Hi all. I’ve been looking at a shared ownership new build, 25% share which would come to about £62,500. I have roughly £3,100 saved so just about 5% deposit on the share. My salary is £27k. I’ve spoken to one broker who said some lenders won’t touch shared ownership below 30% share, which I hadn’t realised. Has anyone managed to get a mortgage at this kind of level? I keep reading that it should be possible but the reality seems harder than the adverts suggest. Would really appreciate any advice or lender names if you’ve been through it.
I bought my studio at 25% share so I can tell you it is doable but your broker is right that the lender pool shrinks a lot. I ended up with Nationwide, they were one of the few that would do 25% at the time, but that was 2022 so things may have shifted. Leeds Building Society was the other name that kept coming up. The deposit side of it is fine, 5% on the share is standard for shared ownership, so £3,100 on £62,500 is about right. The thing nobody tells you is the rent on the unowned share plus service charge plus your mortgage payment adds up to more than you think. I pay about £850 a month all in on a studio and it is not a nice feeling when you only own a quarter of it. Make sure you get the full breakdown of what the housing association charges before you commit because the rent reviews can creep up. Good luck though, it is still better than renting with nothing to show for it.
I know this is not what you want to hear but I would genuinely question whether 25% shared ownership on £27k is the right move even if you can technically get a lender to say yes. You are buying a quarter of a property and paying rent on the rest, which means the housing association is your landlord for three quarters of it and they will put the rent up every year by RPI plus whatever margin they have built in. Meanwhile you are locked into a property you cannot easily sell because of the nomination period, you cannot make changes without permission, and if you ever want to staircase you are at the mercy of whatever the RICS surveyor says the place is worth in five years. I sat on cash for months after selling a BTL and even I found the idea of shared ownership depressing when I looked at the numbers. Sometimes saving for another year and coming in at a higher share, or waiting for a slightly different scheme, is the less painful route even if it does not feel like it right now.
@itsthelonghaul that’s really helpful, thank you. Can I ask what your income was roughly when Nationwide approved you? I’m on £27k and wondering if they applied a different multiplier for shared ownership or if it was the standard 4.5x. My broker mentioned some lenders go higher for SO but wasn’t specific about which ones.
@Frankie91 I do take your point and honestly it keeps me up at night. But rent here is £750 a month and going nowhere but up, so I’m spending that money either way.
That is a fair point about the rent and I do not disagree that paying £750 a month with nothing to show for it is miserable, believe me I have been there. But the maths on shared ownership at 25% is not straightforwardly better than renting, because you are paying a mortgage on the share you own and rent on the 75% you do not, plus service charges, plus you are on the hook for maintenance on a new build that the housing association will cheerfully pass on to you in about year three when the developer warranty runs out. I had a friend on a similar setup in Bristol and her total monthly outgoings were higher than the equivalent market rent would have been, which sort of defeats the object. I am not saying do not do it, I am saying get the full monthly number written down, mortgage plus rent to the HA plus service charge plus buildings insurance, and compare it honestly to £750 before you commit to anything.
@rosie44871 I was on about £29k at the time so not a million miles from you. Nationwide did use a slightly higher multiplier than the standard 4.5x but the thing that nearly tripped me up was the affordability assessment, they factor in the rent you pay to the housing association as well as the mortgage payment so it squeezes you from both sides. Worth getting your broker to run the numbers properly before you get too attached to a specific property.
@itsthelonghaul that’s really reassuring to hear, thank you. One more thing if you don’t mind, did Nationwide factor in the rent portion and the service charge when they worked out your affordability? My housing association has quoted me £135/month service charge on top of the rent on the unowned share, and I’m worried that eats into the amount they’ll lend me. The broker mentioned it but wasn’t totally clear on how much weight it carries.
@rosie44871 yes they did, and that was the bit that nearly killed it for me. They took the rent on the unowned share plus the service charge and treated it basically the same as committed expenditure, so it came straight off what they were willing to lend. My rent was about £340 a month on the 75% I didn’t own and service charge was around £120, so that was £460 a month before the mortgage payment even started. If yours is similar or higher you might find they approve you for less than you expect even with the higher multiplier. I would get your broker to run the numbers with the actual rent and service charge figures from the housing association rather than guessing, because it made a big difference in my case. The other thing worth knowing is that Nationwide wanted to see the full lease and the housing association’s nomination agreement before they would even issue a formal offer, which added about three weeks to the process.
@itsthelonghaul that’s exactly what my broker flagged, the rent plus service charge eating into affordability. My service charge is about £130/month and the rent on the unowned 75% would be roughly £195, so together that’s a big chunk they’d count against me. Did you go to Nationwide through a broker or apply direct? I’m wondering if it’s worth going straight to them rather than paying a broker fee on top of everything else.
Quick update on this. Spoke to a second broker yesterday (L&C, the free one) and they’ve basically said the same thing, 25% share on my income is really tight once you factor in the rent and service charge. They suggested I ask the housing association if I can go in at 30% or 35% instead, which would reduce the rent portion and apparently makes the affordability calc look a lot better. Has anyone actually negotiated the share percentage upward with a HA? I assumed it was fixed but maybe not?
Rosie, I do not want to pour cold water on this but have you done the maths on what bumping up to 35% actually means for the deposit? If the full value is £250k and you go from 25% to 35%, your share goes from £62,500 to £87,500, which means you need about £4,375 at 5% rather than £3,125. That is an extra £1,250 you do not have, unless I have missed something. The rent does drop, yes, but you are also borrowing more, so the mortgage payment goes up, and I am not convinced the net effect on affordability is as rosy as the broker made it sound. The whole shared ownership structure is designed to look affordable on paper while quietly extracting rent and service charges from every direction. I went through something similar with a friend a few years ago and the final monthly outgoing was barely different from just renting privately, except she was also responsible for repairs on top. Worth asking the HA the question, sure, but go in with your eyes open on what the actual monthly cost looks like at each share level before committing to anything.
@Frankie91 yeah I did the maths and you’re right, it’s a big jump. Going from £62,500 to £87,500 means finding another £1,250 just for the 5% deposit on the higher share, plus the mortgage itself is obviously bigger. L&C basically said unless my income goes up or I can put down 10% instead of 5%, 25% is the ceiling and even that’s marginal.
I’ve got a LISA with about £1,400 in it that I opened last year so the bonus won’t hit until April. Has anyone here used a LISA towards a shared ownership deposit? I’m also wondering whether a family gift for part of the deposit would help with affordability or whether lenders just look at income regardless. Would really appreciate any thoughts on this.