The shared ownership calculator is available to download from the HCA s capital funding guide.

Transcription

1 Shared Ownership Affrdability Calculatrs Guidance nte Plicy The calculatr has been created t supprt further emphases being placed n applicants applying fr shared wnership maximising their wn cntributin when purchasing thrugh schemes using public funds. Please ensure yu read this guidance as it explains the flexibility surrunding this plicy and explains hw the calculatr can assist sales teams in explring the right share level fr an applicant t purchase. The agency stipulates that a minimum f 25% f an applicant s net wage and 2.5x their grss incme shuld be used as a minimum twards hme wnership. There is als an upper limit f 45% f their net wage and 4.5x their grss salary t ensure lng term sustainably. These caps are abslute limits and cannt be breached. The agency views all prperties being purchased with a rati between these multiples as maximising their cntributin. All RPs shuld wrk with applicants t ensure their persnal situatins are being taken int accunt. The shared wnership calculatr is designed t assess thse f mrtgageable age, in emplyment r thse receiving eligible universal credit/benefits t fund hme wnership. It des nt wrk fr cash purchasers. Further details n cash transactins can be fund twards the end f this plicy dcument. The upper cap is in place t ensure lng term sustainability and t prtect buyers, RPs and HCA investment against increases in interest rate and shared wnership rent which can add pressure n husehlds paying mrtgage finance, this plicy attempts t minimise risk and prevent repssessins where pssible. The plicy is intended as guidance nly and where cases fall utside f this, if the RP believes there t be exceptinal circumstances t breach the lwer end caps then this can be allwed and a cmmn sense apprach shuld be taken t ensure persnal circumstances are being cnsidered, the higher caps f 45% and 4.5x incme as stated within this guidance are caps and fr lng term sustainability and shuld nt be breached. The Shared wnership calculatr The shared wnership calculatr is available t dwnlad frm the HCA s capital funding guide. It is a stipulatin f grant that Registered Prviders use this calculatr r ne f the same methdlgies. The calculatr requests the fllwing infrmatin Applicant Incme - grss incme f bth applicants (I15 and I17) - Annual vertime, bnuses and cmmissins amunts in full ( J16 and J18) Additinal Incme Universal Credit (UC) means that applicants receive a lump sum payment. Hwever UC is still brken dwn t ensure recipients knw what they are receiving and fr them t ensure that they are entitled t the benefits being received. The calculatr therefre still request benefits separately. - Wrking tax credits accepted - Disability allwance accepted - Guaranteed maintenance accepted

2 - Other incme surce is there t allw applicants t include any ther payments they receive and may want t include. N21 captures the ttal. - Please nte fr clarity, the calculatr will allw yu input figures int child tax credit and child benefit. These amunts d nt cunt twards the mrtgage multiple calculatins and are nt accepted frms f payment. - Further inf is available in the handy hints sectin f this guidance. Reductins in incme - The purchaser s incme is deducted frm the grss husehld figure t create a net incme figure. (I20) we realise sme applicants may pay slightly different tax levels this assessment allws fr tax free allwance and adjusts ver 31,866 in line with the new tax allwances and again at 150,000. This matches calculatins carried ut n % f any bnus and vertime mney is taken (J16 & J18) this is the maximum the agency will accept. We acknwledge that lenders may take mre int accunt hwever sitting behind the MPC this is the maximum we will accept n this calculatin. - Mnthly cntributin t student lan debt shuld als be included and will frm part f the grss salary reductin - An additinal grss salary reductin bx is available t add mnthly payments t childcare vucher schemes and pensins etc. Where figures appear in this cell the payment type shuld be listed in the cmments bx. - Other additinal incme is then added nt the ttal net pay (N23) Debts after Net payment calculatin - Debt Lans, credit card debt, and any ther credit cmmitments are deducted frm the net incme t create a net mrtgagable incme - Mnthly lan cmmitments shuld be input and are multiplied by 12 and deducted frm the net incme d nt use utstanding lan figures - Credit cards - 36% f the debt frm the mrtgagable/dispsable incme per year (3% per mnth). This is equivalent t repaying 1% f the capital per mnth and an interest rate f 24% apr. the ttal debt utstanding shuld be input int this cell. - Child care csts and maintenance csts are nt included in this calculatr. The agency is aware that lenders may reduce incmes further fr thse wh have children, this calculatr is lking at the pure cst f husing and ensuring that it takes n mre than 45% f the net incme after the abve reductins. This leaves a minimum f 55% twards, fuel and living csts. It is als imprtant t nte that this is a maximum and shuld lenders ffer a lesser amunt due t their wn criteria the lender is fllwed.

3 - The calculatr is designed t state the maximum allwed t prtect investment, the purchaser and t ensure lng term sustainably. It des nt insist that all parties are treated unifrmly r insist that all applicants use 45% f their net incme t purchase. - Applicants with children fr example may wish t use a lwer multiple and percentage, as lng as this is (as standard) ver the 2.5x incme and 25% f net pay then this fits with the current plicy. - Any service charge cmmitments shuld be added as a mnthly utging the rent percentage being charged shuld als be included. - As a husehld debt t net incme rati is then created in the results bar, this includes the mrtgage payment, mnthly rental charge and service charge payments, this then establishes the share a purchaser/husehld can affrd and sustain as a maximum, this takes the depsit int cnsideratin als. - Other factrs the calculatr will take int cnsideratin are as fllws (all these fields can be altered t make results as accurate as pssible) Mrtgage term (max 40 years) Interest rates Available depsit Lender depsit requirement Flexibility Applicants shuld nt be brrwing amunts deemed as unsustainable. The HCA cnsiders a 45% husehld debt t net incme rati as maximising their cntributin t hme wnership yet nt ver stretching in rder t allw applicants t adapt t market changes in interest rates etc. This shuld cver mrtgage csts, service charge and rent. A multiple f 4.5 x husehld incme is als the maximum applicants can use t purchase their share. This is a cap and cannt be breached. Applicants shuld als be maximising their cntributin, as a minimum the HCA requires applicants t be multiplying their incme by 2.5x f their husehld incme and 25% debt t net incme rati t be used. Affrdability is assessed using a 25 year mrtgage, this can be stretched if needed but the case shuld be sustainable and the applicants must have the available wrking years up t a maximum wrking age f 75 years. It is dwn t the individual RP t decide n whether this is sustainable and determine the apprpriate share (wrking within the given band between x incme and 25-45% net t debt incme rati) lender decisins shuld supprt this. Check Share Purchase Levels are eligible This functin is there t help yu apply the apprpriate flex as necessary. The secnd tab shws every available percentage alng with the rati and multiple used, it als highlights mnthly csts as a ttal and split int categries e.g. mrtgage amunt, rentals payments. This shuld allw yu t adapt the frnt page and alter the affrdability.

4 If applicants are cncerned abut what wning a huse culd mean they can use the belw budget tl. this helps applicants make the mst f their mney and realise the financial cmmitments f wning a prperty. All LHBA shuld have a link t this website n their websites. Handy Hints fr using the Shared Ownership Calculatr * When yu pen the Excel spread sheet yu will be asked abut macrs yu must click n Enable Macrs the calculatr will nt wrk withut this active. * The calculatr is an excel spread sheet yu must click ff each field fr the inf t registered as if wrking n an rdinary spread sheet. *The calculatr defaults t 25 years, where necessary this can be stretched, the mrtgage years must be available and purchasers must be aware f any ther factrs which culd affect the lng term sustainability * Yu need t click n the click here fr maximum share affrdability the frmulas and macrs will nt register withut ding this and the spread sheet will nt change in all fields *Child tax credits and child allwance are nt included in the husehld incme and are benefits fr the child and therefre cannt be taken as part f the purchaser s incme. They are left ut f all calculatins *If using the calculatr fr Scial HmeBuy the discunt shuld be deducted prir t inserting the purchase price int the calculatr *Althugh the calculatr wrks in single percentages, the HCA des nt expect these t be fllwed exactly, the calculatr may state 57% as the applicants ttal share, hwever yu may wish t rund this up r dwn accrdingly t ensure percentages end with a 0 r 5, this will keep re-sales, staircasing and managing rent in the future easier. In line with the CFG it is expected that RPs ffer flexible shares fr shared wnership, hwever this decisin is fr the RP t make. The HCA cannt dictate the shares available fr sale. The HCA agrees up t 50% f bnus and cmmissin this is a cap. Only thse named n the first charge mrtgage can submit their incme n the calculatr, the purchase must be sustainable fr the individual/s tied t the mrtgage withut requiring further incme. Applicants with an eligible secnd applicant (by eligible they must nt wn any prperty and their jint incmes must nt breach 60,000 as a husehld incme) can submit ne third f their incme twards the assessment.

5 Re-sales The shared wnership calculatr is nt designed t wrk in line with re-sales; this is due t the rental calculatin and als due t the fixed shares cnnected t re-sales. We d nt wish t cause any barriers t existing shared wners selling their hmes. Back t back sales and staircasing can be dne t encurage maximising affrdability and increasing RCGF receipts, hwever it is nt a necessity. Applicants purchasing shared wnership thrugh re-sales shuld fit the brad eligibility criteria and shuld als be able t sustain the share they need t purchase. Eligibility is required if purchasing a share in the prperty, if thrugh the re-sales prcess the new buyers are purchasing 100% f the title applicants d nt need t fit the HCA s general eligibility criteria. Cash buyers This calculatr is nt designed t wrk with cash purchasers all husing assciatins must ensure that applicants purchasing their share using cash have a legitimate barrier t btaining mrtgage finance. The barrier t btaining a mrtgage - (this must be evidence such as a credit rating r letter frm lender r DIP). Fr a cash buyer the RP must check that the rent, service charge, and any ther husing cst des nt breach 45% f the applicants net incme. Example Rent is 260PCM SC is 90 Net incme is 19,000 a year 1583 a mnth = a mnth 350 *100/1583 = % Within fresh hld - can cntinue