AIP for shared ownership on benefits

adrian0508

Hello all,

Hopefully this is the correct forum to ask this question, feel free to move it to a more appropriate place as necessary.

My partner and I have quite a complicated case on our hands, I will try to keep this as short as I can, but basically we are currently looking to buy our first home together and are at the stage where we are trying to get an Agreement In Principle from a lender. Our current situation is as follows:

• We do not currently live together legally - my partners registered address is with her parents and mine is at my parents.
• I am on Income based ESA and do permitted work at around £123 per week. Also, though I doubt it's relevant to any of this, I have diagnosed autism.
  
• My partner is on higher rate of both elements of PIP and Universal Credit in the LCW group (we think she should be in LCWRA group but did not have the energy to appeal this at the time this happened, we did ask for a mandatory reconsideration but got the same result).
• Her father currently receives carers allowance for her though we wish to have that moved over to me when we move in together. (though I understand that when we move in together we would be a joint claim of Universal Credit and this would be deducted anyway and we would get the carers element instead)

My partner has long term disabilities and requires adapted housing so we are looking for a ground floor flat and we have recently been accepted by a charity called Advance UK which helps disabled people purchase a property on the open market (with certain stipulations on the properties they will buy) and they treat it as a shared ownership where you will pay rent on the part the charity owns; this gives us much more choice than the limited selection of suitably adapted properties we were seeing on housing association shared ownership. The charity has given us an indicative funding (still to be formally confirmed) meaning as with any shared ownership we need to source the remaining amount ourselves which will come from a mortgage. We have talked to many mortgage advisors most of whom haven't even been willing to look at our case because of most of our income being benefits, however we are working with one very helpful senior advisor at the moment who agrees with us based on his calculations and the estimated budget we have done ourselves that a property of up to around £175,000 would be affordable; given that my partner and I have savings of £10,000 and our respective parents are both willing to help with deposit and legal fees too, we think a deposit of £15,000+ is reasonable and based on all this we'd be looking at a mortgage of around £52,000 (not including deposit), this would give us roughly a 40% share in the property (the charity has advised us we should buy the largest share we can afford).

Even though the mortgage advisor and myself think based on our income, a mortgage of that amount looks affordable (he was very happy that we had already done a comprehensive estimated budget based on our incomes), he is having trouble and thinks it will be difficult to prove to lenders that it's affordable, the main issues are as follows:

1) Most lenders won't even take my work income into account: because I haven't been there long enough (I started in March but missed furlough cut-off date so didn't have any work until July), and it's a 3 month rolling contract where I am not guaranteed any hours even though I do work stable hours each week.

2) We have been advised we would be entitled to have our rent (and some service charge?) paid on Universal Credit, however our advisor says that he and lenders can't take this into account unless we can get some sort of written agreement that this will be paid, so our rent part has to be added. This part is really crippling our affordability assessment - the advisors mortgage affordability goes from looking at around £60,000 being affordable straight down to around £20,000, which isn't even enough for a 25% share. Is there any sort of agreement that can be given for Universal Credit? How do we prove that we will be eligible for the housing element before we move in and claim it?

I very much enjoy my work it is extremely rewarding and would like to avoid changing jobs if at all possible, however if  we can't do anything about them not considering that our rent will be paid and that is the only option to get my income considered it is something I am willing to look at. Does anyone have any advice or has been in a similar situation to this that could potentially help us? We understand that we are in a very unique situation, however we desperately want to try to make home ownership a reality.

Sincerest thanks to anyone who takes the time to read this and any help or advice is much appreciated and if you need any more information please ask.

Adrian.

[Deleted User]

It does sound like a really difficult case to be honest, perhaps @haras_n0sirrah can offer something different but to my eyes the issues are:

• Number of lenders doing shared ownership mortgages where income is mainly benefit based are very small.   I can only think of 1 or 2.  Nationwide and maybe Halifax off the top of my head. 
• Income from a casual rolling contract or a zero hours contract. Usually has to have at least 1 year payslips to use this income
• The rent being paid from UC is possiblebut its not something that can be proved just now and with government policy on benefits changing all the time its not something the lender will be very flexible on.  Either you are getting it now and can prove what you are getting with statements, or they cant use it.   Same goes with the carers allowance

I dont do a lot of shared ownership, only maybe 5% of my business so maybe there is a more bespoke lender off the beaten path that @haras_n0sirrah is aware of but to me it sounds like your broker has explored the options properly

adrian0508

Deleted_User said:

It does sound like a really difficult case to be honest, perhaps @haras_n0sirrah can offer something different but to my eyes the issues are:

• Number of lenders doing shared ownership mortgages where income is mainly benefit based are very small.   I can only think of 1 or 2.  Nationwide and maybe Halifax off the top of my head. 
• Income from a casual rolling contract or a zero hours contract. Usually has to have at least 1 year payslips to use this income
• The rent being paid from UC is possiblebut its not something that can be proved just now and with government policy on benefits changing all the time its not something the lender will be very flexible on.  Either you are getting it now and can prove what you are getting with statements, or they cant use it.   Same goes with the carers allowance

I dont do a lot of shared ownership, only maybe 5% of my business so maybe there is a more bespoke lender off the beaten path that @haras_n0sirrah is aware of but to me it sounds like your broker has explored the options properly

Thanks very much for your reply,

We have constantly been told by charities and other organisations that being disabled/a carer and on benefits shouldn't hold you back from getting a mortgage because of things like shared ownership/having your rent paid/help towards service charges and mortgage interest etc. but in our experience it's been the exact opposite as lenders don't take any of these things into consideration anyway. We both work hard and the situation we are in is neither of our faults, we just want to own our home like a lot of people and we've worked hard to save what we have.

We will try to approach Halifax and Nationwide directly possibly as I bank with Halifax and my partner is with Nationwide, but it seems as though we are running out of options.

Perhaps I could ask if my employer would consider a fixed hours contract, but I'm not sure how likely that is given they are a charity.

Thanks for your time anyway.

Adrian.

haras_n0sirrah

I think the issue you will have is that with benefits lenders will want to see 3 months of benefit income before they will consider so if you aren't getting it yet it can be problematic
I would try barclays 

kingstreet

There is a specialist for SO for those with mostly benefits income;-
https://mysafehome.info/
but this is not a recommendation as I have no knowledge of them other than seeing a website.

adrian0508

haras_n0sirrah said:

I think the issue you will have is that with benefits lenders will want to see 3 months of benefit income before they will consider so if you aren't getting it yet it can be problematic
I would try barclays 

We have been on benefits for far longer than 3 months due to my partner being disabled, the issue is that we don't get the rent part of Universal Credit until we have rent to pay, which given we are both at our parents and want to move out, we don't have.

Thanks very much for the suggestion - we tried Barclays and were told by their advisor that their calculator showed it as affordable, but they weren't able to offer an AIP (because our income is mostly benefits) until we had a property in mind and had more details of things like service charge and rent amount etc. which seemed absurd to us and our mortgage broker given that estate agents won't even let us view properties without an AIP.

Everything we need to prove seems to depend on something else that we can't get until we have what we need, a complete catch-22.

kingstreet said:

There is a specialist for SO for those with mostly benefits income;-
[Can't post links, see OP]
but this is not a recommendation as I have no knowledge of them other than seeing a website.

Thanks for the suggestion, however we already approached this lender and were told that to be eligible, everyone applying for the mortgage from them has to be unable to work, whereas it's just my partner that is unable to work in our situation. Ironically though, we have been told that for disabled people that are eligible for that lender, they should always try to get a mortgage from normal means first because that specialist scheme has a lot of extra fees and ends up being a lot more expensive.

[Deleted User]

Why didnt your broker just get the AIP from Barclays with a guesstimate for the rent and service charge?  It is near impossible to get an AIP for shared ownerships as the amount that can be borrowed depends on the rental part and that can be different for every property. 

adrian0508

Deleted_User said:

Why didnt your broker just get the AIP from Barclays with a guesstimate for the rent and service charge?  It is near impossible to get an AIP for shared ownerships as the amount that can be borrowed depends on the rental part and that can be different for every property. 

We have estimated service charge, and we already know what the maximum rent on the shared ownership will be because the charity has told us it is capped at 3% of their share.

This is the response from barclays:

"As promised, please find enclosed the affordability assessment completed on our call today. We were not able to provide an agreement in principle, as the income being used was partially benefit income. When income like this is used, it is classed as “non-standard” income, which just means an initial decision cannot be given and an underwriter needs to review this before a formal decision can be made. However, the affordability check does show the borrowing to be affordable based on income and expenditure declared, so this should hopefully serve as some evidence when making an offer on a property. At this stage, no interest rate or mortgage terms have been agreed as the formal application hasn’t been completed. This would only be done when an offer has been accepted on a property you are looking to proceed with."

MissG80

I sympathise, it makes me mad it is so complicated.  The issue holding you back is your employment.  You either need a permanent contract and have been there 6 months (possibly 3) I would guess as most permanent contracts have a six month probation period so this seems to be standard.
Regarding the rent, I was going to say that the affordability checks done by the housing association always seemed more stringent than my mortgage advisers so I'd be wary of just taking a mortgage advisers word.  One option could be if you can get 25% share together there should be the option to staircase which is to buy a bigger share at a later date, usually in 10% increments, although you do have to pay the solicitor fees around 1.2k again.  Where I am there is a 1% scheme where you can by 1% a year for 15 years at a fixed price that rises lower than the market so its worth it. Low uptake unsurprisingly as even 1% is a lot of find every year.