pathway onto the property ladder.

What is Shared Ownership?

Shared Ownership is a government-backed scheme designed to help people buy a home they couldn't otherwise afford on the open market. Instead of buying 100% of a property, you buy a share (typically between 10% and 75%) from a housing association, and then pay rent on the remaining share. It's often referred to as a "part-buy, part-rent" scheme.

The scheme is primarily aimed at first-time buyers, those who used to own a home but can no longer afford to buy one outright, and existing shared owners who want to move. Specific eligibility criteria apply, usually related to household income and not owning another property.

How Does it Work?

When you purchase a Shared Ownership property, you'll secure a mortgage for the share you're buying. For example, if a property is valued at £300,000 and you buy a 40% share, you would get a mortgage for £120,000. You'd also pay a deposit on this £120,000, typically 5% or 10%.

For the remaining 60% of the property, which is owned by the housing association, you pay rent. This rent is usually set at a reduced rate compared to market rent, often around 2.75% per annum of the unowned share's value. You will also typically pay a monthly service charge for the upkeep of communal areas and buildings insurance, and potentially ground rent if it's a leasehold property (which most shared ownership properties are).

Staircasing: Buying More Shares

One of the key features of Shared Ownership is "staircasing." This allows you to buy additional shares in your home over time, increasing your ownership percentage. As you staircase, your mortgage payments will likely increase (as you borrow more), but your rent payments will decrease. Eventually, many shared owners aim to staircase to 100% ownership, at which point they own the property outright and no longer pay rent to the housing association.

The cost of buying additional shares is based on the property's market value at the time you staircase, not the value when you first bought it. So, if the property's value has increased, so will the cost of buying a larger share.

Pros of Shared Ownership

• Lower Deposit: You only need a deposit for the share you're buying, not the full property value, making homeownership more accessible.
• Smaller Mortgage: Your mortgage is based on a smaller portion of the property, potentially making monthly repayments more affordable.
• Stepping Stone: It provides a viable route onto the property ladder for those who would otherwise be priced out.
• Security: As a homeowner, you have more security than renting, and you benefit from any increase in the value of your share.
• Staircasing Option: The ability to buy more shares over time allows you to gradually increase your equity and reduce your rent.

Cons of Shared Ownership

• Leasehold Only: Shared Ownership properties are almost always leasehold, meaning you don't own the land. This can come with service charges, ground rent, and lease restrictions.
• Dual Payments: You pay both a mortgage and rent, which can sometimes be higher than a full mortgage on a cheaper property.
• Restrictions: There can be restrictions on what you can do with the property (e.g., subletting) and how you sell it (housing association often has first refusal).
• Service Charges & Ground Rent: These can increase over time and are an additional ongoing cost.
• Complexity: The legal process can be more complex than a standard purchase, and understanding the terms can be challenging.
• Valuation for Staircasing/Selling: If property values fall, buying more shares can be less appealing. When selling, you usually need to get the property valued, and the housing association may have the right to nominate a buyer.

Using the Shared Ownership Calculator

Our calculator above is designed to give you an estimate of your potential monthly costs and initial cash outlay for a Shared Ownership property. Here's what each input means:

• Full Property Value: The total market value of the property if you were to buy 100% of it.
• Share Purchased (%): The percentage of the property's value you intend to buy initially.
• Deposit on Your Share (%): The percentage of your purchased share that you will pay as a deposit. Your mortgage will cover the rest.
• Mortgage Interest Rate (% p.a.): The annual interest rate you expect to pay on your mortgage.
• Mortgage Term (Years): The duration over which you plan to repay your mortgage.
• Rent on Unowned Share (% p.a. of unowned value): The annual percentage of the housing association's share that you will pay as rent. This is usually specified by the housing association.
• Monthly Service Charge: A monthly fee for the maintenance of communal areas, building insurance, and other services.
• Monthly Ground Rent: An annual fee paid to the freeholder, usually collected monthly.

Important Disclaimer

This Shared Ownership calculator provides an estimate based on the information you provide. It should be used for illustrative purposes only and does not constitute financial advice. Actual costs may vary due to changes in interest rates, property valuations, housing association policies, legal fees, stamp duty, and other associated buying costs. We strongly recommend seeking independent financial and legal advice before making any decisions related to Shared Ownership.