Shared Ownership: the costs
What are the costs of buying a Shared Ownership home?
When thinking about buying a Shared Ownership home, it is important to be aware of the costs involved in the purchase of the property and the monthly costs you will expected to pay once you have moved into your new home.
Buying a Shared Ownership home
When buying a Shared Ownership home, you will need to put down a deposit. This is the amount you pay toward the cost of the share you are buying at the time of purchase. The amount required for a deposit will vary from property to property, but the typical Shared Ownership deposit is 5% or 10% of the share you are purchasing.
For example, if you buying a 25% share of a home with a full value of £300,000, the value of your share will be £75,000. If a 5% deposit was required, you would need to put down a deposit of £3,750.
You will require a solicitor or licensed conveyancer to carry out the necessary legal work. You will need to have instructed a solicitor before your mortgage application can be submitted, and it’s important to check with your solicitor that they are approved to work for your mortgage lender. Solicitor’s fees will usually be based on a fixed cost basis.
For more information or if you’d like to get a quote, you may wish to contact the firms on our Shared Ownership Solicitors and Conveyancing Panel.
First time buyers in Shared Ownership homes will pay zero Stamp Duty on the first £425,000 of any home that costs up to £625,000.
As a first time buyer, when purchasing a Shared Ownership property you will have the option of paying Stamp Duty on the full value of the property as if you were buying outright. The disadvantage here is the initial cost, with the advantage being that you will never have to pay Stamp Duty again – even if you go on to buy the property outright later at a higher price.
Alternatively, you can choose to only pay any Stamp Duty on the share that you are purchasing, which may well be less than the allowance for first time buyers. There may also be a Stamp Duty charge based on the rent payable over the term of the lease (lease premium) called the “net present value”. The advantage being to reduce the costs incurred at the time of purchase, the disadvantage being that the overall cost may be higher when you purchase 80% or more of the property.
If you have already purchased your property and did not elect to pay the full Stamp Duty at outset, then you will not be liable to pay more Stamp Duty until you purchase an 80% share of your home via the staircasing process.
The calculation of the Stamp Duty payable can be complicated and you should seek the advice of your solicitor or other legal adviser for the amount you may be liable to pay early in the process to find out what may be the best option in your circumstances.
Mortgage Broker Fees
Most mortgage brokers will charge a fee for their services and these can vary from a fixed amount to a percentage of the purchase price. A mortgage broker should explain clearly what fees are charged and when before they undertake any work on your behalf. For more information, you may wish to contact a specialist Shared Ownership mortgage broker.
Other moving costs
Other costs may be incurred throughout the process such as removal costs, although these can vary greatly. Housing associations recommend that you have between £3,000 and £5,000 available to cover all the fees and costs of moving, which includes the solicitors and broker fees.
Monthly costs of a Shared Ownership home
Each month you will make repayments on your mortgage, until the time the mortgage has been repaid. The amount you will pay towards your mortgage will be dependent on the value of the share you purchase, the deposit you put down, the remaining length of your mortgage term and the interest rate.
Shared Ownership homes are sold on a leasehold basis. When your lease is first issued, the rent that you pay is generally calculated at 3% of the share still owned by the housing association/landlord. This means that if you were to buy a 50% share of a property worth £200,000 the equity you would pay rent on is £100,000. If you divide the unsold equity by 100 and multiply by 3 you will get the total rent payable per annum. Just divide this by 12 to get the monthly rent payable!
The amount of rent will vary for each home depending on the share you buy and the value of the property when you buy it.
Service charges are payments made by the homeowner to the housing association for the services they provide. These include maintenance and repairs to communal areas, insurance of the building and, in some cases, the provision of lifts, lighting, communal aerials, door entry systems, cleaning of common areas and grounds maintenance, etc. These charges will also usually include the costs of management.
Service charges can vary from year to year, going up or down without any limit other than that they are reasonable. However, a few leases provide a fixed service charge instead so you should always check the terms of your lease to see how your service charge will be calculated.
The amount collected at your development from all residents will be compared with how much has been spent on items such as communal cleaning, gardening and general maintenance and adjusted accordingly. At the end of every financial year, your housing association will be able to provide you with a copy of the audited accounts and clearly explain if there needs to be any changes to your service charge for the year ahead.
Buildings insurance will be the responsibility of the Freeholder – quite often this will be the housing association, however the cost will often be included in the service charge.
Contents insurance – which covers all of the furniture, carpets, white goods and personal belongings in a home – is the responsibility of the person living in the property. It is not compulsory to purchase content insurance but it is advisable.
Future costs in a Shared Ownership home
As and when your financial circumstances change, you can choose to buy more shares in your Shared Ownership home through a process known as ‘staircasing’; this is completely optional and you do not have to buy more shares if you don’t want to. You may acquire additional shares in your property at a price equal to the relevant proportion of the current full open market value of the property. For example: if your home is valued at £300,000 and you want to buy an additional 25% share, the purchase price of your share will be £75,000.
There will likely be other costs involved when buying more shares in your property including broker and solicitor fees, but these will vary from firm to firm. The staircasing process will also vary depending on which version of the Shared Ownership scheme you bought with as some changes were introduced as part of the new Shared Ownership model in 2021/2022. For more in-depth information, please visit our staircasing guide.
If you choose to sell your Shared Ownership home, you will be required to hire a surveyor to value your home. You will have to pay a fee for this valuation but you will be informed of the cost before proceeding. The surveyor will arrange to visit your home to carry out the survey; the valuation will set the sale price for your home and from this, the housing provider can work out the current value of your share. There will likely be other fees involved when selling a Shared Ownership home too, for example solicitor fees.
The resale process can vary between housing associations and will be outlined in the terms of your lease, so we would recommend discussing this with your provider at the outset, before purchasing the property.
Shared Ownership homes are sold on a leasehold basis and depending on the property you’re purchasing and how long you’ll be living there, you may need to extend this lease at some point during your occupancy. Most housing providers now have their own informal policies in place regarding lease extensions but these will vary; we would recommend discussing this with your provider at the outset, before you purchase the property.
If you’re interested in purchasing a part-buy part-rent home, you can find out more via our article index and Shared Ownership terms and conditions on Share to Buy. You can also start your search on our property portal, using key filters such as location, number of bedrooms and deposit amount to find your ideal home.
Search our Guides and FAQs
How much is a Shared Ownership deposit?arrow_downward
When buying a Shared Ownership home, you will need to put down a deposit on the share you are purchasing, rather than the full market value of the property. The amount required for a deposit will vary from property to property, but the typical Shared Ownership deposit is 5% or 10% of your share.
Is Shared Ownership cheaper than renting?arrow_downward
Shared Ownership can often be more affordable than renting, especially in the long run. While initial costs might include a deposit and legal fees, the monthly payments for a Shared Ownership property are typically lower than renting a comparable property in the same area. This is because you’re paying a mortgage on the portion you own and rent on the remaining share.
Over time, if you purchase more shares, your rental payments will decrease while your mortgage payments might increase, but this could still remain more cost-effective than renting. Additionally, Shared Ownership offers the potential to build equity in the property, unlike renting where your monthly payments do not contribute to ownership.
However, it’s important to consider additional costs like maintenance, service charges, and potential future adjustments to your mortgage payments. A careful assessment of your financial situation and comparison of the costs and benefits between Shared Ownership and renting is recommended.
Do you pay rent on top of Shared Ownership?arrow_downward
Yes, in a Shared Ownership arrangement, you typically pay both a mortgage and rent. The rent is paid on the portion of the property that you don’t own, and this portion is usually owned by a housing association or a similar entity. The combined monthly payments consist of your mortgage payment for the share you own and the rent for the remaining share, as well as service charge if applicable.
Over time, you might have the opportunity to purchase additional shares in the property through a process called ‘staircasing‘. This can eventually lead to owning the property outright. It’s important to consider both the mortgage and rent payments when assessing the affordability of a Shared Ownership property and to ensure that they fit within your budget.
How much rent would I pay on a Shared Ownership home?arrow_downward
As a part-buy part-rent scheme, you will pay a subsidised rent to the housing provider on the proportion of the property that you don’t own. The more of the property that you pay a mortgage on, the less rent you will pay.
If you search for Shared Ownership properties on the Share to Buy website, you’ll find that each live listing will include a budget calculator that outlines the estimated monthly costs for that property.
Who do I pay rent to on a Shared Ownership home?arrow_downward
You will pay a subsidised rent to the housing provider on the proportion of the property that you don’t own; the more of the property that you pay a mortgage on, the less rent you will pay.
The amount you pay will depend on the share you have purchased and is generally a lower rate than you would pay when renting privately.
What does 'discounted' or 'subsidised' rent mean on a Shared Ownership home?arrow_downward
The rent you pay on a Shared Ownership home is often referred to as ‘subsidised’ or ‘discounted’ because it’s lower than the market rent you would pay in the local area. The rent is a percentage (usually 2.75% and no more than 3%) of the share retained by the housing association.
The exact percentage is likely to vary from development to development, so we would recommend checking how the rent has been calculated with the sales team at the development you are interested in.
Will my Shared Ownership rent increase over time and how is this calculated?arrow_downward
You will pay rent to your housing association on the unowned share of the property. Any rental increases and how they are regulated will be outlined in the terms of your lease but generally speaking, the rent will be reviewed each year and any changes will be based on the Retail Price Index + 0.5%
Please note that the rent is generally reviewed on an “upwards only” basis and will not go down when reviewed. You should always check the terms of your lease carefully before details of possible rent increases before purchasing a Shared Ownership property.
Is the rent on a Shared Ownership home impacted by the government base rate?arrow_downward
If you choose to buy a Shared Ownership home, you will pay rent to a housing association on the unowned share of the property. In most instances, when it comes to the annual rent review of a Shared Ownership home, the housing association will use the RPI (Retail Price Index) as a benchmark.
What is service charge and what does it cover in a Shared Ownership home?arrow_downward
Service charges are payments made by the homeowner to the housing association for the services they provide. These include maintenance and repairs to communal areas, insurance of the building and, in some cases, the provision of lifts, lighting, communal aerials, door entry systems, cleaning of common areas and grounds maintenance, etc.
How is service charge calculated in a Shared Ownership home? Can service charge increase and decrease?arrow_downward
The service charge on a Shared Ownership home can increase or decrease, and would normally happen at various intervals (usually annually) which will be outlined in the terms of your lease.
The amount collected at a development from all residents will be compared with how much has been spent on items such as communal cleaning, gardening and general maintenance and adjusted accordingly. At the end of every financial year, your housing association will be able provide you with a copy of the audited accounts and clearly explain if there needs to be any changes to your service charge for the year ahead.
The amount you pay will normally vary but a few leases provide for a fixed service charge instead. Your lease should set out how your service charge will be calculated. For more information on Shared Ownership leases, please visit our page on leasehold homes.
Is service charge applicable on both Shared Ownership flats and houses?arrow_downward
Service charges are payments made by the homeowner to the housing association for the services they provide. You may still need to pay a service charge if you buy a house to contribute towards the upkeep and maintenance of the wider development, such as communal landscaping.
My Shared Ownership service charge has gone up, what can I do?arrow_downward
Generally speaking, service charges for Shared Ownership homes are reviewed at the end of each financial year and the terms of these reviews will be outlined in your lease.
However, if you have further questions related to service charges within your home or development, we would recommend contacting your housing provider directly as they will be able to provide you with a copy of the audited accounts and provide clarity on any increases.
What is ground rent and would I need to pay it for a Shared Ownership home?arrow_downward
Ground rent is usually payable on any leasehold property to the freeholder or ‘superior leaseholder’ for the length of the lease. However, ground rent isn’t usually payable on Shared Ownership homes until you own 100%.
If you have questions regarding ground rent at a specific Shared Ownership development, we would recommend speaking with the relevant housing provider directly as they will be able to advise if this is the case for the home you’re interested in.
What percentage of a Shared Ownership home would I need to have deposit on?arrow_downward
Your deposit will usually be 5-10% of the price of the share you’re purchasing, not the full market value of the property.
For example, if a Shared Ownership property costs £500,000 and you purchase a 25% share (equating to £125,000), a 5% deposit on your share would be £6,250, while a 10% deposit would be £12,500.
How would I finance a Shared Ownership property purchase?arrow_downward
To purchase a Shared Ownership property you will need to have access to a sum of money to use as the deposit (traditionally between 5% and 10% of the share you are buying), and approximately £4,000-£5,000 to cover solicitors fees and other costs associated with purchasing a property. You will then need to take out a mortgage from a bank or building society to pay for the rest of your share.
Can family members help with affordability on a Shared Ownership home?arrow_downward
The only way that family members can assist in the purchase of a Shared Ownership home is by gifting money towards the deposit. For more information about the scheme, visit our Shared Ownership article index.
Can I use a guarantor when buying a Shared Ownership home?arrow_downward
Under the terms of the scheme, family members are not permitted to act as guarantors and virtually no lenders will currently accept guarantors for mortgages loans. For more information about the scheme, visit our Shared Ownership article index.
How do I find a Shared Ownership mortgage?arrow_downward
You can use Share to Buy’s Mortgage Comparison tool to get an idea of the Shared Ownership mortgages available on the market. To apply for a mortgage you can then contact the lender directly, or speak with a specialist Shared Ownership mortgage broker.
Other than rent and mortgage on a Shared Ownership home, what other costs should I be aware of?arrow_downward
There may be monthly service charges to take into consideration when purchasing a home.
In some circumstances, providers may include certain utilities in their service charge, or offer standing payments for their heating systems, but this would need to be discussed directly with the housing association. You would need to cover general utility bills, council tax, contents insurance, etc.
You should also have enough in savings to cover legal fees and other costs associated with buying a home. Generally speaking, we would recommend having around £4,000-£5,000 put aside for this.
Do I pay bills and council tax in a Shared Ownership home?arrow_downward
You would pay for bills and council tax, much the same as if you were renting or had bought your home on the open market. In some circumstances, providers may include certain utilities in the service charge but this would need to be discussed directly with the housing association.
Do you pay Stamp Duty Land Tax on a Shared Ownership home?arrow_downward
As a first time buyer, when purchasing a Shared Ownership property you will have the option of paying Stamp Duty on the full value of the property as if you were buying outright, or you can choose to defer your Stamp Duty payment until your owned share reaches 80%.
Do first time buyers have to pay Stamp Duty Land Tax?arrow_downward
If you are a first time buyer purchasing a home under £425,000 then you will not need to pay Stamp Duty. If you’re purchasing a home valued up to £625,000, you will be required to pay 5% Stamp Duty on the remaining £200,000.
What happens if I can't pay the rent or mortgage on my Shared Ownership home?arrow_downward
If you are struggling to make your monthly payments, you should let your lender and housing association know; your housing association can then try to help you manage your situation.
In some circumstances, the housing association may buy back shares from you in a process known as flexible tenure, but this is rare. If necessary, and if no other options are available, you may have to sell your property.
Can you make profit from Shared Ownership?arrow_downward
Making a profit from Shared Ownership is possible, but it’s influenced by several factors. Shared Ownership allows you to gradually purchase a larger share of your property, and if the property’s value increases over time, you could profit from the appreciation when selling your share.
However, the profit potential might be impacted by resale restrictions regulations by housing providers and the terms of your lease. These restrictions are in place to ensure that the property remains affordable for future buyers. Additionally, selling costs, such as fees and legal expenses, could impact your overall profit. While making a substantial profit might not happen on every sale, Shared Ownership can still offer financial stability and a chance to build equity over time.
Can you be refused Shared Ownership?arrow_downward
Yes, Shared Ownership applications can be refused based on certain affordability criteria and eligibility requirements. Housing providers often have specific criteria that applicants must meet to be eligible for Shared Ownership. These criteria could include factors like income thresholds, credit history, and residency status.
Additionally, housing providers might prioritise applicants with a local connection to the area or those in specific housing need categories. If you do not meet these criteria or if your financial situation does not align with the affordability requirements, your application might be declined.
It’s crucial to thoroughly review the eligibility criteria provided by the housing provider and ensure that you meet the necessary conditions before applying for Shared Ownership.
Am I at risk of eviction if I fall behind on my Shared Ownership mortgage or rental payments?arrow_downward
If you are unable to meet your financial obligations with your lender or housing provider, you could be subject to legal action.
If you are a current shared owner who is unable to meet these obligations, we would recommend speaking with your mortgage advisor and housing association who should be able to assist you with next steps and discuss your options.