Joint Shared Ownership

Can two or more people apply for a shared ownership mortgage jointly?

Yes. There’s no maximum number of applicants under the shared ownership scheme, but mortgage lenders do have a limit. With some lenders, the maximum is two people, but other lenders allow up to four.

Do all applicants need to meet the eligibility criteria individually?

Yes, all applicants need to meet the criteria, which generally requires a household income of under £80,000, and to either be a first-time buyer or not to currently own any property. You also need to be unable to afford a suitable home on the open market. Housing associations also have their own additional criteria, so it’s worth checking with the specific provider on that.

How is ownership divided between joint applicants? Do we split rent and mortgage payments 50-50, or can it be tailored?

With any mortgage or home ownership, how monthly payments and household bills are split is entirely up to the owners. Some people have a joint account that both people pay into. Sometimes it’s an equal amount, sometimes it’s unequal. It largely depends on each person’s earnings. You might decide to have the payments come out of an individual account and share the household costs another way. It’s just whatever works best for you.

Can we change the ownership percentages later on?

Yes, and this is one of the good things about shared ownership. There’s a process called ‘staircasing,’ which allows you to buy additional shares in the property over time. It’s usually done in minimum increments of 10%, all the way up to owning 100% of the property. There are usually costs associated with this – such as extra legal fees, stamp duty and valuations. Rather than doing this often, you might prefer to do it all in one go. Some newer shared ownership properties allow gradual staircasing – allowing you to purchase as little as 1%, which is a very flexible option. That’s been introduced over the last couple of years.

What happens if one party wants to sell or exit the agreement?

It’s no different to standard home ownership. In that scenario, the remaining person could look to take on the ownership of the share by themselves. They’d likely need to be approved by the housing association and the mortgage lender to make sure it’s viable for them to do so. It may involve buying out the other person. It’s certainly possible to keep the property as an individual if one person wants to exit. But if it isn’t viable for one person to take on, they may also need to sell their share.

How is affordability assessed in joint shared ownership applications?

With a joint application, affordability is assessed using the combined household income of all applicants. Lenders also factor in the full housing costs. That would be mortgage repayments on the share you’re purchasing, plus the monthly rent on the unsold share, plus any service charges. That makes it different from a standard mortgage assessment, which is why it’s important to work with a broker who understands the shared ownership model. Some lenders stress test these quite rigorously because of the additional costs to pay whilst you live in that property.

Do both applicants need to be employed or have income?

Not necessarily. Both applicants don’t need to be employed or have an income, especially if the application is affordable based on one person’s income. If the other person doesn’t have an income, they should still be able to proceed with the purchase. It’s worth noting, though, that the total household income can’t exceed £80,000. Non-disclosure of income is not a way to circumvent this area of criteria.

What is the minimum deposit required for a joint shared ownership mortgage?

The majority of lenders will require a minimum deposit of 5%, but that’s 5% of the share being purchased, not of the full property value. As an example, if a property’s worth £300,000 and you’re buying a 25% share at £75,000, the minimum deposit is £3,750. This is a significant difference from the open market, where you would need a much larger deposit. Shared ownership can be more attractive to first-time buyers because it means they don’t need a huge deposit to get on the housing ladder.

Can we use a joint Help to Buy ISA or Lifetime ISA towards the deposit?

Yes, you can use these for the deposit, although they do have their own qualifying criteria. That’s the same whether it’s a shared ownership purchase or a standard purchase. You can also still use gifts from family members towards the deposit, as well.

What lenders offer joint shared ownership mortgages? Are there many?

Yes, there are, so we won’t name every single lender. There used to be much less, but luckily, as the appetite for shared ownership is increasing, more lenders are jumping onboard. Some well-known names in the market include Halifax, Nationwide, Barclays and NatWest. These all offer joint shared ownership mortgages. That being said, not all lenders accept joint applicants if one already owns a property. This is where using a broker comes in very handy.

Should we buy as joint tenants or tenants in common?

This comes up a lot when people buy a property jointly – it’s not limited to shared ownership. It’s something to consider carefully when buying a property with someone. There’s no right or wrong. It’s up to the individuals to decide – and worth obtaining legal advice on, as it relates to estate planning upon death. Ultimately, when a property is purchased as joint tenants, the ownership is equal. On the death of one of the owners, their share would pass to the surviving owner. With tenants in common, there can be an unequal split of the shares, and these are inherited as determined by a Will – or laws of intestacy if no Will is in place.

What legal agreement should we have in place for a joint shared ownership purchase?

Again, this depends on the individual circumstances of the buyers. You can make a Declaration of Trust or a Deed of Trust within a shared ownership purchase. This might apply if the parties are contributing different deposit amounts and want to split ownership unequally. The document would set out each person’s financial interest in the property and explain what happens if the relationship breaks down or one party wants to sell their share.

Can we staircase to buy more of the property together at different times?

Yes, most properties allow staircasing up to 100%. You could eventually own all of the property, at which point it’s no longer shared ownership. You would no longer have rent to pay. Some properties do have a restriction on the maximum share percentage, so it’s worth checking this when considering a purchase. It could be capped at 80% of the property value, for example. As both applicants own that share, they’d both be involved in that staircasing transaction. You can’t each own a separate amount of that property.

Any final thoughts before the end of this episode?

We work with shared ownership on a daily basis. It can be extremely helpful to get first-time buyers into the property market. It’s a gateway to owning your own property. It works really well in locations where property prices are high and it’s harder to get onto the property ladder. It really helps those who can’t typically buy on the open market.

Key Takeaways:

• Mortgage lenders typically limit the number of joint applicants to between two and four people.
• All applicants must individually meet the shared ownership scheme eligibility criteria, including a combined household income that does not exceed £80,000.
• Affordability is assessed using the combined household income and must factor in the full housing costs, including the mortgage repayment, the monthly rent on the unsold share, and any service charges.
• The minimum deposit is usually 5% of the share being purchased, offering a much lower entry point onto the property ladder than a deposit on the full property value.
• Owners can buy additional shares over time through a process called ‘staircasing,’ which can eventually lead to owning 100% of the property, at which point no rent is paid.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.