Secured loans on shared ownership and Help to Buy properties

How lenders typically treat it

A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.

Can you get a secured loan on a shared ownership property?

Sometimes, but the field is narrow. With shared ownership you own a share of the property, commonly between 25% and 75%, and pay rent to a housing association on the rest. Your mortgage is secured on your share, and any secured loan would be too. The housing association holds the freehold or head lease, and your lease will normally say you cannot create any further charge without its consent.

That consent is the first hurdle. Housing associations vary: some have a clear process and a modest fee, others are reluctant and slow, and a few refuse further charges as policy, particularly where the borrowing is for something other than home improvements. Ask the association its position before paying for a valuation.

The second hurdle is lender appetite. Most secured loan lenders list shared ownership as an exclusion, because the security is a share in a leasehold interest with a third party's rights attached, and a forced sale is complicated by the association's right to nominate a buyer. A small number of specialist lenders do consider it, generally with a minimum share, a clean credit file and a full valuation. Our lender criteria pages show which, with the date checked.

What does not change is the risk. The loan is secured on your home, and if the payments are not kept up the lender can seek possession and you could lose it. On shared ownership the rent and service charge continue regardless, so the affordability check has to fit three payments together, not two. If that looks tight, free advice from MoneyHelper or StepChange is the sensible first call.

Can you get a secured loan on a Help to Buy property?

Rarely, and the reason is structural. When you bought with a Help to Buy equity loan, Homes England lent you a share of the price, commonly 20% outside London and up to 40% in London, and registered a second charge on the property to protect it. Your mortgage is the first charge, the equity loan is the second, and any new secured loan would have to sit third.

Third charge lending is a tiny market in its own right, as our third charge loans page explains, and it becomes smaller still when the second charge holder is a government body with its own rules. Homes England's administrator has to give written consent to any further charge, and it will usually only do so where the borrowing does not put its equity loan at risk.

The equity loan itself is the other consideration. It is interest-free for the first five years, after which a fee applies that rises every year, and the amount you owe tracks the value of the home rather than the original sum. Adding a third charge behind it makes repaying it harder, because the third charge lender's consent is then needed for any remortgage to repay the equity loan.

For most Help to Buy homeowners, the practical route to consolidating debt is a remortgage that repays some or all of the equity loan and raises money for the debts in the same transaction, if the equity and affordability allow. Our guide to remortgaging to pay off debt covers how lenders assess that.

How much can you borrow on a shared ownership or Help to Buy home?

Less than on a standard home of the same value, because only part of the property is yours to borrow against. On shared ownership the lender values the whole property, applies your share, then deducts your mortgage to find the equity. Suppose the home is worth £300,000 and you own 40%, so your share is worth £120,000, with a £95,000 mortgage on it. Your equity is £25,000, and a lender capping combined LTV at 80% of the share could allow total borrowing of £96,000, leaving room for a secured loan of only £1,000. At a 90% cap the room rises to £13,000.

The lesson is that small shares rarely support a secured loan of a useful size. A 25% share of a £300,000 home is worth £75,000, and after a typical mortgage the equity is often below any lender's minimum loan. Shares of 50% or more, or one that has risen sharply in value, are where the numbers work.

On Help to Buy the calculation is on the whole property, but the equity loan is deducted as well as the mortgage. A £300,000 home with a £210,000 mortgage and a 20% equity loan currently worth £60,000 has £30,000 of equity, and a third charge lender capping at 80% would have nothing to offer. Only where prices have risen a long way or the mortgage has been paid down does a third charge become arithmetically possible.

Affordability sits on top of both calculations, with rent and service charge included as commitments. Our guide on how much equity you need to consolidate debt sets out the bands, and the secured loan calculator lets you test your own figures.

What would a secured loan on a shared ownership home cost?

More than the same loan on a standard property, because the security is less liquid and the pool of lenders too small for much competition. The example below assumes a shared owner with enough equity for a £15,000 loan, and uses the fixed illustrative secured loan rate used across this site. A real quote on a scheme property is likely to be higher; the adviser will show the actual figure first.

The monthly cost of the debts falls from £418 to £142 in the example, which matters when rent and service charge already take a large share of income. The total repaid over 15 years, £25,647, is well above the £15,000 borrowed because the term is long. A shorter term raises the payment and cuts the total, and lenders often prefer one on scheme property.

Fees are the other thing to price. Beyond the usual lender, valuation and broker fees, expect a consent fee from the housing association or the Help to Buy administrator, and legal costs for dealing with the lease. Ask for every fee in writing, and check how much of the loan actually reaches the debts.

Should you staircase or repay the equity loan instead?

Often, yes, if the numbers allow. Staircasing means buying a further share of a shared ownership home from the housing association, and buying to 100% turns it into an ordinary leasehold or freehold property. At that point every secured loan lender and every remortgage lender is open to you, the rent stops, and the equity you hold is all yours to borrow against. Many shared owners find that a remortgage which staircases and raises money for the debts in one step is cheaper and simpler than a secured loan on a part share.

The same logic applies to Help to Buy. Repaying the equity loan, in full or in the 10% tranches the scheme allows, removes the second charge, and a remortgage that repays it and consolidates debt at the same time is a well-trodden path with mainstream lenders. Whether it works depends on equity, affordability and any early repayment charge on your current mortgage; our secured loan versus remortgage comparison sets out how to weigh that.

Timing matters. Staircasing and equity loan repayment both require a valuation, and both cost more when prices have risen. If prices are flat and your mortgage deal is ending soon, doing everything in one remortgage can make sense. If you are locked into a cheap fixed rate with a large early repayment charge, waiting until the fix ends may be better than either route.

And if the debts are already unmanageable, neither staircasing nor a secured loan is the first step. Free, impartial advice from StepChange, Citizens Advice or MoneyHelper covers options that do not depend on borrowing against a home you only partly own.

What improves your chances

• Ask your housing association or the Help to Buy administrator for its further charge policy and fee before applying anywhere.
• Get a realistic valuation of the whole property and work out the equity in your share yourself before you enquire.
• Keep rent, service charge and mortgage all paid on time; lenders on scheme property expect a clean record.
• Consider whether staircasing or repaying the equity loan first would open up more lenders and a lower rate.
• Have your lease, latest rent statement and any staircasing valuations ready, since the lender's solicitor will ask.
• Be realistic about loan size: a small share rarely supports a loan above the lender's minimum.

Alternatives worth considering

For most shared ownership and Help to Buy homeowners, a remortgage is the alternative to weigh first, particularly one that staircases or repays the equity loan while raising money for the debts; our secured loan versus remortgage comparison covers the decision. Unsecured borrowing avoids any charge on the lease and needs no consent from anyone; our secured loan versus personal loan page shows what that costs. For card debt, a 0% balance transfer card can clear the interest for a promotional period. Where the debt has become unmanageable, a debt management plan arranged through a free charity does not involve borrowing at all.