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Shared Ownership Explained | Staircasing Explained


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 £550 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. GTC offer fixed fees but other firms may prove more expensive when hourly rates are applied.  Always use a solicitor who is familiar with Shared Ownership and remember to ask them about any disbursements.

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 £125,000.
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 in the future so as to hold an interest in excess of 80%.
Please note that the Government have recently introduced a SDLT “holiday” for first time Buyers who have never previously had an interest in land. If you qualify then the SDLT threshold rises to £250,000 and a market value election should be made if the original price does not exceed £250,000.
Deposit and Exchange of Contracts
When you exchange contracts on your new home you may be asked you to pay a further deposit to the housing association. This will be added to the holding/administration fee you have already paid to form a total deposit on exchange of contracts. When you complete your purchase this will normally be deducted from any rent and service charge payable and any remainder from the purchase price. 

What are the costs once I move in?

If you have taken out a mortgage to buy your home there will be a monthly mortgage payment to the lender. There will also be the monthly rent to a housing association on the part you do not own. With some properties, usually flats, there will also be a service charge payable to cover the cost of maintenance and repair of the main structure and any communal areas. The service charge is payable even if you should decide to buy your property outright in the future.
The housing association will also have to take out buildings insurance on your new home and will recharge the cost of this to you, usually through your service charge. 

How do I apply?
The housing association will ask you to attend a financial interview to establish the share you are able to purchase. We can recommend an Independent Financial Advisor who is a specialist in arranging finance for this type of purchase. Once this is established you will need to complete an application form and return it to the housing association that will check to see if you qualify. The housing association will let you know if your application has been accepted but may sometimes contact you for additional information. 

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