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Cemap 2&3 Self Testing > 25. Schemes For Specific Groups Of Borrower > Flashcards

25. Schemes For Specific Groups Of Borrower Flashcards

1
Q

What is shared ownership?

A

When the borrower buys a proportion of the property and the provider (often a housing association) owns the rest. They can take out a mortgage for the proportion that they own. The borrower has to pay rent to the provider for the proportion they do not own.

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2
Q

What is the maximum share a borrower can have in a shared ownership scheme?

A

75%

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3
Q

What is the maximum rent that can be charged on a shared ownership property?

A

3% of market value of the proportion owned by the provider

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4
Q

What is staircasing?

A

When the borrower involved in shared ownership purchases further shares in the property

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5
Q

Who is responsible for the maintenance of shared ownership properties?

A

Borrower

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6
Q

What is usually the minimum amount that can be staircased (shared ownership)?

A

10% each time

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7
Q

How is staircasing in shared ownership priced?

A

Using the market value of the share at the time the borrower wants to buy it

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8
Q

Can a borrower go on to puchase 100% of shares in a shared ownership property?

A

Yes, though some schemes only allow 75%

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9
Q

What happens when a shared ownership property is sold? (2)

A
  1. The borrower and provider get a proportionate share of the proceeds based on their share of equity
  2. In some schemes, the borrower needs to offer to sell their shares to the provider before they can sell on the open market
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10
Q

Do borrowers in shared ownership property have a right to extend their lease?

A

No, this only becomes a right once they own 100% of property, though it can be done before at the discretion of the landlord

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11
Q

What does the Homes and Communities Agency do? What are examples? (5)

A

Sets out the clauses for shared ownership leases.
1. Restrictions on sales (maximum staircasing, period between staircasing to 100% and selling)
2. Subletting is not permitted
3. Landlord’s pre-emption rights (offering back to landlord before selling, landlord has 8 weeks to accept )
4. Landlord’s right to repossess if the borrower gets into arrears (borrower not entitled to compensation for any increase in valuation of their share)
5. The service charge payable should be based on whole property value - no individual share

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12
Q

What are a landlord’s pre-emption rigthts? How long to they have to exercise them?

A

Shared ownership - have to offer the landlord to buy your share of the property before you can sell on the open market. The landlord has 8 weeks to exercise these rights?

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13
Q

If a borrower gets into arrears with a shared ownership property and the house is repossessed and sold, is the leaseholder entitled to any compensation to reflect any increases in the valuation of their share since they bought it?

A

No

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14
Q

What is the service charge based on for shared ownership properties?

A

The whole property valuation, not individual shares

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15
Q

Are shared ownership properties subject to SDLT?

A

Yes

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16
Q

Does the first time buyer exemption for SDLT apply for shared ownership properties?

A

Yes, but only for the initial purchase, not later staircasing

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17
Q

If a shared ownership property is purchased from one of a number of approved qualifying bodies, you have two options of how to pay SDLT. What are these bodies? (6)

A
  1. Local Housing Authority
  2. Housing Association
  3. Housing Action Trust
  4. Northern Ireland Housing Executive
  5. The Commission for the New Towns
  6. A Development Corporation
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18
Q

What are the two options for paying SDLT in relation to shared ownership properties?

A
  1. Pay SDLT on 100% market value at time of purchase
  2. Pay SDLT only on the value of your initial share. Once you acquire 80% of shares via staircasing, you must pay SDLT on all shares bought since the initial purchase based on the total of the purchase prices.
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19
Q

What are the pros and cons of choosing to pay SDLT with option 2 for shared ownership properties?

A

Pro - better if you don’t ever intend to own more than 80%, you pay less
Cons 1. first time buyer exemption only available on initial purchase 2. Purchase prices raise over time so could be more expensive

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20
Q

What is an equity share scheme?

A

Where the borrower doesn’t have a big enough deposit to get a mortgage for the amount needed to purchase a property. They approach an equity share provider to provide them with a loan for the shortfall of the deposit, the provider takes a second charge over the proportion of property the loan is the equivalent of equity for.

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21
Q

How is the amount owed to an equity share scheme provider determined?

A

You owe a percentage of equity, so the amount owed can fluctuate over time. E.g. if you need a 20% deposit and you only have 10%, you approach the equity share provider to provide you with a loan for the other 10% - you don’t owe them the amount that 10% was equal to at the time, you owe them 10% of property value at any given point.

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22
Q

How is interest charged with equity share schemes?

A

It either isn’t charged at all or is very low. They make their money back from increases in the property value.

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23
Q

How are equity share schemes paid back? (2)

A
  1. Through the sale of property
  2. At the end of a specified term, often the same length as the mortgage term
24
Q

What are the potential negative consequences of equity share schemes? (2)

A
  1. Difficult to trade up in the property market - you already have low equity and the provider has to take a cut
  2. Lose/lose - if house prices rise, your debt rises, if they fall your own equity falls too
25
Q

What type of scheme is Help to Buy in both England and Wales

A

Shared Ownership

26
Q

Who qualifies for the Help to Buy scheme in England? Is priority given to certain groups?

A

Anyone, so long as joint household income is no more than £80,000 p/a (£90,000 in London).
Priority is given to army personnel and local authorities may have their own priority groups

27
Q

What percentage of the property can the borrower initially own in a help to buy scheme (england)

A

25-75%

28
Q

How does the borrower reimburse the help to buy scheme provider for the part of the property they do not own?

A

The pay rent at 3% of the value of the portion they don’t own.

29
Q

What is the maximum household income for the Help to Buy scheme in Wales?

A

£60,000

30
Q

Who is eligible for the Help to Buy scheme in Wales

A
  1. First time buyers
  2. Newly forming households - following a relationship breakdown
  3. Relocating for work purposes to an area that would otherwise be too expensive to afford
31
Q

What is the Rent to Own scheme in Wales? How many years is the scheme for?

A

You rent a new build home from a housing association for 5 years. After the end of the second year, you are able to buy the home from the H.A. up until the 5 year term is up.

32
Q

What is the main benefit of using a rent to own scheme?

A

The housing association gives you money towards your deposit to purchase the property. This is made up of 25% of the rent you paid & 50% of any increase in value since the start of the scheme.

33
Q

Who is eligible for the Rent to Own scheme (wales)? (4)

A

Those who are:
1. Employed
2. Have a joint income of no more than £60,000
3. Don’t already own a home
4. Can’t afford a home the normal way or other initiatives

34
Q

What is a help to buy equity loan (england)? What is the minimum and maximum amount that can be loaned?

A

Equity share scheme loan provided by the government which is secured as a second charge on a proportion of the property. Min 10%, Max 20% - i.e. min of 80% of purchase price has to be covered by borrower.

35
Q

Help to Buy Equity loan (england) - how much of the funds provided by the borrower rather than the government must be made up by a deposit rather than a mortgage? How much is the mortgage usually for?

A

minimum of 5% deposit. Since the government will lend a max of 20%, this leaves most people with a mortgage of 75%

36
Q

Who is eligible for the help to buy equity loan (england)? (4)

A

Those who are:
1. first time buyer
2. has a 5%+ deposit
3. looking for a repayment mtg (not i/o)
4. want a new build property

37
Q

What fees, interest and grount rent are charged for the help to buy equityb loan (england)?

A

£1 p/m fee
First 5 years - no interest
Afterwards - 1.75% of equity loan annually interest (increases by RPI+ 1% every year)
Ground rent - none

38
Q

When must help to buy equity loans get repaid? What happens if you don’t repay?

A

Must be paid off by end of 25 year term. usually min repayment of 10% installments. If you don’t, the house gets sold and govt will take their share of equity.

39
Q

The London Help to Buy equity loan scheme is similar to the rest of england but with slightly different in it’s figures. What is:
1. The maximum property value in london compared with the rest of england
2. The LTV in london compared with rest of england
3. The amount of deposit required

A
  1. £600,000 london, £400,000 england
  2. 40% LTV London, 20% LTV england
  3. 5% - same everywhere
40
Q

What are the key differences between the Help to Buy Equity loan in Wales compared with England? (4)

A
  1. Max val £250,000.00
  2. Existing property owners are eligible i.e not first time buyers
  3. Must be their only home
  4. Must be a new build, constructed by a builder registered to the scheme
41
Q

Are there any help to buy schemes in NI?

A

No

42
Q

What is the First Homes Initiative (England)? How is it funded?

A

First time buyers purchasing new builds can get 30% discount, funded by the developers. The developers voluntarily opt into the scheme.

43
Q

Who is eligible for the First Homes Initiative (eng)? (3)

A
  1. First time buyer
  2. Able to get a 50% LTV mortgage
  3. Joint income of no more than £80,000 (£90,000 - london)
44
Q

What type of property is eligible for the first homes initiative (eng)?

A
  1. New build, or property that was once a new build under the scheme being sold on to a new first time buyer
  2. max val £250,000 (£420,000 - london)
45
Q

Although developers voluntarily opt in to the first homes initiative, they do have to meet one requirement - what is it?

A

They must offer up at least 25% of their affordable housing development as part of the scheme

46
Q

Does Scotland have help to buy schemes?

A

Used to, but these have now ended (see notes)

47
Q

Which countries have a right to buy scheme?

A

England and NI - Scotland and Wales used to but have now abolished.

48
Q

What is the right to buy?

A

Social housing tenants can buy their home at a discounted price

49
Q

What is the preserved right to buy?

A

People who were initially renting from the local authority but their house got sold to a housing association. The right to buy is kept on their property, even under the housing association

50
Q

What is the minimum tenancy period for the right to buy scheme:
1. England
2. NI

A
  1. 3 Years
  2. 5 Years
51
Q

What discounts are available with the right to buy scheme in england for:
1. Houses
2. Flats
What is the max discount available?

A
  1. 35% +1% per year
  2. 50% +2% per year

Max 70%, also a max amount but this changes yearly

52
Q

What discounts are available with the right to buy scheme in NI for:
1. Houses
2. Flats
What is the max discount available?

A
  1. 20% + 2% per year
  2. exactly the same - doesn’t distinguish between houses and flat

Max 60%, also a max amount but this changes yearly

53
Q

What consideration needs to be taken into account when selling a right to buy property?

A

If within the first 5 years, you may need to pay back a proportion of the discount you received as follows:
year 1 - 100%
year 2 - 80%
year 3 - 60%
year 4 - 40%
year 5 - 20%
Year 6 - no repayment

54
Q

What consideration needs to be taken into account when selling a right to buy property bought after 18th Jan 2005?

A

Offer back to landlord at full market price before selling

55
Q

Are mortgages available on right to buy properties? If so, how much?

A

Yes, though some lenders won’t as they take into saleability of the surrounding area. Some lend on the full amount, others only lend on the amount after the discount is deducted.

Cemap 2&3 Self Testing (29 decks)

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