Share to Buy Expert Sessions: Your questions about affordability

Find out more about the costs associated with buying a Shared Ownership home here.

Response from Southern Home Ownership – Absolutely, both of you can combine your incomes to buy a Shared Ownership home as long as you both meet the general eligibility criteria

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.

Response from JLL – You must be able to afford the purchase and sustain the housing costs. Sellers have a responsibility to undertake appropriate checks on the applicant to ensure that they can do this. Unless you have other sources of income you might not be able to purchase a home.

Response from JLL – You would need to provide three months’ pay slips to ensure you can sustain the housing costs and if you need to obtain a mortgage, you might need to wait three to six months before you are able to apply for a mortgage. We would recommend that you discuss this with a financial advisor.

Response from Southern Home Ownership – If you lose your job and are struggling to pay for your home we’d always encourage you to contact both your lender and your housing association to discuss repayment options

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.

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.

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.

Response from Southern Home Ownership – We would advise speaking to a specialist Shared Ownership financial advisor who will ll be able to advise you on the affect your student loan will have on obtaining a mortgage

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.

Response from JLL – You must maximise your affordability, so purchase the largest share that you can comfortably afford. Our job is to sell responsibly to you, so we will look to ensure you maximise your purchase, minimising your rent payments.

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 .

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.

Response from SO Resi – Affordability will actually be based on the individual properties.

Response from JLL – It is quite possible, although it will also depend on the amount of deposit you have available and the total price of the property, as to whether you are able to sustain the monthly payments.

Response from Southern Home Ownership – The rent you pay on a Shared Ownership home is often called subsidised or discounted because its lower than the market rent you’d pay in the local area. The rent is a percentage (usually 2.75% and no more than 3%) of the share retained by the housing association.

The exact percentage is likely to vary depending on the development and so it’s always worth checking with the relevant sales team who will be able to advise how the rent has been calculated at the development you are interested in.

Response from SO Resi – This payment covers the share of your home that you don’t own.

Response from Southern Home Ownership – The rent is a percentage (usually 2.75% and no more than 3%) of the share retained by the Housing Association. The exact percentage is likely to vary depending on the development and so it’s always worth checking with the relevant sales team who will be able to advise how the rent has been calculated at the development you are interested in.

Response from Southern Home Ownership – The rent increase and how it is regulated will be outlined in your lease but generally speaking the rent will be reviewed each year and any changes will be based on the Retail Price Index + 0.5%

Response from Southern Home Ownership – Generally when it comes to the annual rent review for Shared Ownership homes, housing associations use the RPI (Retail Price Index) as a benchmark.

Response from L&Q – The rent is calculated on the un-owned share value of the property at the time of legal completion. If you decide to staircase at any point, the full market value of the property will be re-valued and the rent will be charged on the new un-owned share in the same way.

Response from Southern Home Ownership – Ground Rent is usually payable on any leasehold property to the Freeholder or superior leaseholder for the length of the lease. However, generally Ground Rent isn’t payable on Shared Ownership homes until you own 100%.

It would be worth checking with your housing association as they will be able to advise if this is the case for the home you are looking to purchase.

Response from L&Q – The service charges cover a wide variety of maintenance and insurance cover for the development. This may include but subject to development specific T&C’s:

• Management fee
• Building Insurance
• Audit fee
• Communal water supply
• Electricity consumption and estate electricity supply
• Cleaning/window cleaning
• General maintenance
• Health & Safety fee and fire equipment
• Gutter cleaning and drain maintenance
• Lighting protection
• Accounting/accountancy fees
• Emergency call out
• Major work provisions
• Bank charges
• Disbursements
• Public liability insurance
• Snow clearance/gritting
• Tree maintenance; garden cleaning and garden supplies
• External cleaning and much more.

Please do speak to a member of the sales team for the detailed list.

Response from Southern Home Ownership – Your service will be reviewed at the end of year. The amount collected at your development from all residents will be compared with how much has been spent on items such as communal cleaning, gardening and general maintenance and adjusted accordingly.

At the end of every financial year your Housing Association will provide you with a copy of the audited accounts and clearly explain if there needs to be any changes to your service charge for the year ahead.

Response from Southern Home Ownership – You may still need to pay a service charge if you buy a house as you may still need to contribute to the upkeep and maintenance of the wider development such as any communal landscaping.

Find out more about the costs associated with buying a Shared Ownership home here.

Response from JLL – Generally, there are service charges and sometimes ground rents to take into consideration and some schemes have standing payments for the heating system.

There is the cost of moving, legal fees and valuation fees that will also need to be paid. There are also utility bills and things like contents insurance to consider. We would recommend you speak with the sales advisor for details related to specific homes or developments.

Find out more about the costs associated with buying a Shared Ownership home here.

Response from L&Q – Before you get swept up in the idea of owning your first home you need to ask yourself some serious questions about what you can realistically afford to borrow. Evaluate factors like bills, changes in circumstances and interest rates to gain a bigger picture of your future finances.

Here are some questions to think about:

• How big is your deposit?
• What monthly repayments can you afford?
• What are your average incomings and outgoings?

At L&Q, we can help you find a home to suit your financial needs with properties across the Home Counties, London and South East.

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.

Find out more about leasehold homes here.