Affordability

Tuareg

When buying shared ownership how is affordability worked out? basically what percentage of a salary is required to be left over after the mortgage cost, rent, service charge, council tax bills, Utilities etc are paid to still be classed as affordable?

Seems a bit of a black art as one HA will require a minimum salary of (for arguments sake) 25k yet another with the same price and value of shares will say 27.5k.

So if I was earning £25k about £1650 a month take home. How much of that would be an acceptable amount to allocate to the above before a HA/bank would say unaffordable?

Would an estimated monthly cost of £780 on a salary of £1650 be too much?
Thanks

tb440167

It sounds like way too much to me tbh

Try and add your costs up over the next couple of months to see how much you spend before social stuff.

£90 Council tax
£50 TV/PHone
£25 Mobile contract

That's the best part of £200 extra a month, every month, and that's even before food/living cost

Tuareg

O.K thanks.

Obviously everyones living costs are going to different some spend lots on food others going out so how do the these companies arrive at the reasonable figure?

Sally22_2

I have just gone through all the affordability stuff with a HA, they want the service charge, rent and mortgage to equate to around 35% of your take home pays. Ours will be approx 31% which in effect makes us too affordable but as we are going for a resale, it shouldn't be too much of a problem...

We aren't trying to stretch ourselves and have paid off our loans early to be able to get a mortgage then it could actually go against us with the HA! Doesnt make sense whatsoever!

Tuareg

Thanks Sally, so in the above example I'd be looking at about £575. Seems a bit low as a percentage especially if you have no other commitments/debts.

Sally22_2

Well in our case, the mortgage, rent and service charge is going to cost just under 800pm, our joint take home pay is 2600. But I have estimated our other monthly costs to be another 500pm on top and 50% of our pay altogether.

If your percentage is too affordable, they will try and get you to buy a bigger share. We didn't want to do this as 1) we don't have a deposit for a bigger share and 2) when we come to sell on, it will be easier to sell a 40% share to someone else who is struggling to get on property ladder as they dont have a big deposit like we do rather than trying to sell an 80% share where if they had that sort of deposit, they might as well get a regular mortgage if you see what i mean?

We are buying 40% for 78k if that helps with the sums.

kingstreet

The HCA supplies a SO calculator and all HAs should use it.

I have a copy, if anyone wants one. It's an Excel file. PM with email address for a copy.

It'll have to be tomorrow. I've had enough of this for one day...

BMW_Mike

Hi,

Yep, - Over 45% of available income (then you cannot afford it) - less than 35% then you shouldn't be on the scheme, it's a bit of tightrope because the household income should not be over £60k in total to get on the scheme (more in London I believe) however they only seem to count salary (If you have some irregular part time work for example this isn't counted).

The IFA has a spreadsheet on which he enters the values and it spits out a % - it isn't rocket science and I was able to get pretty close with a calculator and paper, We hit 38% on the score, right in the sweet spot.

I think I got to about 39 or 40% on my own calculations.

Interestingly our local Council thinks 20 to 30% of income should be a target figure so the Housing Association are tighter.

Sally22_2

Just an update on this, even with our figures being 31% we have still been accepted, but as I said, we are buying a resale so maybe slightly different.