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Confused! Shared Ownership- Gvt calculator doesn't match development affordability criteria

I've visited a shared ownership property in London that would make a great home for me, my son and my mum. On the website for the development it states that a 25% share of the full price of £767,000 is £191,875 with the minimum 5% deposit required being £9,593.75. The rent on the remaining share is £1,079.30 pcm and the service charge is £115.36 pcm. My take home salary is £4200 pcm and so I thought that this would be easily affordable for me, especially as the rent on a three bed in London is around £3k pcm, almost £1k more a month.

I spoke to Metro Finance who assessed me and informed me that I didn't meet the affordability criteria for the SO property. They said that the total costs of the home (i.e. rent, mortgage and service charge) add up to 67% of my net monthly income which is too high, it needs to be as close to 45% as possible. I was baffled by this and did some rooting around the internet and found the Homes England SO affordability calculator spreadsheet. I played around with this and discovered that on my salary of £70K I would still need a deposit of £56K to pass the assessment for this particular property. Even a household with a total income of £90K  - the maximum for London - would need a deposit of £20K to make the numbers add up in terms of mortgage lender affordability assessment.

I'm really confused as to why the development's marketing literature gives the impression that only a deposit of £9,593.75 is required when this is not the case. Is this just misleading advertising, or is there something else I am missing?

I'm also wondering how strictly applied the 45% of net income ratio is? I will have a deposit of £30K (when I did the assessment I told them that I had £10K as I assumed this is all I needed to put down), which gives me a ratio of 48.44% - is it possible to pass on this?

Thanks to anyone who has read this to the end, and especially anyone with any advice/clarification to offer!
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  • kingstreet
    kingstreet Posts: 38,600
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    The deposit can be as low as 5% if your income is great enough to meet affordability. We do SO assessments and the number of arguments I've had with people who don't understand the Homes England calculator is boss. If you exceed 45% it's not proceedable. We have no latitude at all.

    Lender affordability can be different. Sometimes it passes with HE but not a lender. Other times the opposite applies.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Myci85
    Myci85 Posts: 53
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    We were looking into buying a SO last year, but we came away thinking that it's all a load of nonsense. They make out its a scheme to help people get on the market, but the reality seems to be that you need to have either a huge deposit, or a very decent income, and if you have these, I question why you'd be opting for SO in the first place!
    Another hurdle I came across was that I couldn't pass affordability for a 40% on one development (lowest they would do) but on another development that went down as low as 10%, I'd pass affordability, but there were no mortgage companies that would lend such a small amount out of the very small pool that will do SO.
  • housebuyer143
    housebuyer143 Posts: 3,154
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    Myci85 said:
    We were looking into buying a SO last year, but we came away thinking that it's all a load of nonsense. They make out its a scheme to help people get on the market, but the reality seems to be that you need to have either a huge deposit, or a very decent income, and if you have these, I question why you'd be opting for SO in the first place!
    Another hurdle I came across was that I couldn't pass affordability for a 40% on one development (lowest they would do) but on another development that went down as low as 10%, I'd pass affordability, but there were no mortgage companies that would lend such a small amount out of the very small pool that will do SO.
    I suppose it depends were in the country you are. My sister got a 30% share with a 20k deposit and 25k income. This was in south west. 
  • LondonEast
    LondonEast Posts: 11
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    The deposit can be as low as 5% if your income is great enough to meet affordability. We do SO assessments and the number of arguments I've had with people who don't understand the Homes England calculator is boss. If you exceed 45% it's not proceedable. We have no latitude at all.

    Lender affordability can be different. Sometimes it passes with HE but not a lender. Other times the opposite applies.
    Thanks for that, Kingstreet. This 45% thing is complete Bo****ks to my mind! In London a lot of people spend more than this of their income on housing. The other thing that gets me is that the Homes England calculator and its 45% rule was developed in 2006 when mortgage interest rates were under 3%, way lower than they are now. They need to adjust the 45% rule to take account of the fact that mortgage rates have gone up so much in the past couple of year, IMO.
  • kingstreet
    kingstreet Posts: 38,600
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    The deposit can be as low as 5% if your income is great enough to meet affordability. We do SO assessments and the number of arguments I've had with people who don't understand the Homes England calculator is boss. If you exceed 45% it's not proceedable. We have no latitude at all.

    Lender affordability can be different. Sometimes it passes with HE but not a lender. Other times the opposite applies.
    Thanks for that, Kingstreet. This 45% thing is complete Bo****ks to my mind! In London a lot of people spend more than this of their income on housing. The other thing that gets me is that the Homes England calculator and its 45% rule was developed in 2006 when mortgage interest rates were under 3%, way lower than they are now. They need to adjust the 45% rule to take account of the fact that mortgage rates have gone up so much in the past couple of year, IMO.
    This is exactly the response I get for applying the calculator as I mentioned. Everyone shoots the messenger! Unfortunately, the body responsible for distributing Government affordable housing funding does as it sees fit.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • LondonEast
    LondonEast Posts: 11
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    The deposit can be as low as 5% if your income is great enough to meet affordability. We do SO assessments and the number of arguments I've had with people who don't understand the Homes England calculator is boss. If you exceed 45% it's not proceedable. We have no latitude at all.

    Lender affordability can be different. Sometimes it passes with HE but not a lender. Other times the opposite applies.
    Thanks for that, Kingstreet. This 45% thing is complete Bo****ks to my mind! In London a lot of people spend more than this of their income on housing. The other thing that gets me is that the Homes England calculator and its 45% rule was developed in 2006 when mortgage interest rates were under 3%, way lower than they are now. They need to adjust the 45% rule to take account of the fact that mortgage rates have gone up so much in the past couple of year, IMO.
    This is exactly the response I get for applying the calculator as I mentioned. Everyone shoots the messenger! Unfortunately, the body responsible for distributing Government affordable housing funding does as it sees fit.
    I'm so annoyed by it, I'm going to get in touch with Homes England 
  • LondonEast
    LondonEast Posts: 11
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    Thanks @Myci85 , it is nonsense. Needing a massive deposit and/or an income in the top 10% of earners for SO means it's accessible to a tiny number of people. Not sure who it is targeted at now but it's not fit for purpose.
  • LondonEast
    LondonEast Posts: 11
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    The deposit can be as low as 5% if your income is great enough to meet affordability. We do SO assessments and the number of arguments I've had with people who don't understand the Homes England calculator is boss. If you exceed 45% it's not proceedable. We have no latitude at all.

    Lender affordability can be different. Sometimes it passes with HE but not a lender. Other times the opposite applies.
    Hi again Kingstreet, are you able to share how HE verifies that the information you give them is true? What paperwork are you asked to supply to confirm an affordability check? Thanks very much.
  • kingstreet
    kingstreet Posts: 38,600
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    No idea. We provide our HA/RSL introducer with the completed calculator and they do the rest. There appears to be a stage between this and reservation where a referral is made to "the council" which presumably means the local authority for approval.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Bonniepurple
    Bonniepurple Posts: 554
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    Myci85 said:
    We were looking into buying a SO last year, but we came away thinking that it's all a load of nonsense. They make out its a scheme to help people get on the market, but the reality seems to be that you need to have either a huge deposit, or a very decent income, and if you have these, I question why you'd be opting for SO in the first place!
    Another hurdle I came across was that I couldn't pass affordability for a 40% on one development (lowest they would do) but on another development that went down as low as 10%, I'd pass affordability, but there were no mortgage companies that would lend such a small amount out of the very small pool that will do SO.
    We lived in a shared ownership place for 11 years.  We were just able to buy the 25% available outright and it gave us the security that I wanted having been renting previously.  There were niggles - like we had to pay for 100% of all repairs- but the main issue came when we sold.  Buyer 1 didn’t meet affordability with a (very small) mortgage.  Buyer 2 did what we did and bought the share outright.  As we only owned 25%, the amount of equity that we had was also tiny and didn’t even cover the deposit for the next place.


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