Ongoing monthly costs

Your Front Door makes buying your home more affordable but there are still costs to be aware of. In addition to these costs you’ll also need to think about the on-going costs of ownership like Council Tax and utility bills, but don’t worry, your IFA can help you budget for these. 

The Your Front Door lease will clearly specify all payments due – this will typically be the rent, buildings insurance and the annual lease management charge of £210.00 including  VAT (which increases annually with RPI). These amounts will be collected by Direct Debit in one amount each month – usually at the start of the month. (Of course, you will have to pay separately the other usual bills such as Council Tax, utilities and any other third party charges which may apply.) Each year the rent and management charge will be reviewed in accordance with the Your Front Door lease. The rent will increase by inflation, Retail Price Index, RPI, plus 0.75% each year. Unlike other ways to buy a home, payments due under the Your Front Door lease are not affected by changes in interest rates.

For example: If you purchased a 10% share of a £250,000 house then the Your Front Door rent due on the 90% unpurchased share would be £11,002.50 in the first year or £916.88 per month (remember there’s no mortgage to pay). If over the next 12 months RPI is 1.25% then your next year’s rent will increase by 2% to £11,222.55 or £935.21 per month.

Owning more... Here’s how it works

Imagine you purchased a 10% share of a home with a discounted value of £200,000 and would like to buy a further 30%. Since you moved in your property has increased in value and applying the discount the property is now worth £300,000. Buying a 30% share would be calculated as follows:

30% share of the increased property value would normally cost £90,000 (30% of £300,000) but with the Your Front Door value entitlement applied as a discount a 30% share would cost just £67,500.

Once you have purchased an additional share your rent would immediately reduce. In this case, as you are purchasing 30% of the remaining 90% your rent would reduce by 1/3rd.

How so?... Based on the original £200,000 property price a 30% share was worth £60,000. Given that the value of a 30% share has increased to £90,000 you would be entitled to 75% of the £30,000 value increase - which is applied as a discount. This means that you get £22,500 off the £90,000 share price paying just £67,500.

What are the up-front costs?

  • Professional Valuation

You will want to make sure your chosen property is worth what you are being asked to pay. The price of a Valuation will vary depending on the value of the property, however, typically they cost around £200 – £500, this is paid at the point of instruction. Please speak to the Your Front Door IFA for more information.

  • Your Front Door product fees

Your Front Door fees are fixed at £1,200. This covers the cost of your IFA affordability assessment, application processing and legal fees incurred on our behalf to purchase the property before we sell it to you on a Your Front Door lease. You will also be passed the costs of the searches (Local Authority, water drainage, environmental) carried out on your behalf which will usually be in the region of £450. This is customary work associated with home purchase and should reduce the work and charges of your own solicitor.

  • Legal fees

You will need a solicitor to act on your behalf. Our panel of solicitors offer a competitive fixed legal fee and will clearly state any other costs (“disbursements”) payable at point of purchase (“completion”). You can of course use a solicitor of your choice if you wish.

  • Deposit on exchange

When you exchange on the home of your choice you will need to pay a cash deposit of 10% of the property value. If you are buying a 10% share this deposit will be your purchase price. If you are buying more than a 10% share this deposit will form part of your purchase price. The remainder will be payable at completion via your solicitor.

  • Rent on completion

There will be rent payable monthly in advance on the part you do not own – starting at 4.89% per annum on the value of the unpurchased share.

When you complete your purchase, you will need to pay any rent, lease management fee and buildings insurance due between the time you complete and the end of that month PLUS the next full month. This will allow us time to set up your monthly Direct Debit.

  • Stamp duty land tax (“stamp duty”)

Property purchases and leases over 21 years with rent over certain values are subject to stamp duty land tax. Your solicitor will advise you of the current rate, the amount due on the property you wish to buy and how to pay it at completion. Typically, stamp duty payable under the Your Front Door lease is less than the amount that would be payable if you purchased the property outright.

Your new home awaits...