Topic 21 - Schemes for Specific Groups of Borrower

Question 1

What is the maximum initial share for a shared ownership scheme?

Answer 1

75%

Question 2

Staircasing:

Answer 2

Buying further shares in a shared-ownership property based on its market value at the time of the additional purchase.

Question 3

On purchase of a shared ownership property, SDLT can be paid…

Answer 3

…either on the market value of the entire property, or only on the share purchased with the rest paid when additional shares are bought. In the latter case, it is only payable when staircasing has taken ownership above 80%.

Question 4

In equity-share arrangements, the borrower is the legal owner. How does the scheme provider have an equity stake?

Answer 4

Through a second-charge mortgage.

Question 5

Help-to-Buy shared ownership:

Answer 5

• Applicants buy between 25-75% on leasehold basis.
• The remaining share is held by the provider. The buyer pays rent of up to 3% of the value of that portion of the property.
• It is for those with a combined income less than £80,000 (£90,000) in London and priority may be given to armed forces personnel.

Question 6

Help-to-Buy equity loans:

Answer 6

• Applicants with a minimum 5% deposit can buy a new-build property with a purchase price of up to £600,000 on a 25-year term.
• The loan can be for between 10-20% of the full purchase price.
• No interest is charged on the loan for the first 5 years, after which a charge of 1.75% is made. The loan must be paid before the end of the term.
• It is open to first-time buyers and existing homeowners wishing to move up the property ladder.

Question 7

Lifetime mortgage options:

Answer 7

Either/or capital and interest can be paid during the mortgage or paid at the end.

A borrower might have an option to change from paying interest to roll-up (hybrid scheme).

Question 8

Retirement interest-only mortgage:

Answer 8

• Not an interest roll-up mortgage
• For customers above a specified age
• Under which the lender is not entitled to seek full repayment until specified lifetime events.

Question 9

Main safeguards provided by the Equity Release Council (ERC) rules and guidance:

Answer 9

• Legal advice
• No negative equity guarantee
• Right to remain in home - in case of joint borrowers this applies to each of them
• Portability