Shared ownership and buying schemes: how do they work?
We break down different pathways to help you navigate buying your first home and get your foot on the ladder with confidence.
If you’re thinking about buying your first home, government backed schemes are a great option to help you get on the property ladder with a smaller deposit. Here’s how the three most popular options work.
1. Shared Ownership: buy a piece, rent the rest
Shared Ownership is a highly flexible option that’s become a lot more popular in recent years. Instead of buying a whole property upfront, you buy a share of it (typically between 10% and 75%) and pay a subsidised rent to a housing association on the part you don’t own.
- The main benefit: Since you’re buying part of the property, your deposit tends to be smaller and you need a smaller mortgage.
- The future view: As time passes and circumstances change, you can choose to buy bigger shares of the house until you own 100% of it in a process known as staircasing.
- The fine print: Even though you only own a percentage of the home, you are responsible for 100% of the maintenance costs and any monthly service charges. It’s also worth noting that when you want to sell, the housing association gets first refusal to find a buyer for your share from their own waiting list before you can list it on the open market with a traditional estate agent.
2. First Homes: a discount for locals
If you’re looking to buy a brand new home in your local area and live in England, then First Homes is a scheme that could help. It offers first-time buyers and key workers a discount of between 30% and 50% off the market value of the property.
- The main benefit: The discount stays with the home forever, which means you get a brand new property at a substantial price cut, keeping your monthly mortgage payments much lower.
- The fine print: When you choose to sell, the same percentage discount must be passed on to the next eligible first-time buyer, keeping it affordable for the local community.
- Where to find it: This scheme is only available on selected new-build developments in England. Since availability is determined by local councils, eligibility can vary depending on where you live, and priority is often given to people who are currently living or working there or having close family nearby,as well as local key workers such as NHS staff, teachers, and emergency service workers.
3. Rent to Buy: save while you rent
If you’ve found a home you love but your deposit isn’t quite ready yet, Rent to Buy could give you the breathing space you need. This scheme allows you to rent a newly built home at a discounted rate (typically about 20% below local market value) for up to five years.
- The main benefit: The money you save on your discounted rent goes straight toward building up your first home deposit. At the end of your rental agreement, you have the option to buy the home outright or transition into a Shared Ownership scheme.
- Where to find it: The standard scheme runs across England, while London has its own version called London Living Rent. Northern Ireland operates its own local variation, but the scheme is not available in Scotland, and the Welsh version is now closed to new developments.
- Things to consider: As you buy the home down the line, the final price will depend on what the property is worth on the open market at that time, rather than when you first moved in. You’ll also need to show the housing association that you’re actively saving your discounted cash toward a deposit during your tenancy.
How to pick the right path for your budget
Every buyer’s journey is completely unique, and what works for someone else might not fit your specific goals. If you are currently in the middle of making offers or planning your next move, here are two quick steps to help you steady your strategy:
- Check your custom roadmap: Head over to your ‘For you’ tab in-app. It serves up tailored tools, expert tips, and insights based on the exact buying stage you’re at today.
- Chat to an expert: Navigating these schemes can feel a bit complex, but you don’t have to do it alone. We have partnered with the experts at First Mortgage to offer free of charge mortgage advice. They have access to over 28,000 deals and know exactly how different lenders handle buying schemes, making it easy to secure the right match for your situation.
Ready to look at your options? Tap to explore the home-buying hub or chat with a broker today.
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA. Tax treatment depends on individual circumstances and may be subject to change in the future.
Provided by First Mortgage Ltd. Your home may be repossessed if you do not keep up repayments on your mortgage.