WHAT IS SHARED OWNERSHIP?
If you can't afford the mortgage on 100% of a home, Shared Ownership is a government backed scheme that allows you to buy a share of it (between 25% and 75%), and then pay an affordable monthly rent on the remaining share.
It does not mean that you have to share your home with anyone!
Heylo Housing will own the share of the house that you don't buy, and will rent that share back to you. Over time, as and when you can afford to, you are able to increase your share in your home (this is known as staircasing), up to 100% ownership.
who can buy a shared ownership home?
You could buy a Shared Ownership home in England if:
Your household earns £80,000 a year or less outside London, or your household earns £90,000 a year or less in London
You are a first-time buyer, you used to own a home but can’t afford to buy one now or are an existing shared owner looking to move
There may also be some additional eligibility criteria relating to specific new build housing developments
BEING A SHARED OWNER
Given that you will be buying a share of a property, with or without a mortgage, and paying a rent on the share you do not purchase, you will need to make sure that the property is structurally sound, in good condition and that you can afford it. (Naturally, as you will be an owner you will also want to make sure you can look after it!).
Providing you keep up your monthly payments, including any mortgage payments, you and any others in your household are entitled to live in the property as if you owned it outright.
As with any home ownership position where you have not bought the property outright in cash, your home and cash deposit may be at risk if you do not pay the amounts due under the lease and any mortgage.
Whilst shared ownership may allow you to buy the home you always wanted, if at some point in the future you needed to move, then you have 2 choices... simply sell you share or sell the property outright on the open market.
As with any home purchase, the cash invested to buy your share may be at risk if property values fall.
With shared ownership you can climb on and move up the housing ladder, enjoying the usual security and control associated with home ownership and long leasehold property.
WHAT IS INCLUDED IN A TYPICAL SHARED OWNERSHIP LEASE?
A description of the property including its boundaries and guide to which parts are your responsibility.
The start date of the lease, the share that you buy, the amount of rent that you must pay together with other amounts required under the lease and the method that the landlord will use to review the payments due each year.
Buildings Insurance arrangements.
The method by which you can purchase additional shares to own more of your home in the future (known as staircasing).
The method by which you can sell the property in the future and obtain your entitlement to any increase in value.
Your responsibilities as a leaseholder and those of the landlord under the lease.
Any restrictions or prohibitions linked to the Freehold title.
WHAT IF I WANT TO MOVE?
As with any leasehold property, you are free to move home at any time.
Provided that your payments under the lease are up to date, you will you get any increased value on the share you own.
As with any property purchase, if the house has fallen in value you will get back less than you initially contributed.
ONGOING MONTHLY COSTS
Shared ownership 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 Independent Financial Adviser can help you budget for these.
The lease will clearly specify all payments due – this will typically be the rent, buildings insurance and any annual lease management charge. 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 any mortgage separately together with the other usual bills such as Council Tax, utilities and any other third party charges which may apply.)
Each year the rent and any management charge will be reviewed in accordance with the lease. The rent will typically increase by inflation, Retail Price Index, RPI, plus between 0.5% and 0.75% each year.
Unlike other ways to buy a home, payments due under the lease are not affected by changes in interest rates.
TYPICAL UP-FRONT COSTS
Professional RICS Standard Valuation Report
Regardless of whether you are buying with or without a mortgage, you will want to make sure your chosen property is of standard construction, structurally sound, in good condition and is worth what you are being asked to pay. The price of a RICS Standard Valuation Report will vary depending on the value of the property, however, typically they cost around £200 – £500, this is paid at the point of instruction.
You will need a solicitor to act on your behalf. A number of schemes offer a panel of solicitors with competitive fixed legal fees payable at point of purchase (“completion”). You can usually 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, typically 10% of the property value. 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. 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 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 lease is less than the amount that would be payable if you purchased the property outright.