affordability – Be Berry Informed

Overview

I have extensively written on the topic of shared ownership. In this section, I provide you with some techniques to help you find your ideal shared ownership property and some advice to help you along the way. While, I cannot guarantee you that you will find the perfect shared ownership property. The below will, hopefully help you with your journey.

Visit MoSCOW

MoSCOW is Business Analyst tool for prioritising.

M – Must Have

S – Should Have

C – Could Have

O – Ought to Have

W – Would like to have or some will call it wish to have.

This tool is quite useful before viewing homes to determine priorities for features before you begin looking. It helps save time by helping you to idenfity properties that you are most interested in viewing versus wasting time being a ‘lookie loo.’ A ‘lookie loo’ someone who really does not have an interest in purchasing the property but is just looking. Likewise, it forces you to think about the purchase, what is important to you, what you need, and what is more of a luxury for you.

Basically, prioritisation is from the top to bottom with ‘Must Have,’ being the features you must have to consider the property and these would be your most important features. Whereby, if the property did not have most of them, the property would be one you would not pruchase. ‘Ought to Have,’ would be your next most important features that the property needs for you to consider but if a few were not included, it would not be a deal breaker for you. ‘Should’ and ‘Could’ have are features that are not as important but at least some should be included. Whereas, ‘Would like to have’ being more of features being on your wish list. How many you assign to each category, the criteria for each, and how you assign is your choice.

Expand your search

If you are looking towards shared ownership then you need to have a bigger search area. This is because shared ownership properties are in demand due to their limited numbers, and shared ownership operates on a first come first served basis. From my experience, if you are looking in a limited area because of nearby family or schools, for example, it is likely your search will be quite long. To get around the barrier of limited search area, is to expand your search to include nearby areas.

How to search for a shared ownership property using a website

Expand you searching tools

Some people will advise you to use the Shared Ownership website. This is a great starting point but I would strongly recommend expanding your searching tools. One good tool is On the Market. This site allows you to search your area for shared ownership and to search on a variety of criteria. Another option is entering your search criteria into a search engine. The downside, to using a search engine you may return outdated results.

Keep up to date with new housing developments in your area

Share ownership properties are included with affordable housing requirements, social housing, for planned developments. This means a small number of homes will be allocated shared ownership, I believe the figure is around 10% for social housing. However it is worth noting social housing includes housing for councils and housing associations to rent. In order to be one of the first to apply, you will need to contact the developer to find out the housing association that is managing shared ownership. Once you find out, then you will need to contact them and to keep in contact to get your application in as one of the first. A good way to identify potential shared ownership properties is to follow housing developers on Facebook, for example Taylor Wimpey, Keepmoat, and Barrat Homes. Along with following housing associations in your area.

Look at your finances

Affordability and Credit Checks

The last thing you want to happen once you have found your dream home, is to find out you do not pass the affordability checks or you have an adverse credit history. The realiality shared ownership is not cheap. You will have to pay rent, service charge, a percentage of the building insurance, in many cases a mortgage, and repairs on the property. Furthermore, you will have to go through an affordability check to ensure you can afford the property. Plus, you will need to get a mortgage. Since shared ownership means you will not own the property outright, it means the number of mortgages available are limited and it can mean you will need to put up a larger deposit than if you bought the property.

Cost of Moving

The other side of getting your finances into shape is ensuring you have enough money. Moving is not cheap. You will face changes in your expenses, such as utility bills, council tax, and you may face re-connection fees for services like broadband. Also, you will face having to go through your possessions to see what you will need and what you can throw away. This can mean, the need to replace high value items like television and furniture. Along with hiring a skip to throw away items you no longer need. Next, you need to consider the legal expenses. In the UK, outside of London, a good ‘ball park’ starting figure is £2,000. £2,000 is your legal fees and this does not include your first month’s rent, mortgage + any additional days being charged because you are moving during the month. You will need to factor in at least an additional £4,000 – £7,500 if your property does not come with flooring (carpet and tiling). Finally, you need to account for the cost of your mortgage plus any fees being charged by your mortgage and mortgage broker.

Advice: Maximising your chances

Don’t get attached

The above sections gives you techniques on how to find your perfect shared ownership but it does not tell you how to endure the rejection that comes with shared ownership. To begin with, it is important to see your search as a journey that has an undefined destination. Yes, you may have an idea of the type of property you want, its location, and what it should contain, but it is important not to get attached. When viewing properties, it is easy to get attached to a property and begin to get tunnel vision that leads to an obsession of needing that specific property. Best advice, don’t get attached. Shared Ownership, can be very competitive and brutal. Instead, it is best to search every day and regularly view properties. If you find one you like then start the process to compete for it but continue your search. Because of the competitive nature of shared ownership and because shared ownership is done on a fist come basis, it is easy to give up. Perserveriance, is needed to be able to continue your search.

Be flexible and adaptable

While searching for your perfect shared ownership property, it is important to review what is working and what is not working. This is a journey and to find your perfect shared ownership property you will need to be flexible and open to updating your approach. The more you get ‘locked in’ to a location, type of property, or specific features, for example, the harder it will be to find your ideal property. To be clear, I am not saying you will not find it but it will, most likely, take longer with a lot of rejection. So, the more you can be flexible and adapt to what is available in your market the more likely you are able to succeed.

Final Thoughts

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Introduction

This article is written from a buying a share ownership, unoccupied new build perspective. While the following information will provide you some insight into shared ownership, the process and timeline for purchasing resale properties and unbuilt properties are subject to specific dependencies.

So why buy shared ownership? Are you currently renting and aspiring to own your own property, but are you concerned about the current economic situation, particularly the rising taxes on hard-working individuals? Do your concerns lead you to believe that you will always be renting due to your inability to afford homes?

For some, there exists a solution: shared ownership. Not everyone can afford shared ownership, but those who qualify may benefit.

Shared Ownership Explained

Basically, you share the property’s ownership with the housing association. Typically, you will own between 25% and 100% of the property. In some situations, you can buy as low as 10%, but from my experience, 25% seems to be the lowest you can purchase. You pay the housing association rent, service charges, and insurance for the portion you do not own.

Buying a house outright with a mortgage involves making an offer. Purchasing through shared ownership is competitive and operates on a first-come, first-served basis. The individual who completes their checks first will have the first chance to secure the property. This process takes place regardless of any incentives or premiums offered by other buyers.

Purchasing your share

How do you know how much to buy? Purchasing a shared ownership property is more complex than purchasing a home with a mortgage. It involves a step-by-step process involving a finance company, a housing association, and, in most cases, a mortgage advisor.

1st Step: Initial Qualification

What do you want in a property

Consider what you need from your property. Think about your requirements, like location, number of bedrooms, size of the house or flat, if it has a garden, cost, energy efficiency, and other qualities that are important to you. This is the first question you must ask yourself, and it will shape answers to your other questions, such as is shared ownership right for you, can you afford shared ownership,�

Finding the property

There are several ways to find your property and to help you determine if shared ownership is right for you. Please note that these tools are not associated in any way with this site. They provide a broad estimate of what you can afford and list properties in your area.

There are three ways to find a property under shared ownership. First, via the government.uk website. This search will identify developers offering shared ownership homes for sale, along with links to their respective websites. Another resource is Share to Buy, which offers listings of shared ownership homes. The final option is to utilise online platforms such as Rightmove and OntheMarket.com, where you can search for shared ownership homes using the site’s provided filters.

Regarding your affordability, several online tools, such as a shared ownership calculator, can estimate your shared ownership based on the information you provide. Others, like the shared ownership affordability calculator, can give you an estimate of what you can afford for your monthly payment.

Making contact and initial screening

Once you find a property you like, you will reach out to the housing association, who will provide you with information about their finance company and contact details. The finance company will do an initial screening to determine if you qualify.

The finance company will notify the housing association and arrange a viewing of the property if you qualify.

What does this mean? It is a hybrid situation, where you will be leased but enjoy the benefits of home ownership. Because shared ownership is a hybrid ownership model, it means that you will pay a mortgage, pay service charges, and pay part of the building insurance.

Step 2: Viewing and further qualification

At this stage, you will have the opportunity to view the property. It is likely that a representative from the housing association will be there. While the representative may not have all the answers, they should be able to address common questions such as tenancy agreements, the extent of improvements permitted by the housing association, the area, and other general inquiries. Once you’ve viewed the property, you should reach out to the finance company, not the housing association, to discuss your decision to proceed.

Should you wish to proceed, further checks are done, like income, debt, or anything adverse on your credit report, and you may be asked to pull your credit file. This stage is to determine if you qualify for a mortgage, to do a 5-year stress test, and to determine if you meet the housing association’s financial requirements. From my experience, housing associations will have a residual income requirement that can range from 0% up to 20%. Residual income is the percentage of income remaining after paying rent, mortgage fees, service charges, insurance, and other expenses.

If you haven’t already, we will now inquire about the source of your deposit and the amount you plan to contribute. Depending on your response, you may need to provide documentation and bank statements.

Once these checks are completed, the finance company will proceed to search for a mortgage. Really, you don’t need the finance company to find a mortgage. You have the option to find your own mortgage broker or arrange a mortgage on your own. However, if you have adverse credit, low income, or plan on using Universal Credit, then consider using a mortgage broker.

Step 3: Reservation Fee

If you are the first to complete their checks, then you will get the opportunity to reserve the property. In order to reserve it, you will need to pay a fee, which will vary depending on the property, location, and housing association, but generally expect the fee to be in the £200–£500 range. It is only once you pay your fee that the property will be removed from the market, and if someone pays the fee before you, then you will lose the property. Therefore, it is imperative that you pay your fee as quickly as possible once you complete your checks. Once you have paid your fees, you will need to contact a solicitor to complete the process.

Timeframe

So, how long does it take from initial contact to paying your reservation fee? A lot depends on how quickly you can provide the information required, the housing association, the finance company, the time of year, and the type of property. The general estimate would be 2–6 weeks to complete the checks and pay the reservation fee. Once you instruct your solicitor, expect 8–12 weeks, on average, before completing. Overall, this means the whole process from beginning to end will be 3–5 months.

Tag: affordability

How to find the perfect shared ownership property