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  • Writer's pictureMatthew Pigrome

Understanding the Costs and Charges of Shared Ownership Properties: Impact on Mortgage Affordability

Are you considering shared ownership as a path to homeownership? It's an attractive option for many, but it's crucial to understand the costs and charges associated with it. These expenses play a significant role in assessing your mortgage affordability.

In this blog post, we'll break down the various costs and charges that come with shared ownership and how they affect your ability to secure a mortgage.

Shared Ownership: A Brief Overview

Shared ownership allows you to buy a portion (typically between 25% to 75%) of a property while paying rent on the remaining share. It's an excellent way to step onto the property ladder, especially if buying a home outright feels financially daunting.

Costs and Charges Associated with Shared Ownership:

  1. Initial Share Purchase: When you buy your share of the property, you'll need to pay a deposit. This is typically a percentage of your share's value. The larger your share, the higher your deposit.

  2. Mortgage Fees: Like any other mortgage, you'll incur fees such as arrangement fees, valuation fees, and legal fees. These vary by lender and can impact your upfront expenses.

  3. Monthly Mortgage Payments: Your monthly mortgage payments will be calculated based on the value of your share. Remember, you'll also have rent payments on the unsold share to factor in.

  4. Service Charges and Ground Rent: Shared ownership properties often come with service charges and ground rent. These fees cover maintenance and communal services. They can vary depending on the property and development.

  5. Staircasing Costs: If you decide to buy more shares in your property over time (known as staircasing), you'll incur additional legal and valuation fees.

  6. Resale Fees: When you decide to sell your shared ownership property, you might have to pay a resale fee to the housing association. This fee is typically a percentage of the final sale price.

How These Costs Impact Mortgage Affordability Assessment:

When lenders assess your mortgage affordability for a shared ownership property, they consider your income, expenses, and the costs associated with the property. Here's how these costs affect the assessment:

  1. Deposit: A higher deposit requirement can impact your ability to secure a mortgage. Lenders want to ensure you have sufficient funds for the deposit, mortgage fees, and other associated costs.

  2. Monthly Payments: Lenders will evaluate your ability to cover both your mortgage payments and the rent on the unsold share. A high rent can affect your affordability, so it's essential to budget accordingly.

  3. Service Charges and Ground Rent: These ongoing costs are considered part of your monthly expenses, and lenders will factor them into your affordability assessment.

  4. Staircasing Costs: If you plan to buy more shares over time, remember that you'll incur additional costs with each staircasing transaction.

  5. Resale Fees: When selling, you need to account for the resale fee. This fee will affect your net proceeds from the sale.

Planning for Shared Ownership Affordability

Shared ownership can be an excellent way to enter the property market, but it's vital to understand and plan for the costs and charges associated with it. Proper budgeting and financial planning are key to ensuring you can comfortably afford your shared ownership property and secure a mortgage that fits your financial situation.

If you're considering shared ownership, it's advisable to work with a specialist mortgage broker like Mortgage321. Our experts can help you navigate the complexities of shared ownership and ensure you make informed financial decisions on your path to homeownership. Your dream home is within reach, and we're here to make it a reality.


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