How exactly does shared ownership work out to be cheaper than full ownership?

As far as I understand it- in shared ownership schemes, buyers pay 50% of the house/flat price by mortgage and also pay 50% of the price in rent... isn't this really expensive?

I'm not interested in a shared ownership scheme for me or mine... I'm just curious...

Hasn't it got more to do with the limit on how much you can get on a mortgage?

If the bank are only prepared to lend you around half of what you need, you can still step onto the property ladder this way

Hey Lib1

My ex Partner and Me did shared ownership...

For the money we had we were only able to afford a one bed flat or house... very tiny...

That was until we found out that one of our friends was selling their house... which was infact shared ownership...

2 bedroomed house lovely garden drive etc... just what we were looking for but couldnt afford in the real world...

The house value was £68k we got a mortgage for £34k (payments of £241 a month) and our rent was approx £127 a month

Alot of people thought we were paying alot out... but considering we couldnt afford anything without the help of shared ownership i think we got a fair deal... and wouldnt hesitate in going into shared ownership again...

I would recommend it to anyone looking to buy... it maybe a bit of a wait but well worth it... Its that first step onto the property ladder...

We sold our house for £130k got half which was £65k that went on paying off solicitors etc... so we came away with approx 16.5k so we did make quite a profit...

Should you require any further info please feel free to pm anytime :)

It makes a bit more sense now... but surely if banks are only willing to offer people 50% of a mortgage, either:

1. The banks are being overly cautious as people are able to make the extra rent payments (so in theory they could take on a full mortgage if they needed to)... or

2. The banks are right and people are stretching themselves beyond their means when they take on shared ownership properties

This is the part that I don't get.

Originally posted by Lib1
It makes a bit more sense now... but surely if banks are only willing to offer people 50% of a mortgage, either:

1. The banks are being overly cautious as people are able to make the extra rent payments (so in theory they could take on a full mortgage if they needed to)... or

2. The banks are right and people are stretching themselves beyond their means when they take on shared ownership properties

This is the part that I don't get.

Isnt the full mortgage more than a fraction of the mortgage plus the rent? Isnt this the point?

This Observer article illustrates the point that was making earlier- http://observer.guardian.co.uk/cash/story/0,,1604318,00.html

The outdated calculations for how much a bank will lend are only based on only one income, so if you happen to have 2 incomes in your household, this route enables you to afford to live in a house, and step onto the property ladder at a greater height than you would otherwise be able to, as illustrated by Angel05 above