Costs Associated to Shared Ownership Mortgages
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Everyone knows that when you buy a property it can be expensive, but what costs are exactly due and when do they need to be paid?
Property Reservation Fee
When you have found a property that you want to purchase the seller will more than likely ask you to pay a reservation fee and the amount of this can vary from developments – as a guide this is typically £100 to £499.
Mortgage Deposit
When you go to purchase the share you are going to buy, more than likely you will need to put down a deposit. Depending upon your situation and lenders criteria this deposit will probably be 5%+. If you were going to buy a property worth £300,000 and you are purchasing a share of 40% (£120,000), you will need to put down a minimum deposit of 5% of the share you are buying, so this would be £6,000 in this example.
Conveyancing Fees
You will need a conveyancer to complete the required legal paperwork. This conveyancer will represent your interests in this transaction. You should always get a couple of different quotations and make sure the price you get is an ‘all in’ price, so you can easily compare companies.
When you submit your mortgage application you should also instruct the conveyancers you have chosen. It is also worth noting that not all conveyancers may be accepted by your lender, so liaise with your mortgage broker to source a suitable conveyancer.
Stamp Duty
Currently First time buyers do not pay any stamp duty on properties valued up to £500,000 (this will likely reduce back down to £300,000 from April 2021). As a First Time Buyer you will have the option of paying stamp duty on the full market value or you can pay stamp duty on the share you are purchasing if at all applicable.
Regarding stamp duty you should seek legal advice. It is your conveyancers responsibility to advise you of any stamp duty costs that are payable.
Lender Fees
The lender will charge several fees for the mortgage such as:
- Lender Arrangement Fee – This is generally paid on completion.
- Telegraphic Transfer – This is around £35.
- Valuation Fee – Payable upfront and the cost is linked to the property value.
Broker Fee
Your selected broker may charge a broker fee for arranging the mortgage. The broker should clearly outline what is payable and when, so you are fully informed.
On-going costs
Once you have purchased your share of the property there will be ongoing costs to pay such as:
- Mortgage Payments.
- Insurances – Contents insurance, Life insurance, Serious illness cover for example.
- Service Charge – This is to cover maintenance and repairs to the communal areas.
- Rent – This is the monthly rent you pay for the share you don’t own.
Where can I seek Mortgage Advice?
The Shared Ownership bad credit mortgage advisers at The Money Hub would be more than happy to help. Please complete the above enquiry form and you can schedule a telephone appointment with an adviser.
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