Share to Buy Expert Sessions: Your questions about affordability
Shared Ownership Affordability
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 my partner and I combine our incomes to buy a Shared Ownership home?arrow_downward
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
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 affect 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.
Can I buy a Shared Ownership home if I'm currently unemployed?arrow_downward
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.
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 I buy a Shared Ownership home if I've just started a new job?arrow_downward
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.
What happens if I lose my job and can no longer afford to pay for my home?arrow_downward
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
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.
Will my application be affected if I have student debt?arrow_downward
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
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.
Can I have a guarantor if buying a Shared Ownership home?arrow_downward
No – under the terms of the Shared Ownership scheme, guarantors are not permitted.
Can I choose what percentage I buy as long as it's in line with the minimum or above? Or will I be told what share I need to buy?arrow_downward
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.
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.
Is affordability based on an individual basis and does it differ between housing associations?arrow_downward
Response from SO Resi – Affordability will actually be based on the individual properties.
What is the feasibility of being able to afford a Shared Ownership property when I earn the average London wage? (c £27k)arrow_downward
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.
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.
I've heard that rent on a Shared Ownership home is discounted or subsidised - what does that mean and how is it calculated?arrow_downward
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.
Why do I pay rent to a housing association?arrow_downward
Response from SO Resi – This payment covers the share of your home that you don’t own.
How is the rent calculated on a Shared Ownership home?arrow_downward
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.
How often does rent increase on a Shared Ownership home and how is this regulated?arrow_downward
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%
Is the rent on a Shared Ownership home impacted by the government base rate?arrow_downward
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.
Will the rent I pay on my home decrease if the property decreases in value?arrow_downward
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.
Would I need to pay ground rent on a Shared Ownership home? What exactly is this?arrow_downward
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.
What is included in the service charge?arrow_downward
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
- 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.
Will my service charge go up over time? How is this calculated?arrow_downward
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.
Would I need to pay service charge if I buy a Shared Ownership house, or is this only on flats?arrow_downward
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.
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.
Other than rent and my mortgage, what other costs should I be aware of? Service charge, ground rent, etc?arrow_downward
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.
What financial advice would you give first time buyers who are looking to buy a home?arrow_downward
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.
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.