Shared Ownership Costs | Shared Ownership Specialists

Understanding the cost of shared property ownership

The cost of shared ownership

Investing in shared property ownership will typically cost significantly less than buying a property outright, but it’s important to consider that whilst you will own a part of a shared ownership agreement you will not own the whole property.

Shared Ownership costs are usually lower than other housing options for a number of reasons:

- The rent is less than the rate charged on the open market and usually charged at 3% of the property (share owned by the housing association) value per annum.
- You can start with a little as a 25% share if buying through the existing scheme, or from as little as 10% if buying through the updated Shared Ownership model.
- Your deposit will be 5-10% of the price of the share, not of the full market value of the whole property.
- Stamp Duty Land Tax (SDLT or simply ‘Stamp Duty’) can generally be deferred until your share reaches 80%.

Shared Ownership properties can often be found in private developments as a certain number of Shared Ownership homes will often be required as a part of the planning permission for a development. This can help to put affordable housing in the heart of sought-after areas.

Shared Ownership FAQs – What You Need to Know

How much deposit do I need for a Shared Ownership property?

Usually 5–10% of the share you are buying, not the full market value of the property.

Do I have to pay Stamp Duty on a Shared Ownership home?

You can choose to pay Stamp Duty on the full market value upfront or just on your initial share. First-time buyers may benefit from relief up to £300,000.

What ongoing costs will I have to pay?

You’ll pay rent on the share you don’t own, as well as service, building’s insurance and maintenance costs.

Can I get a mortgage for Shared Ownership?

Yes, many lenders offer Shared Ownership mortgages. A mortgage broker can help find one that suits your needs.

What is the assignment fee when I sell my Shared Ownership property?

This is an administration fee charged by the housing provider for managing the resale, usually a fixed fee or a percentage (often around 1.5%) of the sale price.

Can I ever own the property outright?

Yes, in most cases. You can buy more shares through staircasing over time, and once you own 100%, the property becomes fully yours.

Do I always need to pay rent and how much rent do I need to pay?

Yes, you must pay rent on the share you don’t own. The amount varies depending on the provider and the value of the property but is usually lower than full market rent or mortgage interest on the same amount.

Will my rent increase?

It may increase, depending on the terms of your lease. The leases include a rent review clause, often annually or every few years, linked to inflation or a set percentage.

Purchasing Shared Ownership Property

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 are 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. For more information or if you’d like to get a quote, contact our team.

One of us will be happy to arrange a 30 minute free of charge consultation. Our fees are usually based on a fixed cost basis.

As of the Chancellor’s latest announcement, first-time buyers in shared ownership homes will pay zero Stamp Duty on the first £300,000 of any home that costs up to £500,000. First-time buyers purchasing a shared ownership property will have the option of paying Stamp Duty on the full value of the property. 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 the 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 a 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.

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.

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.

Regular 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.