Share to Buy Expert Sessions: Your questions about affordability
Shared Ownership Affordability
Isn't Shared Ownership more expensive than buying outright as you're paying both rent and a mortgage?arrow_downward
In many cases, the monthly payments for a Shared Ownership property is less than renting privately as you pay a mortgage on the percentage share that you own and a below-market-value rent on the remainder to a housing association.
It’s also worth noting that if you choose to buy more shares in your home, your mortgage payments will increase but your rent will decrease in turn.
What is the minimum salary I need to earn as a single buyer?arrow_downward
There is no set minimum income for Shared Ownership – either for single buyers or as a joint household income. Each home will have its own valuation and the housing association will determine the minimum income required for that property to be affordable to people earning under the maximum allowance threshold. However, if you have a large amount of cash to put down on a property then this may make the minimum income more affordable.
Can I buy a home with Shared Ownership if I am self employed?arrow_downward
As long as you can show at least three years of self-employed accounts, and providing your income is sufficient, you should be able to obtain a mortgage. If your income varies from year to year, you should seek independent financial advice about suitable mortgages and about managing the ongoing costs of home ownership.
I'm on a fixed term contract - will this effect my financial check?arrow_downward
It depends on the line of work you are in and if you’re likely to struggle to find work beyond your existing contract, as well as the length of your current contract. We would recommend you speak with a financial advisor who will be able to provide guidance on this.
Am I totally excluded if I'm very slightly below the recommended minimum income on a property I'm interested in?arrow_downward
Response from Clarion Housing – Not necessarily, we’d take into account your deposit too. Typically, the higher the deposit the less the income can be.
I can afford the home but have a poor credit history because of a past instance which was not my fault. Can I still buy?arrow_downward
In order to be eligible to buy a home, you will need to be able to take out a mortgage. If your credit history stops you from doing this, then you will not be able to proceed. Before renting a property to you, housing associations will run a credit check. In some cases they will not allow you to rent the property if you have bad credit, so it is worth asking them about their policy before you view the property.
I have loans, a credit card and overdraft. Will I still be able to buy through Shared Ownership?arrow_downward
Response from Censeo Financial – It will depend on the size of those loans and credit cards, because they will come into play in terms of working out affordability. However, it will not completely rule you out.
Can I buy a Shared Ownership home if I receive benefits?arrow_downward
Benefits are generally not included as income when assessing your affordability. However, some mortgage lenders will accept benefit income if it is permanent, meaning that it’s not subject to review, but generally there does have to be some earned income as well.
Can family members help with affordability?arrow_downward
The only way that family members can really assist is by gifting money towards the deposit. In terms of family members acting as a guarantor to allow you to access a larger loan, virtually no lenders will currently accept guarantors for mortgage loans.
I've been assessed and approved but am being asked for 10% deposit, rather than the 5% I expected. Why is this the case?arrow_downward
Response from Clarion Housing – This depends on your individual circumstances – for example, if you’re in temporary work, have visa restrictions, have a lot of financial commitments or have a poor credit history .
What is the general rule of thumb when it comes to affordability? Is it measured differently between each housing association and mortgage provider?arrow_downward
Response from Clarion Housing – It’s 45% of your net income that should be spent on rent, service charge and mortgage payments. Shared Ownership affordability guidelines can vary from lenders requirements.
Do I have to pay Stamp Duty? If so, is it just on the share I’d own or on the total worth of the property?arrow_downward
If you’re a first time buyer in England, you will not need to pay Stamp Duty on properties worth up to £300,000.
As a first time buyer, when purchasing a Shared Ownership property you will have the option of paying Stamp Duty on the full value of the property as if you were buying outright, or you can just pay Stamp Duty on the share that you’re purchasing. If you have already purchased your property and did not elect to pay the full Stamp Duty at outset, then you will not be liable to pay more Stamp Duty until you purchase an 80% share of your home via the staircasing process.
I've heard some Shared Ownership properties don't allow for lease extensions if the owner hasn't bought 100%. Does this have any impact on the property value or how banks see them?arrow_downward
Response from Clarion Housing – New Shared Ownership homes have 125 year leases typically. Mortgage lenders are okay with leases above 80 years in most instances so there may be no need to think about a lease extension until you’ve reached 99 years at least.