Right to Shared Ownership: buying a share of your rented home
Costs
When you apply for Right to Shared Ownership, you’ll need to make sure you can afford the payments for your home. You’ll discuss the costs with your landlord during a home ownership meeting.
Your landlord will then send you to a mortgage adviser or other independent financial adviser, who will assess your income and outgoings.
You’ll be given an ‘offer notice’ when you apply - this lists the costs you’ll have to pay after you buy your share.
Buying costs
You’ll need to pay a deposit when you exchange contracts. This is usually between 5% and 10% of the share you’re buying.
You’ll need to be able to afford to pay:
- your solicitors’ fees
- your monthly mortgage repayments
- rent to the landlord
- any monthly charges (for example, service charges to pay for the maintenance of communal areas)
You may also need to pay stamp duty.
Your solicitor will give you a list of buying costs. They’ll go through it with you and explain what you need to do.
Once you own a share of the home, you’ll need to pay buildings insurance. You may need to also pay:
- a service charge
- an estate charge
- a management fee
- into a repairs reserve fund
Service charge
You may need to pay a monthly service charge after you buy a share of your home. This depends on the type of home, but it’s more likely you’ll have to pay a service charge if you live in a flat with communal areas.
The service charge covers the cost of cleaning and maintaining shared areas, such as gardens or the external windows of a block of flats.
You can ask the landlord for a summary showing how the charge is worked out and what it’s spent on.
Estate charge
For some homes, you’ll need to pay an estate charge. This is to cover the cost of maintaining any communal areas that are not covered by the service charge, such as roads.
Management fee
For some homes, you’ll need to pay a fee to the landlord to cover their administration costs.
Repairs reserve fund
You may need to pay into a reserve fund (also called a ‘sinking fund’). The fund covers major works, like replacing the roof. Reserve funds usually apply to flats, but some house developments have them.
You can find out how landlords must manage these funds on the Leasehold Advisory Service website. If you sell your home, you will not usually be able to get back any money you pay into a reserve fund. This depends on your lease.
Extending your lease
You may need to pay to extend your lease in the future.
If the remaining lease on your home is too short, it may become difficult to sell or remortgage your home. This can affect the value of your home.
You’ll need your landlord’s permission to extend your lease. Check with your landlord before you buy what rules they have for shared owners who want to do this and how much you’ll have to pay. When the remaining lease drops below 80 years, it can be much more expensive to extend.
You can read more about extending a lease on the Leasehold Advisory Service website.