Heylo Shared Ownership scheme - any pitfalls?

EasyToAssemble01

I've been looking at a few new build developments in my area, as Bovis are offering shared ownership through Heylo (and potentially Help to Buy, though it may only be Shared Ownership on the ones I'm looking at).

Shared Ownership, Home Reach | Bovis Homes

My first silly question is: if a property is listed as Shared Ownership, is this optional? Can I just buy with a mortgage?

My second question is: in the event I can only get Shared Ownership, are there any pitfalls I may be looking at?. The possible obstacles I've seen so far are:

• 2.75% on the unpurchased property value increasing by RPI + 0.5% each year
• Additional service charges may be payable on properties with communal facilities or services.

The scheme does allow me to choose how much part-ownership I can take. At this point, it's likely to be around 80% mortgage / 20% Shared Ownership for me.

Based on the above, are there any cons to Shared Ownership schemes, like limits on the amounts I can repay, or costs in increasing my share (solicitors, etc)? And does anyone here have experience with the Heylo scheme in particular?

As I plan to get a tenant in the second room, I plan to use that to repay as quickly as possible (as far as I know, tenancies are OK if I am living at the property), but worried about getting stuck in an interest-trap if I'm limited on my staircasing agreement.

Slithery

EasyToAssemble01 said:

As I plan to get a tenant in the second room, I plan to use that to repay as quickly as possible (as far as I know, tenancies are OK if I am living at the property), but worried about getting stuck in an interest-trap if I'm limited on my staircasing agreement.

If you let out a spare room and you are also living in the property then they won't be a tenant, they'll be a lodger. There is a massive difference between the two and by calling them a tenant you could end up with all sorts of problems.

EasyToAssemble01

Slithery said:

If you let out a spare room and you are also living in the property then they won't be a tenant, they'll be a lodger. There is a massive difference between the two and by calling them a tenant you could end up with all sorts of problems.

Ah, OK. The only thing I can think it might possibly affect is a mortgage application. In any other instance, I'll easily be able to prove I'm living at the property.

8mbc

A shared ownership property will not allow you to have a lodger/tenant.

Also, they will check your financial criteria and I don't think you're likely to be eligible if you could afford to buy it outright.

EasyToAssemble01

8mbc said:

A shared ownership property will not allow you to have a lodger/tenant.

Also, they will check your financial criteria and I don't think you're likely to be eligible if you could afford to buy it outright.

Underletting is allowed under most / all schemes. It's subletting (ie. renting out the entire property) which isn't allowed.

I think I'd be able to afford 80% of the full value deposit, so it would just be a case of whether a 20% share would be allowed.

eddddy

EasyToAssemble01 said:

My second question is: in the event I can only get Shared Ownership, are there any pitfalls I may be looking at?. The possible obstacles I've seen so far are:

• 2.75% on the unpurchased property value increasing by RPI + 0.5% each year
• Additional service charges may be payable on properties with communal facilities or services.

I'd be pretty sure you'd have to pay the same service charges whether you own 20%, 50%, 100% (or any other percentage) of the property - so that's not a pitfall of shared ownership.

EasyToAssemble01 said:

At this point, it's likely to be around 80% mortgage / 20% Shared Ownership for me.

It's not completely clear what you mean here.

Heyo say they are "Fully supported by mortgage lenders" - so you should be able to "mix and match" mortgage and shared ownership.

As an example, say a property's full price is £200k....

Option 1

• You could buy 100% of the property (i.e. no shared ownership) with a £160k (80%) mortgage 
• So you'd need £40k in cash

Option 2

• You could buy 20% of the property (i.e. shared ownership) with no mortgage
• So you'd need £40k in cash

Option 3

• You could buy 50% of the property (for £100k) with a £60k (60%) mortgage
• So you'd need £40k in cash

Plus many other possible options.

• If you expect property prices to increase a lot - option 1 is probably the best route.
• If you expect property prices to stagnate or drop - option 2 is probably the best route

• If you think property prices might not increase too much - it becomes a much more difficult decision. (If you wanted, you could hedge your bets by taking option 3.)

EasyToAssemble01

eddddy said:

I'd be pretty sure you'd have to pay the same service charges whether you own 20%, 50%, 100% (or any other percentage) of the property - so that's not a pitfall of shared ownership.

EasyToAssemble01 said:

At this point, it's likely to be around 80% mortgage / 20% Shared Ownership for me.

It's not completely clear what you mean here.

Sorry - I meant that I would pay 10% deposit for 80% of full ownership (so an asking price of £200K price would require a mortgage for £160K (I would deposit 10% of that), and the remaining 20% would be shared ownership). I have no idea of the minimum percentage Heylo might want to start with, though.

Do freeholders pay service charges? I always assumed they didn't. If I managed to get 100% ownership, would I still be liable?

user1977

EasyToAssemble01 said:

eddddy said:

I'd be pretty sure you'd have to pay the same service charges whether you own 20%, 50%, 100% (or any other percentage) of the property - so that's not a pitfall of shared ownership.

EasyToAssemble01 said:

At this point, it's likely to be around 80% mortgage / 20% Shared Ownership for me.

It's not completely clear what you mean here.

Do freeholders pay service charges? I always assumed they didn't.

Why wouldn't they? If there are communal costs for the estate, everybody has to chip in.

eddddy

EasyToAssemble01 said:

Sorry - I meant that I would pay 10% deposit for 80% of full ownership (so an asking price of £200K price would require a mortgage for £160K (I would deposit 10% of that), and the remaining 20% would be shared ownership). I have no idea of the minimum percentage Heylo might want to start with, though.

FWIW, the Heylo scheme is really just a "mortgage in disguise". 

Your figures don't really add up. Is this what you mean:

For a £200k house

• Halo would provide £40k (20%)
• You mortgage lender would provide £154k
• You would provide £16k

So you would own 80% of the house but, but you would take out a £154k mortgage loan to buy it.

And Halo would own the other 20% of the house.


If so...

• You would pay the mortgage lender, maybe, 3.5% interest on the £154k they provided
• You would pay Haylo 2.75% interest on the £40k they provided. (Haylo call it "rent", but "interest" is a better description)
• • So that equals a payment of £1,100 of interest (or rent) to Heylo for the first year

But...

• Haylo would get 20% of the increase (or decrease) in value of the house over time
• You would get 80% of the increase (or decrease) in value of the house over time
• Your mortgage lender would get 0% of the increase (or decrease) in value of your house

And...

• Haylo increase the interest (or rent) they charge each year by RPI+0.5%
• So this year you pay them £1,100 - next year you might have to pay them £1,133 etc

EasyToAssemble01

user1977 said:

EasyToAssemble01 said:

Do freeholders pay service charges? I always assumed they didn't.

Why wouldn't they? If there are communal costs for the estate, everybody has to chip in.

Ah, I had no idea. I always assumed it was all just covered by Council Tax if the property was freehold.

EasyToAssemble01

eddddy said:

EasyToAssemble01 said:

Sorry - I meant that I would pay 10% deposit for 80% of full ownership (so an asking price of £200K price would require a mortgage for £160K (I would deposit 10% of that), and the remaining 20% would be shared ownership). I have no idea of the minimum percentage Heylo might want to start with, though.

FWIW, the Heylo scheme is really just a "mortgage in disguise". 

Your figures don't really add up. Is this what you mean:

For a £200k house

• Halo would provide £40k (20%)
• You mortgage lender would provide £154k
• You would provide £16k

So you would own 80% of the house but, but you would take out a £154k mortgage loan to buy it.

And Halo would own the other 20% of the house.


If so...

• You would pay the mortgage lender, maybe, 3.5% interest on the £154k they provided
• You would pay Haylo 2.75% interest on the £40k they provided. (Haylo call it "rent", but "interest" is a better description)
• • So that equals a payment of £1,100 of interest (or rent) to Heylo for the first year

But...

• Haylo would get 20% of the increase (or decrease) in value of the house over time
• You would get 80% of the increase (or decrease) in value of the house over time
• Your mortgage lender would get 0% of the increase (or decrease) in value of your house

And...

• Haylo increase the interest (or rent) they charge each year by RPI+0.5%
• So this year you pay them £1,100 - next year you might have to pay them £1,133 etc

Yes, that's right. The part about a percentage of value-increase belonging to Heylo is good to know. The rest (like the annual  increase on interest) I had taken into account. Guess I have to weigh up the long term cost of any shared ownership vs the short term of pulling a deposit together that will prevent me needing SO as a solution. Long term, it doesn't seem like great value.