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Shared ownership – Frequently asked questions.

by Anne-Marie Pearce & filed under Keelman Homes

What is shared ownership?

Shared ownership gives those who can’t afford to buy a home outright the opportunity to buy a share of it. This can be between 25%-75% of the home’s value.

You will pay “subsidised rent” on the percentage of the property that you do not own, which means the rent is less than the rent you would pay on the open market. The amount of rent paid is agreed and fixed at the outset, and there is a maximum amount it can increase each year.

The more of the property you own, the lower your rental payments will be. Over time, you can buy more shares in your home – this is known as “staircasing”. This can be done at any time after initial purchase. It will reduce the amount of rent you pay, as the share of the home that you do not own will have got smaller.

You can buy a shared ownership home by taking out a mortgage and using your savings. Any deposit you pay will be smaller than if buying outright as you will not be buying the whole of the home.

This scheme is not open to investors or anyone who intends to purchase with a view to renting the property out.

What’s the difference between leasehold and freehold?

A freeholder owns the land that the property is built on. A leaseholder buys the right to live in a property for an agreed period of time (set out in the lease) but does not own the land the property is built on. Shared ownership homes are always sold on a leasehold basis. When you obtain 100% ownership of your property, you have the right to give notice to acquire the freehold.

Can I sell a shared ownership home?

Yes, you can sell your shared ownership home at any time to:
• buy another shared ownership home
• buy another home outright
• move elsewhere

If you decide to sell your share, you must first notify Keelman Homes, who will have a period of time (set out in your lease) in which to sell your home for you. This is to ensure that shared ownership homes (which are part funded by the Government) remain as affordable housing and are available to other shared ownership applicants. If Keelman Homes is not able to sell your property to another shared owner, you will be notified and given permission to sell the property on the open market.

If your home has increased in market value, you will benefit from this increase in line with the amount of equity in the home you own. However, if the market value of your home has decreased, you may receive less money than you have paid in.

If you have made improvements to your home, you will benefit from the full value of the improvements that you have paid for. Keelman Homes will advise you of the full process and how this all works when you first decide to sell and move.

Can I make alterations to the property?

Before making any alterations or additions to the property you must ask Keelman Homes for their written approval. You will be responsible for obtaining all licences, permission and consents in relation to the works, including any necessary planning permission and building regulation consent.

Can I buy more shares in my shared ownership home?

Once you have taken your first step on to the housing ladder by buying an initial share you can, at any point afterwards, buy more shares in your home. This is known as “staircasing”.

Some homes have restrictions on staircasing. Keelman Homes will advise you about them before you buy your home. Any restrictions will also be detailed in your shared ownership lease. Most homes, however, have no restrictions and you will be free to staircase to own 100% of your home.

Shares can be bought in a minimum of 10% amounts. You can do this by paying in cash or by increasing the amount you borrow from your mortgage lender. Your lender will check that you can afford it. If you want to buy more shares you will need to get in touch with Keelman Homes to discuss it. Your lease will set out the process you will need to follow.

Keelman Homes will get your home valued by an independent surveyor. This valuation will set the price you will need to pay for the additional share. You will also have to instruct a solicitor to act for you in the purchase of the additional shares.

It will be down to you to pay the valuation fee, solicitor’s fees, and any mortgage fees, plus any administration fees that your landlord may charge.

What other costs are there when buying a shared ownership home?

As with any home purchase there are several other costs that you will need to budget for. These include:
• the cost of a valuation of your home
• legal costs for the buying process (known as conveyancing)
• any mortgage fees
• reservation fees
• Land Registry fees and Stamp Duty Land Tax (where applicable)

You will also need to budget for the other usual costs involved in moving home, such as removal costs.

As a shared owner you will be responsible for the maintenance and repairs to your home. This will be explained to you during the application process and will be set out in your lease. In addition to repairs you are also responsible for arranging for all gas installations within the property to be tested (serviced) annually and for providing Keelman Homes with a copy of the gas service certificate.

A reservation fee of £250.00 to hold the property will be payable. The fee will be deducted from the price you pay when you complete the purchase. This will reserve a property for six weeks. If you do not proceed with the purchase in this time, your reservation fee is non-refundable.

Will I have to pay other charges while Keelman Homes still owns part of the property?

You must pay Keelman Homes a buildings insurance fee, along with an administration and service charge fee (where applicable). Service charges cover the cost of providing communal grounds maintenance of the site. Keelman Homes will provide details of these before you buy a property.

Will Keelman Homes pay for repairs?

As a shared owner, under the terms of the lease you are solely responsible for the maintenance of the property. This includes the maintenance of gardens, and any fences, walls or hedges.

What running costs should I expect to pay after I buy a shared ownership home?

You should budget for:
• Mortgage repayments – this will depend on interest rates, the amount you borrow,
the length of the mortgage, and any fees added to the mortgage
• Rent (low-cost rent based on the proportion of the home you don’t own)
• Buildings insurance, administration fee and service charges (where applicable)
• Council Tax (payable to Gateshead Council)
• Repairs and maintenance of the building
• Contents insurance
• Heating, lighting, water and sewerage charges
• Fittings and furniture
• Savings (for emergencies and to buy further shares)

What happens if I don’t pay my rent or mortgage?

Your home could be repossessed by either Keelman Homes or your mortgage company. If you are thinking of buying a shared ownership home, we recommend you consult an independent financial advisor (IFA), although this is not a requirement. They will look in detail at your income and expenditure and advise you on what you can afford. A financial advisor may charge you for this advice. They are not employed by either the Help to Buy agent or Keelman Homes, so their advice is impartial. Any advice from a financial advisor about how much you can afford is not necessarily the amount you will end up buying. If you need a mortgage, your lender will do their own assessment, which may differ in terms of what they think you can afford and, more importantly, how much they are willing to lend you by way of a mortgage.

What income do I need to afford shared ownership?

This will depend on the value of the share that you buy. Keelman Homes’ minimum affordability criteria are that your cost of housing (rent, mortgage and service charges) should not exceed 45% of your net monthly income. Your net monthly income would include benefits such as child tax credits, plus your pay after tax and National Insurance is deducted, but less any loan or credit card payments.

Will I need any legal advice?

Buying a shared ownership home is no different to buying a home outright. It is advisable to appoint a solicitor to act on your behalf, who can deal with the conveyancing process (the legal transfer of the title to you). They are also needed to help you understand the terms of your lease, and to deal with Keelman Homes’ legal team. You will need to budget for these legal fees if you buy a shared ownership home. We recommend that you use a solicitor who is familiar with the shared ownership product, as the work involved is different to someone buying a home outright.

How do I apply?

You must first register with a local Help to Buy agent. They will check to see if you are eligible to apply, and support you with the application process. They will then send your details to Keelman Homes to carry out a financial assessment. Keelman Homes may appoint a consultant to act on their behalf to help with the financial checks and ultimately confirm your eligibility to buy. You should be eligible for the scheme if the following apply:

• You can’t afford to buy a suitable home on the open market
• You have a household income of £80,000 a year or less
• You are assessed as being able to afford and sustain shared ownership

The only group of people that have priority for shared ownership homes are serving members of the British Armed Forces, or those who have been honourably discharged in the past two years. Otherwise, you can apply for a home anywhere in England and do not need to live, work or have any local connection to an area other than in some designated rural areas.

Who is the Help to Buy agent and why do I have to send my application to them?

Help to Buy agents are appointed by the Government to help provide Help to Buy schemes across England. It is a central organisation that advertises and assesses applications for all types of affordable home ownership schemes. When you send your application to the Help to Buy agent, they compare your circumstances to a set of criteria, and if you qualify, they pass the application form to us. The Help to Buy agents provide central Government with statistics on who is buying affordable home ownership products, so we can improve our services and target our funding more efficiently.

How do I contact the Help to Buy agent?

Phone: 0300 790 0570
Post: 90-94 Upper Parliament Street, Liverpool, L8 7SY
Business hours: Monday to Friday, 9.00am to 6pm.

Registration for shared ownership:

These are guidance notes only. If your application is successful, your solicitor will receive a copy of the lease relating to the property. Please ensure that he/she explains the contents of the lease to you in detail.

If you have more questions or would like to discuss the shared ownership scheme, please contact:

Janice Adams (Home Ownership Manager)
Civic Centre, Regent Street, Gateshead NE8 1HH
Tel: 0191 433 5396
Text: 0778 620 8277 (Keyword BUY)
Fax: 0191 433 5354