What is shared ownership, and how does it work?

Shared ownership is a great solution that lets first time buyers and other eligible buyers buy a share of a home with a smaller deposit. This ownership percentage can then be gradually increased with incremental shares.

At a time when affordability and rising rental costs make buying a house difficult, shared ownership schemes, including our Staircase scheme, make the dream of buying a home a reality. 

Here we take a look at how shared ownership works, and whether it could be just the thing to help you make your next move. 

How shared ownership works

If you buy one of our shared ownership homes, you’ll acquire a share between 10% and 75% of the property’s total market value. For the remaining share, you’ll pay a monthly subsided rent to our partner, RESI. The amount you pay will be based on the government’s formula. You’ll also make payments on your mortgage, the cost of which reflects the percentage and value of the shares you own. 

You’ll pay a small deposit when buying your home - smaller than if you were buying the property outright. This typically totals at around 5% or 10%. 

Am I eligible?

Each specific shared ownership scheme will have its own eligibility criteria, so it's best to do your research on that particular scheme beforehand. To use the Persimmon Staircase scheme, the below needs to apply to you: 

• You're 18 or older
• Your household income is £80,000 per year or less (£90,000 or less in London)
• You can't afford all of the deposit and mortgage payments for a home that meets your needs
• You don't currently own a home. 

One or more of the following must also apply to you: 

• You're a first-time buyer
• You used to own a home but can't afford to buy one now
• You're forming a new household - for example, after a relationship breakdown
• You're already a shared owner but want to move
• You own a home and want to move but can't afford anything that meets your needs (local conditions may apply)

How do you apply? 

To buy a home through shared ownership, you’ll need your application for the scheme to be successful. For this, you’ll require a mortgage.

When applying, you’ll need to provide details of your income, budget, preferred area and credit history. A mortgage broker will assess your eligibility and affordability alongside these checks. Once accepted, you can begin your mortgage application. However, it’s important to note not all major lenders offer a shared ownership mortgage. 

The total amount you can borrow depends on standard mortgage factors, with some additional specific regulations:

• Total household income
• Full cost of the property purchase
• Monthly rent cost
• Ground rent on property
• Any additional service charges on the property

Shared ownership:

• Renting is a lost investment -  no matter how much you pay or how long you live at the property, you’ll never own a home at the end of the process.
• You still have the freedom to decorate your home - painting walls and upgrading bathrooms. Note that you’ll need permission for some larger changes, like new flooring. 
• You’re dependent on a landlord for repairs, maintenance and upgrades to the property.
• In some areas, purchasing a home through shared ownership is cheaper than renting a flat or house.

Am I a homeowner if I purchase through shared ownership?

Yes! If you buy a home through a shared ownership scheme then you're the homeowner, regardless of the percentage of the property you own. 

This means you can make alterations to the property (bearing in mind larger changes will need to be signed off by the landlord or housing association you’ve entered into an agreement with). As a homeowner, you'll typically be liable for damages or infractions. This includes breakages, mortgage payments and taxes.

Whatever stage of the process you find yourself at, once you’ve bought your home through shared ownership, whether it’s 10% or 100%, you have a property that is legally considered yours. 

Who lives in a shared ownership house?

Until you’ve bought 100% of the shares in your home, there are some rules around who can and can’t live in your home and limitations regarding renting the property to a tenant. 

As the owner-occupier still buying more shares, you have to live at the home. You're allowed to have a lodger but can't rent out the property to one or more tenants. You'd only be allowed to sublet when you own 100% of the home or have approval from the current landlord. 

Staircasing with Persimmon

Staircase is our version of the government-backed Shared Ownership Scheme that has helped thousands of people onto the property ladder. It’s a simple, practical and affordable way to make sure buyers, including first-time buyers, have an alternative way to find a home within your budget that feels right for you.

You’ll be supported throughout the process by us, who can offer insights on shared ownership and find the perfect development for you. 

Upon completing your initial purchase and becoming the shared owner of a property, you’re free to start increasing the shares you own. As you buy additional shares and own a greater percentage of the property, the amount of rent you pay each month will decrease. 

Shared ownership: pros and cons of the scheme

As with any path to buying a home, shared ownership has pros and cons that might contribute to your home-buying experience. No one approach to homeownership suits everyone, and while shared ownership offers an affordable alternative that helps you exit the renting sphere, it isn’t the right scheme for every buyer.

The pros

There are a number of advantages to buying your home through a shared ownership scheme:

• It’s an affordable way to buy a home at a lower cost  - you only need a 5% deposit of the share that you are buying, therefore reducing the value of the overall deposit.  
• It’s your home in the long run - shared ownership ends in the same way as any purchasing scheme, with you owning your own home.
• You can enjoy the freedom of owning your own home - unlike renting, once you move into your new home, you’re free to start applying the finishing touches that make a home feel yours.
• You can sell your shares at any time - should things not work out (i.e. you don’t feel settled in the area or your circumstances change), you can sell your shares at any time. We’ll try to find a buyer, but if it doesn’t happen within 4 weeks, you can put it on the open market. Should you have bought the remaining shares and own 100% of your property, you’re free to sell it on the open market.
• You have more freedom on paying stamp duty - stamp duty payments are more flexible when purchasing a shared ownership property. If you’d prefer to pay yours immediately, you have the option to pay stamp duty on the full value of your home, as if you were buying the property outright. While this results in a higher upfront cost, it diminishes the percentage of yearly income you’re putting towards your home. Alternatively, you have the option to avoid paying a full stamp duty sum, instead opting to pay stamp duty on the share you’re purchasing, with additional costs coming each time you purchase an additional share.

Why the scheme might not be for you

While shared ownership offers many of us the opportunity to realise our home ownership dreams, there will be times when shared ownership isn’t the right approach:

• You’re still a tenant - although you do own your home, you'll still have experiences similar to renting. Committing a section of your monthly income to renting a month may not be an affordable option either.
• Service charge and maintenance costs - even if you only own a small portion of your property, you’ll be required to pay a service charge for any maintenance, such as communal areas and gardens for blocks of flats. You’re also entirely liable for maintenance costs - at Persimmon, our scheme will help alleviate these costs for the first 10 years. 

We offer a range of schemes designed to help you take the leap and purchase your own home. Explore them today with our ways to help you buy.