WHAT ARE THE INITIAL COSTS INVOLVED IN THE PURCHASE OF MY NEW HOME?

There are initial costs associated with purchasing a shared ownership home, just like there are if you buy on the open market. We have set out below details of the costs you are likely to incur:

Holding/Administration Fee
When you view a property you will be given the opportunity to place a holding/administration fee on the property of your choice. If the housing association is unable to offer you your choice of property, your cheque will be returned to you. If you accept an offer of a property and then do not proceed to complete your purchase, the housing association will retain this fee to meet their legal and administrative costs.

Survey and Valuation Report

Your mortgage lender will want to make sure that the property you are buying is worth the money you are being asked to pay and will therefore want to carry out a survey on the property before you purchase. If it is a new property, this will normally be a standard ‘Mortgage Valuation, however, if you are buying a second hand property you may require a more extensive ‘Homebuyer’s Report. The lender sets the fee you will be charged, but you should typically allow between £175 and £300 depending on the property you are buying and the type of survey you decide to have.

Legal Fees
You will need a solicitor to act on your behalf and fees vary. This firm's fee is £579 plus VAT with no hidden extras but other firms may be more expensive. Always use a solicitor who is familiar with Shared Ownership and remember to ask them about any “disbursements”. 
These are additional costs for Land Registry Fees. These fees are based on the price you are paying for your share in the equity as follows:

£0 - £50,000                          £50.00
£50,001- £80,000                  £80.00
£80,001- £100,000                £130.00
£100,001 - £200,000             £200.00

Stamp Duty Land Tax [SDLT]

If the value of the equity share you purchase initially is less that £125,000* you do not have to pay SDLT
You do, however, have a choice to pay SDLT on each separate stage of the phased purchase by reference to the prevailing rates of tax in force at the time, or alternatively make a market value election by paying tax as if the property had been purchased outright now.

Market Value Election
On your behalf we will [if you ask us to] make an election to Revenue & Customs to pay SDLT on the basis of the market value of the property at completion of your purchase. The purchase will be treated as a conventional purchase and you will make a once and for all SDLT payment – even if you “staircase” later [increase your share in the property at a later date].
Typically a Market Value Election will normally be beneficial where the initial market value does not exceed £175,000.

If you do not decide to make a Market Value Election then SDLT may be payable on the original purchase price and then additional SDLT may have to be paid if you staircase [see explanation  of “Staircasing” below] in the future so as to hold an interest in excess of 80%.
*Tax is subject to change at anytime. First Time Buyers may be entitled to a “holiday” that increases this limit to £250,000. This advantage is currently due to be removed at the end of March 2012.