RESALES
ARE YOU READY TO BUY?
Monthly NET pay £1,994.66 Based on average UK salary
14%
With shared ownership more and more people are discovering that they can afford to buy, and the idea of finally getting on the property ladder is very exciting – but are you ready? We asked the country’s largest resales specialist Urban Moves The first step to getting your shared ownership property is to make sure you’re eligible for the scheme. Tick all that apply: I don’t own another property in the UK or any other country or have agreed a sale by the time I apply and will sell the property I own on or before the completion date of the shared ownership property I wish to purchase I have a household income that is less than £90,000 or £80,000 threshold outside the M25. (Every property will have a minimum income level too, determined by its value, rent and service charge costs. In most cases you will need to meet or exceed the given minimum income) I have access to a minimum deposit of 5% of the share being purchased I am in full-time permanent employment I am a British, EU or EEA Citizen or have indefinite leave to remain in the UK I have a good credit history If you ticked all the boxes then congratulations, you meet the general eligibility criteria! This is great news as AFFORDABILITY A
55%
20%
6%
• Mortgage
6%
• Rent • Service Charge
• Monthly payments (loan, pension etc) • Remainder
it means you’re eligible for the scheme – although you may not pass affordability for every property. Each property will have a required minimum income level which is calculated by its value, rent and service charge costs. In most cases you will need to meet the guideline minimum income to pass affordability, but don’t worry, every Urban Moves property will have this figure listed clearly on the property marketing details.
UNDERSTANDING AFFORDABILITY Affordability is a term used to explain if your monthly income is enough to cover your potential outgoings. The monthly cost of a shared ownership property (rent, service charge and mortgage) along with any other financial commitments you may have (phone plan, car loan, pension contributions etc) must be less than 45% of your NET monthly income (after tax), see chart above. When staff at the Presales Team at AFFORDABILITY B
Urban Moves are assessing your application form they will enter your information into the affordability calculator to see if you are under the 45% maximum. If you’re not, they’ll look to see if there is any way you could be (ie raising your deposit or reducing a loan payment) and they’ll let you know if it’s possible. Some may think that if they were to buy a larger share the monthly cost would be cheaper because the rent would go down, but you have to consider that the mortgage costs will increase unless your deposit is increased to cover the additional shares purchased – this is very rarely the case as you can see in the table below.
TOO AFFORDABLE? In some cases, a property is too affordable for an applicant, this is when the monthly cost of rent, service charge and mortgage along with any other financial commitments would be under 25% of their NET monthly income, which is deemed the minimum monthly household payment to net income AFFORDABILITY C
Full Market Value £200,000
Full Market Value £200,000
Full Market Value £200,000
25% Share £50,000
50% Share £100,000
75% Share £150,000
Deposit required (10%) £5,000
Deposit required (10%) £10,000
Deposit required (10%) £15,000
Rent on unsold Equity (2.77%) = £346.25 PCM
Rent on unsold Equity (2.77%) = £230.83 PCM
Rent on unsold Equity (2.77%) = £115.42 PCM
Service Charge £100 PCM
Service Charge £100 PCM
Service Charge £100 PCM
Mortgage £238* PCM
Mortgage £475* PCM
Mortgage £713* PCM
Monthly Total: £683.78
Monthly Total: £805.89
Monthly Total: £928.00
Guideline Minimum Income: £21,600
Guideline Minimum Income: £26,400
Guideline Minimum Income: £31,200
*Approx figure subject to mortgage rates 30
First Time Buyer June/July 2022
FTB 30-31 Urban-Moves June-July22.indd 30
17/05/2022 13:30
