A Budgeting Guide to Shared Ownership Hidden Costs
Shared ownership is a great way of climbing the property ladder and for many, getting onto it in the first place. Buying a home is not as easy as it was a few decades or so before. With the cost of living being what it is and living wages not necessarily matching the hike in property prices, getting a property of your own can prove difficult.
Thankfully, buying schemes like shared ownership enable many who are priced out of traditional property purchases to buy property.
A budgeting guide like this one will help reveal the ins and outs of shared ownership, as well as hidden costs to be aware of.
Initial Upfront Costs
Initial costs are something that are likely brief but can prove quite costly if you’ve not budgeted for them accurately.
Beyond the deposit of usually 5-10% of the share, as well as mortgage fees, you’ll want to budget for these upfront expenses:
- Reservation fees – A non-refundable fee to secure the property. This can range from £100 to £500, typically.
- Legal fees – Solicitor fees for conveyancing that are specifically for leasehold and shared ownership contracts. This can often go into the thousands.
- Valuation and survey fees – Required by the mortgage lender, which may cost a few hundred dollars to get done.
- Stamp duty – SDLT can be paid up front or deferred, depending on the property value and the property itself chosen.
Ongoing Monthly Hidden Costs
The shared ownership hidden costs are worth knowing, because they can also be part of the ongoing monthly costs, as well as the long-term financial strain.
Rent on Unsold Equity
Any rent is paid to the housing association for the share you don’t own. This is typically calculated at 2.75-3% of the remaining property value and can increase annually. This is on top of your mortgage payment.
Service Charge & Management Fees
Service charges and management fees are typical for maintaining communal areas, and these can also rise steeply.
Ground Rent
Although this is being phased out, some leases will still include this charge.
Maintenance and Repairs
For older, pre-2021 homes, you’re responsible for 100% of repairs despite only owning a share of the property.
Long-term and ‘Staircasing’ Costs
As your income changes, you may want to buy more shares in shared ownership, which is known as staircasing. While this is helpful, it can inclur significant costs.
Staircasing Legal Fees
Legal work is required for every additional share that’s purchased, so it’s good to do it in bulk where you can to stay on budget.
Valuation Fees
RICS valuations are needed to determine the current market price of the share. These valuations can vary in cost, depending on who you pick.
Mortgage Administration Fees
Lenders may charge for updating your mortgage terms, which can be a small cost but one that adds to your overall financial costs.
Selling Costs
If you end up selling the property, the housing association will often have a set period to find a buyer, and you may face higher, more complex estate agent and legal fees as a result.
The more you know about shared ownership, the better. Particularly when it comes to hidden costs.
*This is a collaborative post.
