What is ‘Shared Equity’?
‘Shared equity’ means you can purchase a property with the financial assistance of a housing association via an ‘equity loan’. You only pay a percentage of the full open market value of the property but you will own it outright. The housing association will retain the remaining percentage as a Legal Charge (second mortgage) on the property. E.g. If you pay £70,000 for a property worth £100,000, your equity share will be 70%. The housing association’s share will be 30%.
Unlike a mortgage, there are no repayments due to the housing association on its equity share. It can be repaid either voluntarily or on a future sale.
What is a Charge?
A Legal Charge (or Legal Mortgage) serves to act as the legal document that registers all mortgage lenders interest over a property. All Charges pertaining to a property are recorded on the ‘Charge Certificate’ which is managed by HM Land Registry.
On all our schemes, your mortgage provider will have the first registered Charge and United Welsh will have the second registered Charge. In the case of repossession or upon future sale of a property, the original mortgage provider will be paid first from the proceeds of the sale and then United Welsh.
Where can I find information on mortgages?
The Financial Services Authority provides information on mortgages – you may like to visit their website (www.moneymadeclear.fsa.gov.uk)
What is an ‘in-principle’ mortgage offer?
Mortgages can be agreed in principle so you know that you can get the mortgage before you make offers for a property. Your Agreement In Principle will be the first document provided to you by your mortgage lender. It shows any prospective seller that you can actually get a mortgage to cover the purchase price. This can include the lender checking your income, expenditure, credit rating and confirmation of the amount you are able to borrow.
You will need this document before you start property hunting!
Do I need a deposit?
When your application has been approved, you are able to select a property you wish to purchase. You are required to pay the housing association a £250 deposit to reserve the property. This will be deducted from the purchase price upon completion but is non refundable if a successful completion is not achieved.
Some mortgage lenders also require you to pay a deposit based on a percentage of the amount you wish to borrow. Your financial advisor or mortgage provider will be able to provide this information.
Can I purchase the housing association’s equity share?
Yes, you may purchase the housing association’s equity share outright but not normally within the first three years. You may also increase your equity share by purchasing portions of equity, but not less than 10% at any one time (otherwise known as ‘staircasing’)
Can I sub-let my property?
No, purchasers must occupy their property as their only or principal home.
What do I do when I want to sell my property?
You need to notify the housing association in writing that you wish to sell your property. You are required to provide a property valuation and agree the purchase price with the housing association. The housing association will try and nominate a purchaser to you from its waiting lists. If a purchaser is not identified within the nomination period, you are at liberty to sell the property on the open market via an estate agent, repaying the housing association its percentage equity share upon completion of the sale.
What does the ‘Service Charge’ cover?
The service charge contributes towards the costs of grounds maintenance, cleaning and maintenance to communal areas (e.g. hallways, staircases), buildings insurance, ground rent, and servicing of lifts and any specialist equipment, if provided, eg video door entry systems, CCTV, etc.
What if I already own my own property?
Our schemes are aimed at first time buyers who cannot afford to purchase a property outright. Someone who has never owned a property and never had their name on a mortgage or title deeds. However, consideration may be given, on a case-by-case basis, to former homeowners ‘in their own right’ e.g. those who have sold their jointly owned property as a result of divorce or separation.