Shared Ownership – the costs
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 your 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 property 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.
Your will need a solicitor or licensed conveyance professional to carry out the necessary legal work. You will need to have instructed a solicitor before your mortgage application can be submitted and it is important to check with your solicitor that they are approved to work for your mortgage lender. Solicitor’s fees are usually be on a fixed cost basis and all the solicitors on our mortgage panel will be happy to give you a quote.
Stamp Duty Land Tax (SDLT) is normally payable when property or land is purchased and is generally a percentage of the purchase price. When purchasing a share in a Shared Ownership property you are not required to pay SDLT unless your share is eighty percent or more. The solicitor or conveyancer dealing with your purchase is responsible for dealing with the SDLT and will be happy to advise you accordingly.
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.
The fees for the Share to Buy mortgage service are fixed and as follows:
- To assess and carry out the necessary affordability calculations on an agreement in principle application – No Charge
- To check documentation and submit an agreement in principle application to a lender for a credit scored agreement in principle – £50
- To check full documentation and submit a full application to a lender and then liaise with the lender through to a mortgage offer being issued – £199
Other moving costs
Other costs may be incurred, such as removal costs but these can vary widely. Housing Associations recommend that you have between £3,000 and £5,000 in hand 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 tie 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, how long of your mortgage term is remaining and the interest rate.
The exact figures for the rent are sent to you with the viewing details. It is usually set around 3% of the unsold equity.
For example: if you wanted to buy a 50% share in 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
- The value of your property when you buy it
Service charges are payments by the homeowner to the housing association for the services they provide. These include maintenance and repairs to common parts, insurance of the building and, in some cases, provision of lifts, lighting, communal aerials, door entry systems, cleaning of common areas and grounds maintenance, etc. Usually the charges will also include the costs of management.
Service charges can vary from year to year; they can go up or down without any limit other than that they are reasonable. Details of what can and can’t be charged by the landlord and the proportion of the charge to be paid by the individual homeowner will all be set out in your lease.
Buildings insurance is be the responsibility of the Freeholder – quite often the housing association. The cost will often be included in the service charge. Contents insurance, which covers all your furniture, carpets, white goods and personal belongings, is the responsibility of the person living in the property – it is not compulsory to purchase but it is advisable.
Search our Guides and FAQs
Who do I pay rent to?arrow_downward
You pay rent to the housing association that built the property. The amount you pay depends on the size of the share of the property you have purchased and, is generally at a lower rate than you would pay when renting privately.
Does the rent on a Shared Ownership property increase?arrow_downward
The rent paid to the Housing Association on the share not owned by you will be reviewed periodically, usually every year, and will be increased in line with any proportionate increase in the Retail Prices Index plus an amount, typically between 0.5% and 2%. Note that the rent is only reviewed on an “upwards only” basis and will not go down when reviewed. You should always check the terms of your lease carefully before you purchase a shred ownership property for details of possible rent increases.
How is the service charge calculated?arrow_downward
The lease should set out how your service charge will be calculated. Often it is a percentage or proportion of the total costs of repair, maintenance, management and insurance of the building. The amount you pay will normally vary but a few leases provide for a fixed service charge.
Can the housing association increase the service charge?arrow_downward
The service charge can increase or decrease, this would normally happen at various intervals which would be outlined in the lease.
You should refer to the terms of the lease in order to establish whether the service charge is fixed or variable. If it is variable it can go up or down and so the landlord can increase the service charge provided it is reasonable.
How do 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 to cover solicitors fees and other associated costs that come 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.
Share to Buy have a team of mortgage experts who can assist you in finding a mortgage deal.
How do I find a mortgage?arrow_downward
Share to Buy’s specialist Shared Ownership Mortgage team can help you find a mortgage for your new home. The first step is to use our Mortgage Comparison tool, or email our Mortgage team if you have already found a property to purchase.
What happens if I can't pay my rent or mortgage?arrow_downward
If you are struggling to make your monthly payments you should let your lender and housing association know. Your housing association will try and 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 recourse is available, you may have to sell your property.