21) SCHEMES FOR SPECIFIC GROUPS OF BORROWER Flashcards
What is shared ownership?
Not a mortg schm, but many lenders offer mortgs to shared ownership buyers.Helps 1st time buyers, reqs co-op betn hsng assoc, local auth, and mortg lenders.
How does shared ownership work?
- -Ownership provider assesses finanl and other criteria of borrower.
- -Buyer purchases a share (25-50 per cent), provider the rest. Bought as LEASEHOLD at MKT VALUE.
- -Scheme provider arranges mortg with partner lender, assessed by lender in usual way.
- -Max of 3 per cent value of share retained by provider is paid as rent by buyer.
- -Buyer can buy further shares whn they can afford - staircasing (usu a min of 10%)- (some can buy max of 75%, some will let 100% ownership)
- -Buyer is resp for maint of prop
What does the lease of shared ownership contain?
Leases are usu in format approved by Homes and Communities Agency - HCA
Diff from std long lease in that the leaseholder not being able to extend the lease till they own 100% share - (but some may allow it).
_Lease may state max staircasing allowed, and prd betn staircasing to 100% and selling
–No subletting
–If selling, owner offers to lender or their nominated buyer at a price valued by indep valuer, if not exercised w.in 8 wks, can sell in open mkt.
–Service charge paid based on full value of prop
SDLT on shared ownership
**First time buyer exemption may apply if eligibility criteria is met
If purchased from an approved qualifying body, purchaser has two options:
1__ pay SDLT on entire mkt value of prop (after taking 1st time buyer and 2nd time buyer exemptions into consideration)
OR
2__pay SDLT only on value of share purchased and upon the staircased share each time (after taking 1st and 2nd time buyer exemptions into account)
What is equity share?
Schm wh enables borrower to be the legal owner of the whole prop - pays deposit and arranges first-charge mortg for their propor of prop. Schm provider has equity stake for the balance of the prop through second-charge. (ownership is freehold or leasehold).
Typically borrower - 80%
Provider - 20% second charge
Borrower repays for 20% upon selling or at end of agreed term, normally end of first charge term. No interest is charged on the equity share of provider (altho some charge a low int rate)
What is Help-to-Buy shared ownership?
[combined annual income not to be >80k (90k in London), with some priority grps inclu by local auth]
[Wales - combined annual inc not >60k]
A govt initiative to help those who cd not afford to buy a prop.
Applicants can buy 25 - 75 per cent of prop. on leasehold, using repayment mortg to buy their share, the remng held by provider.
Buyer pays upto max 3 per cent rent on rest of value of prop held by provider.
Help to Buy equity loan
(For 1st time buyers and owners wishing to move up prop ladder)
Wales - similar to England but max value is £300k
NI - no Help to Buy schm in Norther Ireland
England - buyer with min 5% deposit can buy new-bld with purchase price of £600k for 25 yrs. - govt provides equity loan to help with purchase.
Rest of England - from 10 - 20% (max 120k) is govt equity, borrower arranges 5% depo + 25 - 75% conventional repayt mortg; a monthly fee of £1 from beg of schm to end; no int charges on equity loan for first 5 years - 1.75% from 6th yr and will incr with retail price index plus 1% each yr.
Buyer can reapy equity loan ,at least 10% of mkt value at a time, or repaid at end aof 25 yr term.
If not repaid, prop is sold and loan as percentage of prop’s mkt value is taken.
London Help to Buy - as above but govt equity loan is upto 40% of purchase price i.e. £240k wh is 40% of max £600k
What is Rent to Buy scheme?
From Sep 2014 - Hsng Assoc and others bid for share of £400m in low cost
loans to bld 10,000 homes across country - one and two BR aptmts, wh are rented out to applicants at no more than 80% of local mkt rates for min of 7 yrs. Tenants save during this and can buy at end of prd
Discount starter homes
Govt initiative in 2015 for first time buyers between 23 and 40 years, (injured military or their widow/er) - at discounted at 20% of mkt value.
If joint buyers, at least one must be below 40 years
Key points of discount starter homes -
**Discounted price cannot exceed £450k in London or £250k in rest of England.
**cannot be resold/rented until at least 5 years
**because 20% discount, devt sites are designated’exception sites’ - builders exempt from obligations to provide affordable hsng and local infrastr work normally reqd as condn of recvg planning permission.
Land is under-used comml or indusl land
Explain Help to Buy scheme in Scotland.
2 new build schemes
H2B (SCotland) Affordable New Build Scheme (large hse builders)
H2B (Scotland) Smaller Developers New Build Scheme (smaller hse builders)
Rules are
**Availability - avai on new-bld from participating builders. Applicants must be first-time or existing home buyers who cannot afford. Single applicant
not > 4.5 times inc and couples not > 3.5 times jt inc.
**Purchase price - max £200k (at April 2021)
**Depo & mortg - buyer arranges 85% purchase price through depo and mortg, min 5 % depo. Mortg at least 25% of price
**Equity loan - Scottish govt provides 15 % equity loan - no int paid at any time - repaid based on prop value at time of repayment.
Open Market Shared Equity Scheme (Scotland)
Schm designed to help those on low and moderate inc to buy ‘starter’ homes on sale in open mkt - shd have one more room (apartment) than no of people living in that prop.
__Buyer must buy 60-90 % of prop with ‘modest’ depo. Can keep £5k from savings, but must use at least 90% towards purchase.
__Balance of (10-40%) provi by Scot govt - repaid whn prop is sold.
__Schm administered and applicants assessed by regd social landlords on behalf of govt.
__Limits on value of prop eligible depends on town/city of whr prop is located.
__After ini purchase, owner can tranche up (staircasing) to own all of prop.
__In areas of limited hsng govt can retain 10% share in prop - buyer max owns 90%
What is Right to Buy scheme?
(Wales - Does not operate anymore (no appln from 6 Jan 2019)
Scotland - ended from 01 Aug 2016)
NOT A MORTG SCHEME
Tenants of local auth, district council, London borough council or regd landlords can purchase the prop they have been occupying at discounted price.
Lenders’ attitude varies -Some lenders may lend to this schm whl others lend on discounted price.
(Prop location and resale value of prop and if tower blocks, may affect lender decision)
What is ‘Right to acquire’?
Same as right to buy - can buy hsng assoc prop after 3 years of tenancy. Landlord may offer alternative prop to tenant to buy
What is equity release?
Shd be at least 55 years, sometimes 70 years
Equity-release plans enable homeowners with little or no mortg to release some of the equity in order to provide or supplement retirement income
What is lifetime mortg?
[Hybrid schemes - arranged on int-only initially, but borrower can opt to roll-up the interest as they get older]
[Drawdown - a limit arranged, and borrowed as whn reqd subj to min withdrawal amt each time
REgulated mortg contracts with older borrowers - repaid upon --death --move (care home) --move to another main home --sale of prop --lender insists on taking possession
