Shared Ownership About Shared Ownership
About Shared Ownership 1 1 2 2 2
What is Shared Ownership? Why buy through Shared Ownership? Who are Severn Homes? Why buy through Severn Homes? What am I buying?
The Process 3 4 4 5 6 7 7
The Steps of Shared Ownership Step 1 — What’s available and registering your interest? Step 2 — Am I eligible? Step 3 — Can I afford it? Step 4 — Confirmation of offer and appointing a solicitor Step 5 — Arranging a mortgage Step 6 — Completion
How Much Should I Expect To Pay? 9 10 11
Starting out costs Monthly costs Other costs
Once You’ve Moved In 12 12 12 13 13 13
Repairs and maintenance Repairs and maintenance for new homes. Alterations and improvements Changing your lease Increasing your share Selling your home
About Shared Ownership What is Shared Ownership? Shared ownership enables the purchase of a property that otherwise would not have been affordable. It is,
By purchasing an initial share of 25% to 75% of the value of a property, Shared ownership opens the door to home ownership when it would otherwise not have been affordable.
ÌÌ a scheme for people who are unable to afford to buy a home at full market value (limits on income apply),
A mortgage is required for the share that is purchased and rent is paid on the remaining share. There is also a monthly service charge payable (see page 11).
ÌÌ also known as ‘part-buy, part-rent’, is aimed at first time buyers.
The benefits of shared ownership include:
Shared ownership is available on a number of different properties including new build and preowned properties (resales). Pre-owned properties include those either the current shared owner or Severn Homes wishes to sell on a shared ownership basis.
Why buy Shared Ownership? Shared ownership helps many first time buyers get a foot on the property ladder. Buying a home in the current market can be very challenging.
ÌÌ Owning part of your home, rather than paying all rent with no return. ÌÌ Your monthly rent and mortgage can work out cheaper than buying outright and sometimes cheaper than renting. ÌÌ You can buy more shares (limits may apply) or sell your share if you want, when you want. ÌÌ You only buy what you can afford so you don’t overstretch yourself financially.
About Shared Ownership
Who are Severn Homes? Severn Homes is a division of Severnside Housing that specialises in private sector housing for rent, sale and shared ownership. Based in Shrewsbury, we have a growing portfolio of high quality homes throughout Shropshire. Using our links with Severnside Housing, we offer a wealth of knowledge and experience in developing, managing and maintaining outstanding properties.
About Severnside Housing Severnside Housing is one of Shropshire’s largest social landlords owning more than 5,400 properties in Shrewsbury and the surrounding areas, including more than 1300 supported housing properties or homes suitable for older people. Severnside Housing is a registered charity that invests in its neighbourhoods and works closely with residents, partners and the widercommunity to deliver its vision of ‘Excellent Homes in thriving communities’.
Why buy through Severn Homes? ÌÌ We are a reputable company who care about our homes and our customers. ÌÌ We have access to the wealth of expert knowledge in the Severnside’s development team who design state of the art affordable housing and older property renovations. ÌÌ We offer affordable rent on the share of the property you don’t own (a monthly service charge is also applicable, see page 11). ÌÌ All of our new homes come with NHBC warranty or equivalent. ÌÌ We work with many national house builders and local contractors, building and
purchasing high quality homes in popular areas. ÌÌ We aim to sell to first time buyers who are able to afford the cost of shared ownership but unable to buy a suitable home by any other means. Eligibility requirements differ from scheme to scheme.
What am I buying? Buying a property through Severn Homes as a shared owner makes you an owner occupier, not a part tenant. Initially, you purchase a share of your home, ranging from 25%, on a 99 year lease. Your lease is a legal document that sets out terms and conditions such as, ÌÌ your rights and responsibilities as an owneroccupier, ÌÌ what to expect from Severn Homes, ÌÌ how often your rent and service charge will be reviewed, ÌÌ how to purchase additional shares in your home, and ÌÌ the procedure when selling your home. This property must be your main and principle residential home and you must not own another property in this country or abroad. You must live in the property. The lease has a sub-letting clause which prevents you from sub-letting. As you own a lease you will be known as a ‘leaseholder’ and we will be known as the ‘Landlord’. As a leaseholder you will have the rights and responsibilities of a full owneroccupier. You can choose to buy additional shares in your property, this is called staircasing. The more shares you own in the property the less rent you need to pay. At this time, Shropshire Council’s policy has staircasing limited to a maximum of 80% share, however this is under review.
The Process The Steps to Shared Ownership
6 Completion 5 Arranging a mortgage 4 Confirmation of offer and appointing a solicitor
I 3 Can afford it?
2 Are you
Whatâ€™s available and registering your interest
Step 1 — What’s available and registering your interest Homes available for shared ownership are usually advertised on the Severn Homes website and with nominated local estate agents, who then promote through newspapers and various property portals, such as Rightmove, Zoopla and On the Market. Each property advert will contain information about shares available to purchase, rent levels, property specifications and contact details to arrange a viewing. If you are interested in shared ownership you will need to register with Severn Homes in order to proceed. This involves completing a full application form so we can assess your eligibility for shared ownership, ensuring that we meet the audit requirements for the shared ownership scheme and that you end up with the property that’s right for you.
Step 2 — Am I eligible? Eligibility may vary depending on the development you are interested in, the property size and any additional criteria imposed by the local authority. For every scheme there are a number of criteria that must be first met. ÌÌ Total household income must be less than £80,000 per annum. ÌÌ Be a first time buyer, or a new household, for example, starting again after a relationship break-up. ÌÌ Be relocating for work purposes into an area where house prices are too high for you to buy a home suitable for your family size. ÌÌ You may not own a home elsewhere in the world, unless a court order forces you to remain on property deeds where your child or children reside. ÌÌ The shared ownership home you’re looking to buy will be your only home and you may not sub-let all or any part of it.
TIP Are you registered on the Electoral Roll? Having your correct and current details registered on the Electoral Roll helps mortgage lenders identify who you are and, therefore, process your mortgage application. Talk to your local council to find out more information about the Electoral Roll.
ÌÌ You cannot afford to buy a property suitable for your family size on the open market. ÌÌ You must pass a financial assessment and secure a mortgage and be able to afford to buy the minimum share available. ÌÌ You should also be a British or EU/EEA citizen, or have indefinite leave to remain. Customers without indefinite leave to remain must be able to demonstrate that they are able to raise a mortgage with an acceptable lender. ÌÌ You need to be 18 years old or over to apply for a mortgage, and have savings for the legal and financial arrangements and the mortgage deposit. ÌÌ You must meet any local connection criteria attached to the development (if applicable) and provide evidence of your connection. ÌÌ Home owners, including shared owners, are not excluded from applying but are subject to additional criteria. To find out more contact Severn Homes on 0300 300 0059.
Step 3 — Can I afford it? We will ask you to complete a financial assessment early in the process, before you view any homes, to ensure you qualify for a mortgage and are not over-commiting yourself. For this, we request you meet with a Mortgage Advisor, who will carry out a provisional assessment and, ÌÌ check the information on your application form is correct, ÌÌ agree with you, based on your income, savings and outstanding credit commitments, what purchase percentage share is affordable, ÌÌ confirm your ability to obtain a mortgage and provide evidence for you to supply to us, ÌÌ provide information about choosing a solicitor and the right mortgage for you.
ÌÌ Evidence of rent payment history (if applicable). ÌÌ Proof of residency for the all the addresses you have lived at for the last three years. This can be utility bills, bank statements or Council Tax documentation. ÌÌ Statements or agreements for any credit cards, store cards or personal loans that you are liable for. ÌÌ Proof of savings. ÌÌ A signed letter from a family member confirming any gifted deposit. Your mortgage advisor will also require the above documentation. If you do not complete the assessment your application for a shared ownership property will not be able to proceed.
In addition to the above, we will carry out income and expenditure, referencing and credit checks. In order to complete these you will need to provide us with the following. ÌÌ Evidence of your income. This may be your payslips from the last three months or, if you are self employed, your audited accounts from a certified or chartered accountant for at least the last two years, or your tax assessments from the HMRC for at least the last two years. ÌÌ Your passport.
TIP Be careful with your credit rating
ÌÌ Bank statements for the last three months. ÌÌ A copy of your marriage certificate (if applicable). ÌÌ Details of any previous surnames or other names (if applicable). ÌÌ Evidence of any benefits you receive, for example, Child Benefit.
After you are offered a mortgage do not spend excessively or apply for loans as your application may be scored again before mortage funds are released. Anything that might show up on your credit score runs the risk of your mortgage being withdrawn.
Step 4 â€” Confirmation of offer and appointing a Solicitor If you are eligible for one of our homes, we will contact you to make an offer of a home. You will need to write back to us, within a specified time frame, to confirm your acceptance. We will also need details of your solicitor. Once you accept a property, you will need to pay a reservation fee and complete a reservation form with the local estate agent. Your reservation fee will be deducted from the cost of the property.
ern mes citor
Severn Homes is necessary to process and A solicitor
organise the legal documents required when purchasing a home. Try and find a solicitor who is experienced in shared ownership schemes and always obtain a quote before you engage them. Their costs should include their fee plus the land registry fee, search fees (which checks that we actually own the home weâ€™re selling and whether there are any planned developments that will affect your home, for example, new roads) and any expenses.
On receipt of your acceptance of our offer, the local Estate Agent will issue a Memorandum of Sale (MoS) to all parties involved. The MoS details your proposed purchase and sets out the terms of the sale. The conveyance process allows Severn Homes staff to speak with you, our purchasers, but the solicitors can only speak to their respective clients, and to each other. Please note, you cannot directly contact our solicitor and we cannot directly contact your solicitor.
Severn Homes Solicitor
Step 5 — Arranging a mortgage Following an offer of a home, you need to apply for your mortgage as this can take at least 21 days to be issued. During this time your mortgage lender will be preparing your mortgage offer and your solicitor will be preparing the legal paperwork.
happy the property is sufficient security for the loan you are applying for. This should take place within a couple of weeks after applying for your mortgage. Your lender will also be assessing your application and verifying the details you have provided during this time.
Mortgage Advisors, can help you arrange a mortgage and will handle the processing of the application for you — saving you time and also ensuring the right type of mortgage is obtained.
Once you receive your mortgage offer, contact your solicitor straight away to arrange to sign your contract. Your solicitor will need to send a copy of your mortgage offer to Severn Homes’ solicitors for approval. Your solicitor will now also ask you to pay your deposit.
If you prefer, you can also arrange your own mortgage with a bank and building society.
Step 6 — Completion
It is important that your advisor or lender is aware that you are buying a shared ownership property, the share you are buying and if there are any restrictions on the sale, ie, 80% maximum purchase, as this may have an impact on your application. A valuer will inspect your new home on behalf of your mortgage lender to ensure they are
Once you have paid your deposit and signed your contract, an ‘Exchange of Contracts’ can take place. Once this has happened the sale process is complete and you will be given a ‘completion date’ to move into your new home. An Exchange of Contracts is when solicitors swap the contracts signed by each party. From this point on you are legally bound to the purchase of
your home and Severn Homes are legally bound to the sale of it. Neither party can change their minds past this point! On the completion day, your mortgage lender will, via your Solicitor, give Severn Homes the money to buy your home. Once the money is received the purchase is complete and you are now the leaseholder of your home. Severn Homes will then release the keys to you for your new home. The Severn Homes team will read the meters and provide them along with a welcome pack for you to collect with the keys from the Local Estate Agent’s office. Please be aware keys will only be released by the local Estate Agent once they have had confirmation from Severn Homes that the sale has completed. The Welcome Pack will include, ÌÌ information about being a home owner, ÌÌ instructions for your central heating, warranties and manuals for appliances,
ÌÌ NHBC handbook if applicable, or equivalent, ÌÌ Energy Performance Certificate and Gas Safety Certificate for the property ÌÌ utility meter readings, taken the days prior to completion, and the supplier details. We will advise the utility companies of the meter readings and advise the local authority of your completion date. You must also contact these providers to update your personal details. Following the completion, our teams will set up your rent, service charge and ground rent accounts. You will also receive a visit from your local Neighbourhood Officer within four weeks of your completion date. Your solicitor will send us a ‘Notice of Charge and Transfer’, which is a legal document confirming your name and your lenders details. On receipt of this Severn Homes will register the property in your name. Until your solicitor sends this to us, your account will not be completely set up so please ensure they send this promptly.
For more information, please visit www.severnhomes.co.uk 8
How much should I expect to pay? It is important to know exactly what your new home will cost you, both the starting out costs and your monthly costs. We have provided a guide for you.
Starting out costs On average, you should allow between £3,500 and £5,000 to cover the costs associated with buying your home. Costs include: ÌÌ Reservation fee. This is the £500 you pay to reserve your home through the local Estate Agent on acceptance of your offer. This will be deducted from the total amount payable at completion. ÌÌ Mortgage Advisor, Bank or Building Society Fee. There is normally a fee for the professional service and advice they provide to source a mortgage and progress it. This would be payable to the Mortgage Advisor directly and usually starts from £225. ÌÌ Mortgage Valuation fees. Your Mortgage Lender will arrange a valuation of your home to ensure it is worth the price you are paying. The cost varies depending on the lender but usually start around £400–500. You pay this when you apply for your mortgage. ÌÌ Mortgage Arrangement fees. Some mortgage products, usually fixed rate mortgages, have an arrangement fee (or application fee) which varies depending on the lender. They usually start from £500.
exchange contracts. This can be between 10–20% of the value of your mortgage. Like the reservation fee, this is deducted from your total purchase price. ÌÌ Stamp Duty Land Tax (SDLT). You have to pay Stamp Duty Land Tax (SDLT) if you buy a property in the UK over £125,000. This is charged on all purchases of houses, flats and other land buildings. However, when buying a shared ownership property through Severn Homes, there are two different ways to pay: Making a one off payment based on the total market value of the property. This is known as a ‘market rate election’ for SDLT. Once this amount is paid you won’t be required to pay any more even if you staircase the ownership later on. Pay any SDLT due in stages. The first payment will be based on the value of the share purchased and no more will be required until the share reaches over 80%. For more information about SDLT, visit: https://www.gov.uk/sdlt-sharedownership-property ÌÌ Removal Costs. If you are going to use a removal company it is a good idea to get quotes from two or three companies as the cost can vary quite a lot. You could pay between £150 and £500 so it pays to shop around.
ÌÌ Solicitors fees. These usually start from £500 and include Land Registry fees, local search fees and other expenses. Part of their fee is usually taken at instruction with the remainder paid on completion.
ÌÌ Utility connection charges. Although telephone connection points are always included in our homes, if you are moving in to a new build home you’ll have to pay a connection charge to the phone company. This cost is usually around £150
ÌÌ Deposits. You will be required to leave a deposit with your solicitor when you
*Costs correct at the time of printing
How much should I expect to pay?
Monthly Costs Each month you will need to pay, ÌÌ your mortgage (on the percentage share of the property you own), ÌÌ rent (on the property share owned by Severn Homes), ÌÌ service charge, and ÌÌ ground rent (if applicable).
Your mortgage You will need to make a monthly payment, usually by direct debit, to your mortgage lender. These payments protect the ownership of your home. The mortgage payment is between you and your mortgage lender, but as a part-owner Severn Homes wants to make sure the investment is protected, just as much as you do. It is very important to maintain your monthly payments.
What happens if I can’t afford my monthly payment? If you think you might struggle to make a payment, or you are going to miss a payment, it is really important to contact your mortgage provider and talk to them as soon as possible. Most mortgage providers will help you to work out a solution, but if you don’t get help you could end up having your home repossessed. If your home is repossessed it will be sold to cover the cost of the mortgage and will affect your credit rating for the future. If the money from selling your home doesn’t cover the amount owed to the mortgage lender, you will be responsible for paying the difference. Losing your home in this way could also mean that you will have problems getting a mortgage in the future and could also affect any other credit you may wish to apply for. Severn Homes will do everything it can to help you sort out any financial problems, including putting you in touch with independent qualified
debt counsellors. If you are a shared owner we can also help you sell the property before it’s too late.
ÌÌ Management charge and audit fees. ÌÌ Buildings insurance. ÌÌ Reserve fund for cyclical decorations and/or major works.
Your Rent Each month you will pay your rent to Severn Homes by direct debit. Paying by direct debit makes payment simple and convenient for everyone as the payments are taken directly from your bank account. Your rent will go up in April every year by a set amount, as agreed in your lease. You will be notified of the new rent amount at least four weeks prior to the increase. What happens if I am unable to pay my rent? In order to build our affordable homes we, like you, have to borrow money from the banks. Your rent to us repays these loans so it is important to contact us if you cannot make a payment. If you miss a payment, our team will contact you to discuss your financial situation. If you continue not to pay your rent, you will be charged interest and you may have to pay an administration cost. Failure to pay your rent is a breach of your lease and may force Severn Homes to take legal action and even go to court, which could mean you lose your home. If you are in genuine financial difficulty, please contact our Customer Service Centre on 0300 300 0059 and Severn Homes will do everything it can to help you, including arranging payment plans, putting you in touch with your local benefit agency, speaking with your mortgage lender and/or putting you in touch with an independent qualified debt counsellor.
Shared owners contribute to the service charge in the same way as an outright leaseholder would. Service charges are payable by monthly direct debit. You should refer to the lease with your solicitor as this confirms what the service charge covers for your property. Please note we do not insure the contents of your home. You need to arrange your own content insurance cover.
Ground Rent As a leaseholder, especially those who own an apartment, you may be required to pay ground rent. Your ground rent will be charged as per the terms of your lease, with options to pay either by an up front annual payment, or by monthly direct debit. The ground rent charges will increase over a period of time, details of which will be contained within your lease.
Other costs Other costs that you should budget for, and you are responsible for. ÌÌ Council Tax. ÌÌ TV Licence. ÌÌ Water. ÌÌ Electricity and/or gas. ÌÌ Other utilities such as telephone, internet, satellite TV.
Service Charge As a leaseholder, you will be required to pay a monthly service charge to cover any or all of the following costs. ÌÌ Maintenance and repairs to communal areas. ÌÌ Cleaning communal areas. ÌÌ Gardening and grounds maintenance.
How much should I expect to pay?
Once you’ve moved in
Repairs and maintenance If you have bought a house, you are responsible for all repairs and maintenance to the inside and outside of your home. If you have bought an apartment, you are responsible for maintaining the inside and we will take care of any maintenance and repairs on the outside. On some developments, Severn Homes don’t own the block and in these cases an External Managing Agent is likely to be responsible for repairs, maintenance and redecoration. This is paid for through your service charge.
Repairs and maintenance for new homes It is not uncommon to have ‘teething problems’ with new homes. Usually, any issues will be
minor, such as cracking as the property dries out, or sticking doors. Issues like these can be reported to Severn Homes as long as you are the first occupier of a newly constructed home. The builder will also inspect the property, usually just before a year from the date of the property being built. They will arrange to make right any repairs, though they will not repair damage caused through day-to-day use. Your home is also covered by the National House Building Council’s (NHBC) Warranty or equivalent. This covers your home for defects in the building workmanship for the first year after completion of the property and for structural problems for ten years (in some cases twelve years). Your solicitor will give you a copy of the NHBC buildmark certificate.
Alterations and improvements You may decorate and make simple repairs
without contacting us or requesting permission. However, for anything more complicated you will need to contact our Customer Service Centre on 0300 300 0059. If required, they will arrange for one of our surveyors to visit your home to assess the planned works. If your improvements add benefits (and, therefore, value) to your home, then this can be taken into consideration if you decide to sell or buy more shares in your home. For this purpose, it is important the work has been agreed to beforehand and by saving receipts, costs and plans of the work. It is important to note when you sell your home that you will receive your share of the full market value which takes in to consideration any home improvements. A buyer will only buy as seen and will not pay additional money on top of the current market value for work you may have done. So if you own a 40% share you will receive 40% of the full market value at the time of the sale.
Changing your Lease As Severn Homes has an interest in your property, we need to approve any changes you wish to make. For example, a new mortgage needs approval so it can be registered with the Land Registry. Likewise, adding or removing somebody from your lease will mean we may need to assess you still meet the affordable homes criteria, or that you can comfortably afford the share you own. Remortgaging does incur fees with Severn Homes, your lender and your solicitor. Please ask for more information.
Increasing Your Share Once you’ve settled into your home, you may decide you want to increase your share of the property. This is called staircasing. The first step is to check your lease and talk to your Solicitor. Your home will be valued by an independent RICs qualified valuer and that will determine the cost of any extra shares you wish to buy. There are
some costs involved — such as the valuation fee and your Solicitor’s fees — but these won’t be as high as the costs incurred when you first bought your home. The price you pay for any extra share is based on the market value of your home at the time you wish to buy, which could go up or down. Please ask for more information on staircasing.
Selling your home Depending on the terms of your lease, you need to notify Severn Homes if you wish to sell your share in your home. Severn Homes has the option to buy back your share of the property or will help you to sell your home. Severn Homes usually has eight weeks to find a buyer for your home who meets the affordable homes criteria. If we are unable to sell your home, then you may choose to market it with an Estate Agent of your choice. The buyer must meet the affordable homes requirements. Like staircasing, your home will be valued by an independent RICs qualified valuer and, like any home, the value of your property can rise or fall depending on the housing market. If you are considering selling your share, please call us for a chat and to get more information.
We look forward to welcoming you to your new home!
To view our available Shared Ownership properties, visit www.severnhomes.co.uk
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About Once Shared you’ve Ownership moved in
SEVERN HOMES c/o
Severnside Housing Brassey Road Old Potts Way Shrewsbury SY3 7FA
TEL: 0300 300 0059 EMAIL: INFO@SEVERNHOMES.CO.UK WWW.SEVERNHOMES.CO.UK
Information to help you through the shared ownership process