Joint Shared Ownership

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Joint Shared Ownership (Part 1)

Sam Hubbard explains joint shared ownership mortgages.

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

Absolutely. In the UK, up to four people can be named on a shared ownership mortgage. However, in a lot of cases, lenders will base the affordability on the highest two incomes, even if all four people are legally named on the mortgage.

If you’re applying as a group, all applicants will be ‘jointly and severally liable’, which means everyone is responsible for the full mortgage, no matter whether or not their income is included in the calculations.

Do all applicants need to meet the eligibility criteria individually?

Yes, every named applicant must meet the criteria for the lender and also for the housing association.

That involves full credit checks by the lender, and proving your ID and residency status. There also needs to be confirmation that no applicant owns another property, and that the household income fits the shared ownership limits. These are £80,000 outside London and £90,000 in London.

Someone with no income can still be named on the mortgage, but if one individual has a credit issue, that can hold things up and cause problems.

With all mortgages, it’s about doing the homework. We find out who’s going on the mortgage and if there are any hiccups or things behind the scenes to be aware of. We can then approach the right lenders for a positive decision.

Nobody really wants a mortgage. What we all want is to buy a home – the mortgage is just how we get you there. Getting a broker to do that homework helps you get there with less stress.

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

Legally, the title deed will show a single collective share of the property. You might be buying 25% from the housing association, for example. But internally, you can split that between you.

If four people are buying they might have 25% of that share each, or it might be an uneven split – whatever you like. If there are two of you, it could be 50-50, or 1% and 99%. You can split it in any way you like.

Often the reason for an uneven split is where the deposits each person puts in aren’t quite equal. To protect everyone, the split is generally recorded in a Deed of Trust, which sets out how much each person put in and how the proceeds will be divided if you sell.

Can we change the ownership percentages later on?

Yes, but with certain limitations. You can update the internal split at any time by drafting out a new Deed of Trust. However, you cannot remove or transfer someone legally from the mortgage without the lender’s formal consent. That’s called a transfer of equity.

At the same time, there are corroborating checks by the lender to make sure the remaining borrowers can afford it. There is flexibility to change the legal structure, but to change the mortgage itself there needs to be a reassessment to ensure the lender is happy to do it.

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

This is where having multiple parties to a mortgage gets complex, especially for a group of friends.

Shared ownership properties often come with a nomination period, where if you’re selling, the housing association has the right to find a buyer for your share. It’s only if they fail to do that, or that nomination period expires, that you can sell it on the open market. That’s an important thing to consider.

Equally, if one party wants to sell and the other wants to stay, it comes back to that transfer of equity, and making sure the lender is comfortable that the mortgage is affordable in your own right. You then go through the transfer of equity legal process to move it all into your name.

Can we staircase together and at different times?

Staircasing is buying an additional share of the property. You might start off by buying 50% of a home, and then buying another 10%. You might buy the whole outstanding 50%. That process is known as staircasing.

Legally, all owners would staircase together, because everybody is named on the lease.

But, potentially, if one person is putting more money in to buy that share, you can update your Deed of Trust to reflect that in the balance of ownership.

How is affordability assessed in joint shared ownership applications?

Affordability can become more complex with shared ownership than with a standard purchase.

On a standard residential mortgage, the lender is only interested in whether you can afford the mortgage on that property, and if you fit their criteria. When you buy a shared ownership property, part will be mortgaged, part will be under a rental agreement – and sitting behind that rental agreement is a lease.

Nine times out of 10, ground rent and service charges are involved. From an affordability point of view, the lender is not just assessing your affordability on the mortgage – it’s the mortgage, the rent, the ground rent and service charges.

They will also want to understand the terms of that lease and if those are likely to change. The housing association will also carry out their own affordability checks. Getting the two to match is a balancing act, so a broker’s help with this can be really helpful.

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Do both applicants need to be employed or have an income?

Not at all. There could be two people buying, one who is employed full-time and the other a student, a carer or on benefits. They can still be party to the mortgage.

It’s all about whether the proof of income for the other person, plus any benefits, make it affordable to the lender. You don’t have to both be employed.

In fact, you could have a situation where nobody’s employed but you receive self-employed income. As long as it’s regular, proved and you’re paying tax on it, lenders will accept that income.

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

Typically, 5% would be the minimum, based on the share being purchased. It’s not 5% of the full market value, just the share.

You might buy a property where the full amount is £100,000 and you’re buying a 50% share, worth £50,000. A 5% deposit on that is £2,500.

As always with mortgages, if you’ve got slightly impaired credit or blips on your credit file, you might be asked to put slightly more in – perhaps 10% or 15%. It’s always best to check the minimum deposit with the lender or broker.

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

The Help to Buy ISA has now ended to new customers, although you can still spend any savings in them until 2030. The Lifetime ISA (LISA) is a similar scheme that is open to new applications.

A first-time buyer can use a Lifetime ISA, and a couple could use two LISAs and each receive the 25% government bonus, which is great news.

The caveat here is that the full market value of the property – not just the shared portion – must be £450,000 or less to be LISA-eligible. That should still give plenty of leeway.

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

Lots of lenders offer shared ownership, but not all of them. Watch out for minimum share rules, which do vary by lender. Some high street lenders require you to buy at least 25% of the property, white other non-high street lenders may allow you to buy as little as 10%.

The minimum share for sale is typically laid out by the housing association, so it’s a case of picking the right lender to suit the circumstances.

Should we buy as joint tenants or tenants in common?

This is a bit of legal jargon. If contributions are unequal, tenants in common is usually safer as it allows you to ring fence your deposits, define the exit proceeds and pass your share on via a Will. That’s typically used where a group of friends are buying and things aren’t all equal.

A couple would tend to buy under a joint tenancy, where they are seen as contributing equally and gain automatic survivorship. If anything happens to one person, ownership automatically goes to the other, rather than being passed on in a Will.

Your household setup and relationship to each other would determine which legal option would be best. A conveyancer or solicitor will advise you as part of the process.

What legal agreement should we have in place?

As a minimum, a Deed of Trust should be in place. For joint shared ownership, you might also consider a cohabitation agreement. This helps determine how you will cover the bills and repairs, for example.

Life insurance is important so that the mortgage is cleared on death. This is key if one person is earning and the other is not – if the person who was earning passed away, it would hugely affect the person left behind. Protection helps with long-term sustainability.

A dispute resolution clause is also worth considering, so that if something untoward occurs, you’ve got mediation routes as opposed to the courts.

A lot of these things can seem slightly negative, but it’s important when going into a big commitment together. Who’s going to pay the bills, and what happens if something goes wrong?

Any final thoughts for this episode?

Those agreements we were just talking about don’t just protect relationships. They protect the mortgage and keep everybody aligned if circumstances change. It’s important to think about those possibilities, because nobody knows what’s around the corner.

Key Takeaways:

Up to four people can be named on a shared ownership mortgage, but all applicants are ‘jointly and severally liable’ for the full mortgage, regardless of whose income is used in the affordability calculations.
Every named applicant must individually meet the eligibility criteria for both the lender and the housing association, including passing credit checks and confirming they do not own another property.
While the title deed reflects a single collective share, joint applicants can divide the internal ownership split unevenly (e.g., 1% and 99%), which is typically documented in a Deed of Trust to protect unequal deposits.
Affordability is complex because lenders assess your ability to pay not only the mortgage but also the rent, ground rent, and service charges associated with the lease.
A Deed of Trust is a minimum legal agreement required, and other recommended protections include a cohabitation agreement, life insurance to clear the mortgage upon death, and a dispute resolution clause.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.