What is a traditional mortgage?
A traditional mortgage is the most popular route to homeownership. With this type of mortgage, you purchase 100% of the property outright using a combination of your personal deposit and a loan from a mortgage lender, such as a bank or building society.
The lender provides the majority of the property’s value, which you then repay over an agreed term – usually around 25 to 35 years, though shorter or longer terms may be available depending on your finances.
Each month, you make repayments that cover both the amount borrowed (the capital) and the interest charged by the lender. The size of your repayments will depend on several factors, including the amount borrowed, the interest rate type (fixed, variable, or tracker), and the length of the mortgage term. Once the mortgage is fully paid, you will own the property outright and no longer owe to the lender.
Deposit requirements and repayments
Usually, to secure a mortgage you’ll need a deposit of at least 5–10% of the property’s value.
Monthly repayments depend on your loan amount, interest rate, and term length. You’ll also be responsible for all maintenance, insurance, and ownership costs.
Pros and cons of a traditional mortgage
Pros:
- Full ownership from the start: You own 100% of your home, giving you complete control over how it’s used and maintained.
- Greater flexibility when selling or remortgaging: You can sell or switch mortgage deals at any time without restrictions.
- Builds equity if property value increases: As you repay your mortgage and property values rise, your financial stake in the home grows. (The value of your property can also fall.)
Cons:
- Higher deposit and income requirements: You’ll need a larger deposit and income to qualify for a full mortgage than you might for a Shared Ownership mortgage.
- Larger monthly repayments: Borrowing the full property value usually means higher monthly costs compared to Shared Ownership.
- Greater financial exposure: If property values fall, you bear the full risk of any drop in value rather than sharing it with a housing association.
What is a Shared Ownership mortgage?
A Shared Ownership mortgage means buying a share (usually between 25% and 75%) of a property and paying rent on the remaining portion to a housing association such as Peabody. This makes it easier to step onto the property ladder with a smaller deposit.
For example, if you buy a 50% share of a £250,000 home, you’d need a mortgage for £125,000 and have to pay rent on the other 50%. Over time, you can Staircase – buying more shares until you own the property outright.
Who is eligible for a Shared Ownership mortgage
Shared Ownership is open to:
- First-time buyers who can’t afford to buy outright
- Those who used to own a home but can’t afford to buy again
- Households with an annual income of £80,000 or less (or £90,000 in London)
See our eligibility page for the full details.
Pros and cons of getting a Shared Ownership mortgage
Pros:
- Smaller deposit and lower initial mortgage repayments: Because you’re only buying a share of the property, the amount you need to borrow, and the deposit required are both lower than with a full mortgage.
- Option to buy more shares later: You can increase your ownership over time through Staircasing, eventually owning 100% of your home if you choose.
- A route to homeownership for those priced out of the market: Shared Ownership makes it possible for buyers who can’t afford to buy outright to get onto the property ladder and start building equity. See our costs of buying through Shared Ownership page for more information.
Cons:
- You pay rent as well as mortgage repayments: Since you only own part of the property, you’ll still need to pay rent on the remaining share owned by the housing association. However, the total payments can often be cheaper than renting in the same area.
- Restrictions on selling or subletting: There are sometimes conditions on who you can sell a Shared Ownership home to and whether you can rent out your home, which can limit flexibility.
- Limited ability to make major changes or improvements: Because you don’t fully own the property, you often need permission from the housing association before making significant alterations or renovations.
Comparing traditional mortgages vs Shared Ownership
Affordability and deposit size
Traditional mortgages require a larger deposit and income, making them less accessible for first-time buyers.
Shared Ownership, on the other hand, allows you to get started with a smaller deposit, since it’s based only on the share you purchase.
Flexibility and long-term costs
Shared Ownership can be an accessible way to get onto the property ladder, however, this setup can also mean less flexibility compared to owning a home outright.
Shared Ownership homeowners may need approval from the housing association to make major alterations. In addition, increasing your ownership through Staircasing can involve valuation fees and legal costs each time you buy a larger share.
While traditional buyers gain full control and ownership from the outset, Shared Ownership provides a gradual path to the same goal, full ownership.
Ownership rights and restrictions
With a traditional mortgage, you own the property outright from day one. Shared Ownership buyers have limited ownership rights until they Staircase to 100%.
Selling a Shared Ownership home may also involve offering it back to the housing association first.
Frequently asked questions about traditional mortgages vs Shared Ownership
A traditional mortgage lets you buy 100% of your home from the start, while a Shared Ownership mortgage allows you to buy a portion and pay rent on the rest.
Shared Ownership can be cheaper upfront because you only need a deposit and mortgage for a portion of the property, but long-term costs like rent on the remaining share, service charges, and fees for buying more shares can add up - so whether it's cheaper overall depends on the property's value, how much you eventually own, and how long you stay.
Yes. You can increase your ownership share over time through Staircasing, eventually reaching full ownership.
No. While they’re popular with first-time buyers, Shared Ownership schemes are also available to those who can’t afford to buy outright after selling a previous home.