How does Shared Ownership work?
Shared Ownership means buying a share of the property at a more affordable price. The amount required for a deposit is lower than a traditional sale and you only need a mortgage for the share you are purchasing. The buyer would also then be paying a reduced rent to cover the remaining share of the property. Overall this route usually costs less than purchasing a property outright or renting privately, with the additional bonus that you are building equity with your payments.
A typical share would initially be between 25% and 75% of the full purchase price (depending on what the landlord is offering) with the rent reducing accordingly when increased shares are purchased.
You will need to be able to obtain a mortgage for the share you want to purchase unless you are able to buy the share outright.
Can I sell my home?
Yes, just like any other homeowner you are free to sell the percentage that you own, however you will need to give Pioneer Places the first right of refusal, but if we don’t take this up you are free to sell to any other eligible person. If you decide to sell your share you will need to instruct an Independent Valuer to set the selling price.
Who can buy through Shared Ownership?
The average cost of a property in Birmingham is £137,000, Shared Ownership is aimed to help those buyers for whom this would be unaffordable, this is a government backed scheme to help people on smaller incomes, so you need the below to qualify:
You have a household income of less than £80,000 per year
You have a household income of less than £80,000 per year
You are a first time buyer
(Second steppers may also be considered)
You are at least 18 years of age
You have a good credit rating
You have at least £2000 savings
(to cover one-off costs such as solicitor costs)
When making such a large investment it is important to seek independent financial advice.
Some of the first things you will need to consider when buying a home are:
How much deposit you can afford to put down?
How much you can borrow?
Which is the most suitable mortgage for your circumstances?
An independent financial advisor (IFA) will be able to assist you with this and will also help you to complete your mortgage application.
This is a £250 fee you pay to reserve your home. It is non-refundable should you pull out of your purchase during the sales process, however you’ll get this back when the sale completes as it will be deducted from the monies due on completion.
Your mortgage lender will usually require a deposit in order for you to secure a mortgage, this typically begins at 5% of the share you are purchasing but will vary from lender to lender. Your Independent financial advisor will be able to discuss the deposit requirements of different lenders with you.
Depending on which lender you choose there may be a fee as part of the mortgage application or mortgage valuation process. Your IFA or lender will be able to advise you about the fees applicable to you.
These vary depending on the solicitor you use and will include items such as Land Registry fees, search fees and other expenses.
Stamp Duty Land Tax (SDLT)
This is a government tax on buying a home. Your solicitor will be able to tell you if the tax applies and if it does, how much it will be.
Your mortgage for the share of the property that you own.
If you purchase a property with communal areas there will usually be a service charge. Your service charge is calculated at a monthly rate and covers the cost of the upkeep of communal areas such as gardens, pathways or hallways
The management charge is payable monthly and helps us to cover the cost of running and managing the area in which you live. Some of the services that the management fee contributes towards are:
- Rent and service charge collection
- Customer care and after sales service.
- Staircasing applications
- Property management
Under the Shared Ownership scheme you pay a subsidised monthly rent on the share of the property you don’t own. The larger the share you own, the less the rent will be.
As the freeholder of your home you need to make sure that your home is adequately insured against unexpected damages
We will arrange for any defects on new-build homes to be repaired during a set time period. After that timescale, you will be responsible for arranging and paying for all repairs to your home
Other household costs
You will need to organise payment of your own contents insurance, council tax, utility bills, TV licence and any other utilities that you require e.g. internet, telephone etc.
To apply for Shared Ownership, you first need to register with the governments Help To Buy scheme before speaking to one of our advisors about your preferred property.
Buyers are responsible for ensuring their approved application with Help to Buy is correct and up to date before proceeding with our advisors. Any informtion which is withheld or is proven to be incorrect may delay or affect any potential purchase.
Any existing owners or shared owners who have been approved by Help to Buy would need to have sold subject to contract their existing property before being considered to reserve a property.
Once your initial application has been registered we will also need to see the following from you to support your application:
- Proof of your income by way of your payslips for the last three months or a P60
ORIf you are self-employed we will need to see three years audited accounts
- Proof of savings such as a photocopy of a bank or building society account statement
- A mortgage in principle certificate
(Most banks/building societies provide this free of charge or your IFA will assist with this)
- Proof of identity such as a passport or driving licence
- Proof of address such as a recent utility bill
- A tenancy reference
(If you are renting your current home)
We will then check the information on your application form to make sure that you are eligible by carrying out an affordability check to ensure that you can afford your home now and in the long term.
If you are eligible, we will then agree the percentage share that you will purchase based on your affordability check.
Appointing a Solicitor
The next step is to appoint a solicitor to carry out all the necessary legal work. It’s best to do your research and gather some estimates in order to obtain a competitive quote. Some of the costs involved when looking into legal help are solicitors fees, land registry fees, search fees and expenses (also known as disbursements).
Once instructed, your solicitor will act on your behalf by then:
- Checking the lease
- Speaking with your mortgage lender and the sellers solicitors
- Carrying out ‘searches’ and check that there are no issues that will affect your new home
- Ensuring the legal paperwork and the mortgage are in place in time for you to move into your new home
Once we have received your reservation fee and you have confirmed the solicitor that will be representing you, we will issue a ‘reservation document’ to you and all solicitors involved. This document summarises the details of your proposed purchase and will give a date by which you must exchange contracts. The date for exchange of contracts will usually be 28 days from when we offered you a property. During the sales process your solicitor will carry out searches, check over the lease and raise any questions they may have to our solicitor. The legal term for this process is ‘conveyancing’. You must also inform your mortgage lender of the details of the home you are buying. Your mortgage lender will instruct a valuer to inspect your new home to ensure that they are happy it is suitable for them to lend on. Once you receive a copy of your mortgage offer and valuation report we will need to see a copy to approve. Throughout the sales process your appointed Sales Consultant will be available to answer any questions you may have.
Exchange of contracts
You are now entering the last stages of the legal process. Exchanging contracts means that the buyer and the seller are both legally committed to the sale; you are legally bound to buy the home and we are legally bound to sell to you. Both parties will then agree a ‘completion date’ – a date on which you get the keys and move into your new home. The completion date is usually within 10 working days of exchange of contracts if your home is ready to move into. If your home is still under construction we will let you know when it is ready and then arrange a completion date, this is known as ‘completion on notice’.
In readiness for completion, your mortgage lender will have transferred the mortgage monies to your solicitor. Your solicitor will then pass that money on to our solicitors, once this is received the transaction will ‘complete’ and it’s time to move into your new home! Our team will then make arrangements to meet you at your new home to give you the keys and supply you with a handover pack, which includes:
• Instructions for your new appliances such as heating, white goods, etc.
• NHBC warranty handbook or equivalent.