About Shared Ownership
First off, shared ownership doesn’t mean sharing your home with anyone! Created in the early 1970’s, shared ownership was designed to help people get onto the housing ladder in a more affordable way. Over the past 40 years, shared ownership has helped hundreds of thousands of people become home owners across England and Wales.
As the name suggests, you buy a share of the property and pay a rent on the part you don’t. You will own a share in a long leasehold property which means that you will be able to live in your home as if you bought it outright for your lifetime and be able to pass it on to your heirs if you wish – just like any other leasehold property.
Given that the majority of current schemes designed to help people into home ownership are focused on new build housing, heylo thought it important to bring forward a product solely focused on making existing properties more affordable.
Being a Shared Owner
Given that you will be buying a share of a property and paying a rent on the share you do not purchase, you will need to make sure that the property is structurally sound, in good condition and that you can afford it. (Naturally, as you will be an owner you will also want to make sure you can look after it!).
Providing you keep up the Your Home monthly payments, you and any others in your household are entitled to live in the property as if you owned it outright. As with any shared ownership lease your home and cash deposit may be at risk if you do not pay the amounts due under the lease.
Whilst Your Home may allow you to buy the home you always wanted, if at some point in the future you needed to move, then just like any other house purchase you would simply seek to sell the property on the open market. (Of course your buyer may be using Your Home to buy your property!) As with any home purchase, the cash invested to buy your share may be at risk if property values fall.
With Your Home you’re firmly on the housing ladder, enjoying the usual security and control associated with home ownership and long leasehold property.
What is included in the Your Home lease?
- A description of the property including its boundaries and guide to which parts are your responsibility
- The start date of the lease, the share that you buy, the amount of rent that you must pay together with other amounts required under the lease and the method that the landlord will use to review the payments due each year.
- Buildings Insurance arrangements.
- The method by which you can purchase additional shares to own more of your home in the future (known as staircasing).
- The method by which you can sell the property in the future and obtain your entitlement to any increase in value.
- Your responsibilities as a leaseholder and those of heylo as landlord under the lease.
- Any restrictions or prohibitions linked to the Freehold or superior leasehold title.
What if I want to move?
As with any leasehold property, you are free to move home at any time. With Your Home you can put your property up for sale on the open market. Provided that your payments under the Your Home lease are up to date, if you sell outright not only will you get any increased value on the share you own but you will also be entitled to 75% of any increase in the market value of the share owned by heylo too. As with any property purchase, if the house has fallen in value you will get back less than you initially contributed.
Ongoing monthly costs
Your Home makes buying your home more affordable but there are still costs to be aware of. In addition to these costs you’ll also need to think about the on-going costs of ownership like Council Tax and utility bills, but don’t worry, our Your Home team can help you budget for these.
The Your Home lease will clearly specify all payments due – this will typically be the rent, buildings insurance and the annual lease management charge of £181.44 including VAT (which increases annually with RPI). These amounts, together with any ground rents or service charges, will be collected by Direct Debit in one amount each month – usually at the start. (Of course, you will have to pay separately the other usual bills such as Council Tax, utilities and any other third party charges which may apply.)
Each year the rent and management charge will be reviewed in accordance with the Your Home lease. The rent will increase by inflation, Retail Price Index, RPI, plus 0.75% each year. Unlike other ways to buy a home, payments due under the Your Home lease are not affected by changes in interest rates.
For example: If you purchased a 10% share of a £250,000 house then the Your Home rent due on the 90% unpurchased share would be £11,002.50 in the first year or £916.88 per month (remember there’s no mortgage to pay).
If over the next 12 months RPI is 1.25% then your next year’s rent will increase by 2% to £11,222.55 or £935.21 per month.