Catch 22- Shared ownership- confused millenial ! Rejected by HA for earning to much but below 90,000

mmlady12

Hi


I am a 26 year old who is on GBP 48,000 a year and my take home is around GBP 2500 a month (after tax and a salary sacrifice for shares scheme at work)


I am trying to get onto the property ladder and saw a decent 2 bedroom in north London for GBP 270,000. The local housing association were selling a 60% share for GBP 162,000 and rent on the 40% was around GBP 250, service charge around GBP 91. Today I was told I was priority number 3 because the other two applicants had a less annual income and were considered a priority because of this due to the local housing association policy.


How is this fair? I feel like these government schemes are a catch 22- especially for young professionals who are doctors/lawyers/accountants. We earn too much to be considered by local associations but meet the minimum annual threshold set by the association (in this case it was GBP38,000) ...


the association also have a financial assessment that priority 1 candidate has to do before being accepted by the housing association... the main requirement is that 45% or more of net income should not be spent on rent/mortgage and service charge and that a mortgage can only be given for 3.5 of ones salary.


That means that.. if a candidate was on 40,000 a year..and after tax they had 2300 a month.. only 45% of that 2300 could be used as rent/mortgage/service charge.. which is 1035 which just about covers the mortgage/rent and SC calculations I did below..


When I did my calculation the below calculations I did on the share to buy calculator regarding mortgage monthly quotes.


E.g for a mortgage of 162,000 the 60% share association are offering.. and with a 20,000 deposit the mortgage, rent and service charge will be:


1. Mortgage 670 a month- 2 year fixed 2.19% interest
2. Rent- 250
3.Service Charge -90
Total= 1010 a month


So in order to meet the threshold that no more than 45% of ones net income should not be spent on rent/mortgage and service charge..one needs to be earning 2244 or more a month.(1010/45%=2244)


2244 a month after tax is around 39,000 a year.


however a salary of 39,000 to 40,000 multiplied by 3.5 get you a mortgage of only 120,000 which is less than the 162,000 60% share being sold? So how will that work? Candidate 1 who has priority would if on 38,000 would only be able to get a mortgage of 133k..unless i guess they have a deposit of 162-133k= 29k


So basically I have been penalized for studying and earning to much


any advice on next steps.. as I do not want to invest time in viewing housing association flats for them to tell me i earn to much.. could help to buy be an option? The issue I have with Help to buy is new builds on average go for 450,000 for a 2-3 bed in north London- totally out of my budget!


Please help!
Signed confused millennial!!

sal_III

The shared ownership scheme is aimed at low income people. So the fact that the HA is giving priority to the lowest income applicants is perfectly normal.

In your calculations you used 45% of net, when according to you the requirement is 45% of gross:

main requirement is that 45% or more of gross income should not be spent on rent/mortgage and service charge and that a mortgage can only be given for 3.5 of ones salary.

Maybe look at a different HA with different rules, or more expensive property where your 48k will make you one of the lowest income applicants.

csgohan4

Shared ownership is not for everyone. Some won't allow staircasing to 100%, you have 100% of the maintenance costs even if you own less

mmlady12

Hi.


Thanks.. I have updated that now.


Yes but the candidate would still need a salary of 162,000 divided by 3.5 to get a mortgage...so that's a salary of around 46,000 to even get a mortgage of 162k..


Thanks for the suggestion of looking for higher priced properties, where i would be classed as a low earner.. but issue with these new builds in London is i wont be able to afford..as all of my net income will go onto mortgage/rent..


I see how it is fairer to give the lower earner a priority i guess..but in order to get a mortgage of 162,000 one would need as calculated above a salary of 46,000 a year.. that's not really a low earner is it.....


Many pitfalls..nothing is ever simple/straight forward isit! There are some flats I have seen.. were the minimum threshold income is even more than 48,000 so that prices me out of those too...

PasturesNew

You seem to be looking at it from your 1 salary position; maybe successful candidates are couples with 2 salaries, so they can meet the criteria more easily.

mmlady12

yes I know that.. but what are young people suppose to do then.. I earn to much too little to get a 100% mortgage straight out.. and do not have bank of mum and dad to top up by 20,000 savings for deposit.


but i earn too much to be given priority in this HA case.... as a family that earns less and might potentially struggle with rent/mortgage is given priority.

mmlady12

yes perhaps.. although I asked the 3rd party company facilitating this shared ownership offer to purchase and they said the difference between me and candidate 1 and 2 is that they earn a lower annual income. They did not say anything about them being a couple and having two incomes.


Priority is given if you live in the borough, have children or you are giving up a council house to buy the shared ownership property.


The only difference between me and the other candidates is income.

PasturesNew

mmlady12 wrote: »

... that they earn a lower annual income. They did not say anything about them being a couple and having two incomes....

They might earn just a tiny bit less than you - they never said how much. Maybe they're "just" (*chuckles*) on £47k.

sal_III

Well the 2 other applicants that are ahead of you are lower than your 48k, and fall into your calculation of 46k, so see no problem. Not to mention that they might have higher deposit and looking for lower mortgage.

Thanks for the suggestion of looking for higher priced properties, where i would be classed as a low earner.. but issue with these new builds in London is i wont be able to afford..as all of my net income will go onto mortgage/rent..

Your take home pay is 2.5k, the mortgage + rent + service charge on slightly more expensive property will hardly cost you that much. No need for over-dramatising.

You manage to earn 48k at 26, that must have taken some effort. Apply the same in finding the right scheme and property for you, instead of complaining how unfair life is.

mmlady12

sigh!


I guess so.. I added that i was expecting A 2000 bonus this year.. but this is not confirmed.. i thought the higher the annual salary the better.. i guess that's only in terms of a mortgage not in selection criteria!


maybe i should have removed the bonus..

sal_III

mmlady12 wrote: »

yes I know that.. but what are young people suppose to do then.. I earn to much too little to get a 100% mortgage straight out.. and do not have bank of mum and dad to top up by 20,000 savings for deposit.


but i earn too much to be given priority in this HA case.... as a family that earns less and might potentially struggle with rent/mortgage is given priority.

You can save ~20k, take a £200k mortgage and buy a 1-2 bed flat?
Or you can find a partner and buy something bigger together
Or you can find a different shared ownership property
Or you can buy outside London

Losing 1 SO property to someone in bigger need than you is hardly the end of the world...