Copy article

Shared ownership, service charge and remortgaging

Journalist: Shekina Tuahene, Mortgage Solutions

ended 04. June 2024

Hi, 

I am looking for experiences brokers have seen shared ownership borrowers come across when remortgaging. There has been a lot of news about service charge rising either rapidly and/or by large amounts, beyond owners' expectations.

Is this something which seems to be impacting shared owners when remortgaging? Is it limiting their options? Or are such large increases relatively rare?

5 responses from the Newspage community

Copy all

Copy

Editor
Michelle Lawson
Director at Lawson Financial
Shared Ownership remortgages can be quite costly as the Housing Association (who aren't the quickest to respond) has to approve it as well as the lender, the valuer and lawyers. With the uncertainty of the associated costs too such as the ground rent on the unowned share as well as the mortgage payments. If the borrowers increase their share (known as staircasing) this is another complexity. There are limited lending options for shared ownership borrowers as it isn't accepted by every lender so this can really narrow down choice.
Copy

Robert Timm
Managing Director at Sunland Mortgages
I've helped a number of clients remortgage their shared ownership properties over the years, both like-for-like as well as staircasing. The process is definitely not easy, sometimes very difficult to get information quickly from the Housing Association, and many comment at how much the service charge (or rent) has increased by.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Service charges, for any leaseholder owners not just those via shared ownership, have been an issue lenders have been watching for a little while now. Many lenders are taking issue with service charges, or ground rents, which are above a certain percentage of the property value or have automatic increases built into them making the property unacceptable to some lenders. This causes issues for those homeowners and limits the pool of properties that potential buyers can access, due to a reduced number of lenders willing to help. The rules and Laws around leasehold property are in the spotlight at the moment, so it's possible that we could see changes in the area over the coming months, it will be interesting to see how and when lenders respond to these changes and whether they help, or hinder, those looking to mortgage a leasehold property.
Copy

Austyn Johnson
Founder at Mortgages For Actors
Yes, I had a client who went from about £100pm to around £400pm in 2 years as it was in need of a new roof suddenly. They are looking at keeping the charge at this level for 2 years before they review, in which case it could go up again. This shouldnt be allowed as its now the highest SC in the area and has pretty much made it unsellable. The client is now forced to pay this service charge on her 1 bed appt or hope for a sale, which then the new buyers would also be at the freeholders mercy...
Copy

Ellis Shepherd
Business Owner, Senior Broker at All About Mortgages
Happy to provide some proper insight, having worked in the shared ownership sector now for 11 years. Firstly, Service Charge is an industry-wide problem and not something specific to shared ownership. I feel shared ownership gets an unfair blasting because it's an affordable housing product, but this is nothing new. Turn the clocks back a few years, it also got unfairly tarnished when rising ground rents were an issue.

In recent months, I have found returning clients who are looking at remortgaging are feeling the pinch, but is this specifically because of service charge? No. Have I seen examples like I have read in the media? No. For many, it is probably not an issue in singularity, but is the word we are missing out here "yet"? Could Service Charge become more of an issue in the coming years? Is this just the start? What will lenders think, as they were quick to refuse to lend on those scaling ground rents every 5/10/25 years, but service charge is seemingly changing every year.