The cost of buying a new build shared ownership home
It is important when you consider buying your first home that you know the costs involved in buying and also the costs you will need to pay each month when you complete.
There are various up-front costs that you should budget for when buying a shared ownership property; the fees will vary based on the price of the property you wish to buy and the share you can afford to buy taking into consideration your financial situation. These figures are for guidance only and it is recommended that you research the full costs yourself.
The Reservation Fee: £500 – Once you have a property you want to call home you will need to pay a reservation fee within a few days of reserving the property. This will be after a financial assessment with our nominated Mortgage Advisor to ensure you can afford the property and after our allocation process. This payment is usually paid by card and will be deducted from the price of the share you are buying.
Mortgage Adviser Professional Fees: From £350 – Many Mortgage Advisers charge for their service. It may seem an unnecessary expense, but they have access to the whole mortgage market, accessing lenders who only offer mortgages online or direct with Mortgage Advisors, saving you hours contacting Lenders you believe most suitable. They also assess your personal financial situation and match your circumstances to the most suitable lenders underwriting requirements, reducing the chances of getting rejected for a mortgage – a rejection could prevent you from securing a mortgage. Finally, they can also progress your mortgage directly with the lender, having direct access to the underwriters, saving you time but more importantly, they ensure your mortgage is issued on time.
Mortgage Arrangement Fees: From £450 – Some lenders charge an arrangement fee for mortgages with fixed interest rates (where you want to fix your monthly mortgage payments). These fees vary in cost but generally the longer the interest rate is fixed for, the higher the fee. Most allow you to add the fee to the mortgage loan, but you will need to discuss this with your Mortgage Advisor and decide what is right for you.
Mortgage Valuation Fee: From £500 – Your Mortgage Lender will need to value the property you wish to buy to ensure the property price is suitable to secure a mortgage against. The Lender will send a valuer to the site to view your property and/or plans and show home if the property has been sold off plan to gain a value for mortgage purposes. With off plan sales, they may revisit the property when it is built. Some Lenders will allow you to add this fee to the mortgage loan, but you will need to discuss this with your Mortgage Advisor and decide what is right for you.
Solicitor’s Professional Fees: From £650 – When contacting a solicitor ensure you look for a solicitor who offers a fixed fee for their service as many charge fees by the hour which can make buying a home expensive, especially for a first-time buyer who may need more help. It is also important to find a solicitor that you find easy to talk to and more importantly that has experience in shared ownership. Normally a solicitor will ask for a small fee upfront @£200 with the rest payable on or before completion day.
Solicitors Disbursements: From £850 – A solicitor will send you a quotation when you call them, this will show their fees. Their professional fees are for their work however, the legal process requires them to undertake legal enquiries on your behalf, these are known as disbursements and will include Land Registry fees, Local Search fees, Chancery Searches, Drainage searches to name a few. Some of these may be paid as required but are usually paid with the remainder of the Solicitors professional fee on or before completion day.
Deposit: A Mortgage Lender will require at least 5% of the share you are buying as a deposit. So, if the share you are buying is £100,000 you will require at least £5,000 as a deposit. If you have a larger deposit, you may get a better mortgage rate meaning your monthly mortgage payments will be lower.
Stamp Duty: Officially known as Stamp Duty Levy Tax (SDLT) – This is a government tax on buying a property. Your solicitor will advise you on this, as the fee depends on the value of the property and needs professional advice on how to proceed. Full details are available at www.hmrc.gov.uk/sdlt.
Advance Rent and Service Charge: On completion day, your solicitor will collect for us the rent and service charge from the day of completion to the end of the month plus one month.
Removal Costs: If you plan to use a removal company, we recommend that you get a selection of quotes as costs may vary. If possible, we recommended arranging for your removals to take place the day after your completion day as they could have to wait for the money to be received by our solicitors before they can start moving your furniture not your new home. We cannot allow access to your home until the money is received. This can be anytime during the completion day and if you have the removal firm waiting you could incur waiting charges.
Your Mortgage: Your mortgage payment will be due to your lender each month. This usually takes place by Direct Debit. It’s important that you don’t fall behind with mortgage repayments as this could put your home at risk of repossession and affect your ability to get a mortgage or credit in the future.
If you do fall behind on your payments or you are concerned that you might, it’s very important that you contact your lender as soon as possible, to explain your position as they may be able to offer payment solutions and advice to help you. You should also speak to the Income Team at Lewisham Homes who will do everything possible to offer assistance.
Your Rent and Service Charge: Your rent and service charge has to be paid each month to Lewisham Homes on behalf of the Council, by Direct Debit. Both will be reviewed annually, on 1st April, in line with the terms of your lease. The service charge may change depending on the expenses incurred for the development and you will be informed about any changes by March of that year.
As with your mortgage, it is important that you don’t fall behind with your rent or service charge payments as this could result in your being taken to court and the subsequent loss of your home. If you do fall behind on your payments or you are concerned that you might, please contact the Income Team at Lewisham Homes as soon as possible. They will do everything they can to help you.
Utility Costs: You will be responsible for payment of the household bills including electricity, gas, water, council tax, TV licence, contents insurance and other household costs. Please read the meters and provide your details to the utility companies as soon as you move in
Repairs and Maintenance: If you buy a Shared Ownership property you will be responsible for all internal repairs and maintenance to your home – everything through your front door. Lewisham Homes on behalf of the Council is responsible for the repairs and maintenance to the outside of the property and communal areas.
Buying your first home can be expensive, as a first-time buyer you may need to buy furniture, soft furnishings, window dressings, even pots, pans and cutlery – they all add up and it is very easy to spend lots of money on credit cards and loans – if you do, remember you need to budget for these in your monthly costs. It is important that you maintain your financial commitments as these can have a significant impact on your credit file if you do not keep up your monthly repayments.