Shared Ownership finances explained

Property Values

We offer a wide range of newly built properties across London. Each development will have various types and sizes of home, as well as a range of internal finishes. This mix means our homes are available to applicants across a range of incomes at a range of different price points, the prices will be set by independent, RICS (Royal Institute of Chartered Surveyors) qualified surveyor.

We include on our development pages guidance about the income you’ll need to buy a specific property

Your share

Shared ownership is another way to buy your own home. You buy a percentage, as much as you can afford from 25% to 75% of the value of the home, and pay rent on the rest. We own part of it — but you’re living there, you decorate it, and you decide when to sell.

Buying a percentage means a smaller deposit and smaller mortgage. It’s a sooner first step on the ladder for lots of people. Usually, you can also carry on buying shares, to own it 100%.

There’s lots of flexibility when it comes to shared ownership, so to help you make up your mind about which options are best for you we –

  • Advertise the minimum share available – this means that you can see the lowest amount you could earn to buy the smallest share. This gives you an idea of the most affordable option when you’re thinking about buying a home at one of our developments.
  • Offer you the highest share you can afford to buy – if we match you with one of our homes we’ll offer you the highest share you can afford to buy (based on your household income, savings and any commitments you might have such as loans, credit cards or childcare costs). This is so that you own as much of your home as you can and puts you in the best possible position to buy a greater share in the future.

How much can I afford?

We assess all applications in the same way: our definition of an affordable share is where the cost of a purchase is no more than 45-50% of your total household income, after any regular commitments.

When we work this out we include your estimated mortgage repayments, monthly rent and service charge bills. We don’t include costs for Council Tax, utility bills or maintaining your home.

You'll need a mortgage to cover the share we offer you (after deducting your mortgage deposit). So, for example -

  • For a home with a full market value of £310,000
  • Where you’re buying a 30% share, the amount you’ll need a mortgage for is £93,000
  • • If you pay a 10% deposit (£9,300) you'll need a mortgage for the remaining amount of £83,700.

You'll need to pay this equity amount on the day you complete – your solicitor will request these funds from your lender.

On the day of completion you'll also need to pay -

  1. 1 to 2 months' rent and service charge , so please have the money ready to cover this too
  2. the equity amount (the amount you have a mortgage for), your solicitor will request these funds from your lender.

Monthly costs

To give you an idea of how much a Shared Ownership home will cost, here are two examples that show the monthly costs based on different market values and shares.

They're only estimates though – have a look at how we work this out.

Example 1: Home worth £270,000

With a 25% share

  • 25% share = £67,500
  • Estimated mortgage = £359
  • Rent = £464
  • Service charge = £125
  • Total = £948
  • Guidance household income required: £34,172

With a 50% share

  • 50% share = £135,000
  • Estimated mortgage = £718
  • Rent = £309
  • Service charge = £125
  • Total = £1,153
  • Guidance household income required: £41,540

Example 2: Home worth £400,000

With a 25% share

  • 25% share = £100,000
  • Estimated mortgage = £532
  • Rent = £688
  • Service charge = £200
  • Total = £1,420
  • Guidance household income required: £51,160

With a 50% share

  • 50% share = £200,000
  • Estimated mortgage = £1,064
  • Rent = £458
  • Service charge = £200
  • Total = £1,723
  • Guidance household income required: £62,080

Other costs

We don't factor these into our affordability calculations monthly costs such as gas, electricity, water, internet and phone services or council tax. You'll need to consider them separately when you're deciding whether to buy a property.

You'll also need to budget for some extra fees you'll need to pay when you buy your home. We recommend you budget for at least £3,000 to £4,000 to cover:

  • legal costs
  • mortgage arrangements (including survey fees)
  • stamp duty (please ask your solicitor about this)
  • 1 to 2 months' rent and service charge costs up front when you complete.

How we work this out

When you’re buying a home, the costs will vary, depending on the share you buy, your mortgage and the service charge for your home. As costs vary, we have made some assumptions in our examples -

Mortgage assumptions

  • We've used a capital and interest mortgage with an interest rate of 5% for the total share amount (i.e. including your deposit)
  • A 25-year repayment term without tax relief

The annual percentage rate (APR) of your mortgage will depend on the amount of the loan and the costs linked to it.

Your monthly mortgage payments will depend on the mortgage you can get, and the interest rate – this could increase over the term of the loan unless you get a mortgage with a temporarily fixed rate.

When you speak to your potential lender ask them for a written quotation.

We recommend you speak to one of our suggested Specialist Financial Advisors – they'll be able to advise you on mortgage products that may be available from lenders who handle Shared Ownership applications.

Rent assumptions

You'll pay us rent on the share of the property we own – so for example if you own a 25% share, we own 75%.

In the examples shown, the rent you pay is 2.75% of the share we own. This is typical for new build homes, but it can vary by location.

The rent will increase every year, typically at a rate of the Retail Price Index plus 0.5%. You'll find details of the annual increase in the terms of your lease agreement.

Service charge example

Service charges will vary because some developments will have more communal services than others, like a concierge, gym or shared gardens and terraces. The service charge is also based on the size of your home so will be higher for larger properties.

Your service charges cover the cost of maintaining any communal parts you have access to. This includes the maintenance and servicing of any plant rooms, energy centres and other mechanical or electrical equipment such as lifts.

It will also cover costs such as your buildings insurance and contributions towards a reserve fund to cover any unexpected major repairs. Your solicitor will give you a full breakdown of costs during the buying process.

The service charge is based on the estimated costs over the course of a year in the first year, in subsequent years these estimates will be based on actual costs. We review these annually, so they may increase over time.

 

NEXT: check out our complete guide to buying your Shared Ownership home