Shared Ownership Clarification

surfer9

I am not entirely clear about the Help To Buy Shared Ownership scheme. Can some people help? Thanks.....

Say you are looking at a Shared Ownership property like the following:

1 Bedroom Apartment.

Full Price: £190,000, 40% Share: £76,000

Is it as simple as: If you can get a mortgage for that 40% share then basically that apartment is yours if you want it as long as you are eligible in terms of locality to the borough and can afford the rent/maintenance costs....

If some people could clarify my 3 points below that I am not clear on, that would be excellent:

1. I may have been hallucinating, but I am sure in the past when I have looked up these kinds of properties online before, some have stated that they require you to eventually own the whole 100% of the property. I am also sure I have read some require, for example a £40,000 income, even though that was much more than was required for the share on offer. If either of these sound familiar to anyone please let me know that I wasn't imagining these things.

2. Do some also only allow you to purchase up to 75%?

3. These housing associations also usually say that they expect you to buy what you can afford. Is this a rule that is set in stone? Would I HAVE to buy what I can afford or could I just buy say a 40% initial share that is being offered and leave it at that and continue paying the rental and maintenance costs forever, never owning more than a 40% share. I know it doesn't make the most sense to do such a thing, but just wondered if you have that flexibility?


My situation:

These homes usually have ridiculous rents and maintenance costs, though I have found some new builds in an area I grew up in not far from where I live now and they are actually a lot fairer in terms of these costs.

There is this 1 bed apartment. 40% share is being offered and I could buy the share outright, then just pay £330 in rent/maintenance per month, though ideally I'd take out a mortgage and bring it up to about 75% and put my money into buying more of the house and therefore paying less of the rent.

I am considering it, but just wanted help clarifying these 'discrepancies' I think I have seen in different Shared Ownership property adverts.

streetlovin

surfer9 wrote: »

I am not entirely clear about the Help To Buy Shared Ownership scheme. Can some people help? Thanks.....

Say you are looking at a Shared Ownership property like the following:

1 Bedroom Apartment.

Full Price: £190,000, 40% Share: £76,000

Is it as simple as: If you can get a mortgage for that 40% share then basically that apartment is yours if you want it as long as you are eligible in terms of locality to the borough and can afford the rent/maintenance costs....

If some people could clarify my 3 points below that I am not clear on, that would be excellent:

1. I may have been hallucinating, but I am sure in the past when I have looked up these kinds of properties online before, some have stated that they require you to eventually own the whole 100% of the property. I am also sure I have read some require, for example a £40,000 income, even though that was much more than was required for the share on offer. If either of these sound familiar to anyone please let me know that I wasn't imagining these things.

2. Do some also only allow you to purchase up to 75%?

3. These housing associations also usually say that they expect you to buy what you can afford. Is this a rule that is set in stone? Would I HAVE to buy what I can afford or could I just buy say a 40% initial share that is being offered and leave it at that and continue paying the rental and maintenance costs forever, never owning more than a 40% share. I know it doesn't make the most sense to do such a thing, but just wondered if you have that flexibility?


My situation:

These homes usually have ridiculous rents and maintenance costs, though I have found some new builds in an area I grew up in not far from where I live now and they are actually a lot fairer in terms of these costs.

There is this 1 bed apartment. 40% share is being offered and I could buy the share outright, then just pay £330 in rent/maintenance per month, though ideally I'd take out a mortgage and bring it up to about 75% and put my money into buying more of the house and therefore paying less of the rent.

I am considering it, but just wanted help clarifying these 'discrepancies' I think I have seen in different Shared Ownership property adverts.

I don't have an answer to all your question but below is what I know from experience..

All your questions do not have a definitive answer. It depends entirely on the Housing Association. I have contacted multiple ones in the past month and most of them made me maximise my own share, unless it is a Shared Ownership Resale then the minimum share you can buy is the amount that the current owner is holding.

Yes, some also require you to have minimum earning of certain amount. I personally think this is the kind of thing you check with the Housing Association. When you apply for a Shared Ownership they will take your confirmation of earning, deposit available to assess your affordability. I have been turned down by some due to not meeting the income they require.

Yes, some will allow you to staircase to 100% eventually but some will cap at 75/80% to ensure they have affordable houses in the area. The logic is that when you own 100% share you can sell it at whatever price you want but if the HA has a share they will have a say in what price you can sell - and they usually won't allow you to sell higher than market value. The HA that I am with only allow certain properties to be bought outright, the rest capped at 80%.

For the one that makes you maximise your affordability, I think they should be OK with you buying what you can curently afford and eventually increase your share. Again, when you increase your share they will check your affordability.

Some HA's that sell new builds also prioritise buyers who can go for higher share .... but the one that truly focus on providing 'affordable' homes won't. I have not come across any HA that make you increase your share to 100% eventually though.

I hope that answered some of your questions.

Elfbert

surfer9 wrote: »

I am not entirely clear about the Help To Buy Shared Ownership scheme. Can some people help? Thanks.....

Say you are looking at a Shared Ownership property like the following:

1 Bedroom Apartment.

Full Price: £190,000, 40% Share: £76,000

Is it as simple as: If you can get a mortgage for that 40% share then basically that apartment is yours if you want it as long as you are eligible in terms of locality to the borough and can afford the rent/maintenance costs....

Not always. Sometimes you not only have to show you have links to the local area - usually that you either live or work near there already - but also be in greater need/a priority group - such as ex-forces, or in a council property, or various other criteria.

surfer9 wrote: »

If some people could clarify my 3 points below that I am not clear on, that would be excellent:

1. I may have been hallucinating, but I am sure in the past when I have looked up these kinds of properties online before, some have stated that they require you to eventually own the whole 100% of the property. I am also sure I have read some require, for example a £40,000 income, even though that was much more than was required for the share on offer. If either of these sound familiar to anyone please let me know that I wasn't imagining these things.

Never heard of them requiring you to buy 100% - how could they ensure you would ever earn enough??

You will often need to earn more than you would if you were solely taking out a mortgage for the amount your share is worth, as the bank know you will also be paying rent and service charge. They factor these in along with you other outgoings.

surfer9 wrote: »

2. Do some also only allow you to purchase up to 75%?

I have heard of some which are capped. Usually to keep the housing stock under control of the HA. You usually do not pay any more rent once you have reached the cap though - just the service charge. However, banks are pickier about lending on these types of SO, as repossession is much more difficult, I think.

surfer9 wrote: »

3. These housing associations also usually say that they expect you to buy what you can afford. Is this a rule that is set in stone? Would I HAVE to buy what I can afford or could I just buy say a 40% initial share that is being offered and leave it at that and continue paying the rental and maintenance costs forever, never owning more than a 40% share. I know it doesn't make the most sense to do such a thing, but just wondered if you have that flexibility?

Depends on the HA. With a new build I would expect that they would want you to require a mortgage, at the very least. If you could buy 40% (say) for cash, you could buy on the open market (probably - I know that's not always true.) You would have to check with individual HAs as to their rules - which may also change between sites.

surfer9

Elfbert wrote: »

Depends on the HA. With a new build I would expect that they would want you to require a mortgage, at the very least. If you could buy 40% (say) for cash, you could buy on the open market (probably - I know that's not always true.) You would have to check with individual HAs as to their rules - which may also change between sites.

Thanks for your help.

I wouldn't be able to buy the apartment in question on the open market at full value, I don't earn enough. I have a big deposit, I just don't have a high income.

yllop1101

Just to add to what others have said, it really varies by housing association. Whilst there is a minimum amount they require you to earn to ensure its affordable, there is also a maximum amount you can earn before its considered 'too affordable'.
The housing association I bought from, the total cost of mortgage, rent and bills had to be between 25-45% of your take home pay.
Most require you to take out a mortgage, as has been said if you could afford a share outright, you could in theory afford a deposit on some sort of home. Saying that, my neighbour bought her 50% share of a 200k flat with a 40k deposit because her salary was so small, but with a larger deposit the mortgage payments etc were manageable.

Lastly, when we bought, we were tenants and the landlord of the shared ownership place came to sell. The landlord owned 50% and wanted myself and partner to buy it for ease, however we were considered by the HA as a household to be too affordable because of our combined salaries. After much anguish, they allowed us to buy 100% of the property so we are now in full ownership. So, some housing associations may have rules they can flex.

If you read my previous posts you will see my discussions around the whole dilemma we had with negotiating the shared ownership world. It was all worth it though!

surfer9

There are also a few Shared Ownership 2 bedroom houses on the new development in which the 1 bed apartment I spoke about is being built.

I definitely can't afford a £290,000 2 bed property on the open market......but......

A 40% share of a 2 bed house is available to buy for £116,000. Rent is £400, with no Service Charge.

I'd only really be able to afford paying for the £46,000 mortgage that I'd need + the £400 rent.

So at least initially I'd only really be able to show that I could afford the 40% on offer.....

Do you guys think the Housing Association would be ok with me only having enough to cover that initial 40%. They wouldn't be worried about me taking a bigger share over time?

I see now with previous posters help that different Housing Associations work in different ways and have different rules.....

But has anyone on here that owns a Shared Ownership property simply shown they can buy the initial share and possibly not gone onto increase their share once the initial share was paid off, but just continued paying the rent, and any service charge?

surfer9

yllop1101 wrote: »

The housing association I bought from, the total cost of mortgage, rent and bills had to be between 25-45% of your take home pay.

Not sure what the bills include?, gas, electric, water? + service charge? + council tax? + internet/tv license?

It seems based on that 25-45% rule I'd be ok for the 1 bed apartment and the 2 bed apartments, but it definitely rules the 2 bedroom house out, which I guess isn't a surprise.

yllop1101

I know people that have never gone on to increase their share. You're asking a lot of hypothetical questions though that none of us can answer for sure. You need to speak to the HA concerned

kingstreet

surfer9 wrote: »

Not sure what the bills include?, gas, electric, water? + service charge? + council tax? + internet/tv license?

It seems based on that 25-45% rule I'd be ok for the 1 bed apartment and the 2 bed apartments, but it definitely rules the 2 bedroom house out, which I guess isn't a surprise.

The Government's shared ownership calculator asks for service charge, rent, credit etc and it works out the most affordable share.

It's an excel spreadsheet. Suggest you get yourself a copy.

surfer9

Costs calculations of buying the 2 bed apartment with varying percentage shares taken out. Based on a mortgage rate of 2.19% over 25 years.

2 Bedroom apartment:
Full Value: £230,000
Minimum Share on offer: 40% (£92,000)

Deposit: £75,000
Mortgage needed: £17,000

Rent: £315
Service Charge: £100
Monthly Mortgage repayment: £74
Total: £489

Council Tax: £120
Bills: £140
Extras (TV license/Internet): £30
Totals: £290

Total Costs: £789

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2 Bedroom apartment:
Full Value: £230,000
Minimum Share on offer: 50% (£115,000)

Deposit: £75,000
Mortgage needed: £40,000

Rent: £240
Service Charge: £100
Monthly Mortgage repayment: £173
Total: £513

Council Tax: £120
Bills: £140
Extras (TV license/Internet): £30
Totals: £290

Total Costs: £808

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2 Bedroom apartment:
Full Value: £230,000
Minimum Share on offer: 60% (£138,000)

Deposit: £75,000
Mortgage needed: £63,000

Rent: £190
Service Charge: £100
Monthly Mortgage repayment: £272
Total: £562

Council Tax: £120
Bills: £140
Extras (TV license/Internet): £30
Totals: £290

Total Costs: £852

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2 Bedroom apartment:
Full Value: £230,000
Minimum Share on offer: 70% (£161,000)

Deposit: £75,000
Mortgage needed: £86,000

Rent: £140
Service Charge: £100
Monthly Mortgage repayment: £372
Total: £612

Council Tax: £120
Bills: £140
Extras (TV license/Internet): £30
Totals: £290

Total Costs: £902

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£122 more per month to own 70% compared to 40%.

£902 outgoings per month before food, travel and going out - is pretty high......

Will need to look at this again with a higher deposit as I can potentially get an extra £10,000, or maybe more of help from family.......

surfer9

-An extra £10,000 deposit top-up saves an extra £42 per month.
-If I increase the length on the mortgage to 30 years instead of 25 - it saves £16 per month
-If I increase the length on the mortgage to 35 years - it saves £30 per month

So I could save an extra £72 by upping the deposit by £10,000 + extending the mortgage length to 35 years.

Costs if I did that....

40% (£92,000)
Total: £417 (Rent, Service Charge, Mortgage)
Total Costs: £707 (Including Council tax, bills, and others)

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50% (£115,000)
Total: £441
Total Costs: £736

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60% (£138,000)
Total: £490
Total Costs: £780

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70% (£161,000)
Total: £540
Total Costs: £830

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