Your Guide to Shared Ownership 1
Shared ownership is designed for first-time buyers, who are able to raise a mortgage but are unable to afford the full cost of homeownership. Why buy a shared ownership home? Your monthly mortgage and rent can work out much cheaper than buying outright, and sometimes not much more than renting. You can buy more shares when you can afford to You only buy what you can afford so you don t overstretch yourself fi nancially. Why buy with East Thames? East Thames has provided homes for rent and affordable home ownership and residential care homes for over 30 years. Based in east London and Essex, we also build new homes and provide employment, training and community programmes. East Thames is also part of the Triathlon Homes consortium, delivering 1,379 affordable homes in East Village, E20. We have a proud history, including a number of awards for our projects. But more importantly, we have constantly questioned the way housing is designed and built. More than ever, we are dedicated to ensuring that new homes are built to the highest standards and are easy to maintain and live in, providing our tenants with homes they are really happy to live in. We aim to deliver high quality homes in great neighbourhoods, available to people on a wide range of incomes. We have a passion for creating great places for people to live, down to the smallest detail. 2 3
When I part buy a shared ownership home, what am I buying? Shared ownership helps you to get onto the property ladder, owning a share in your home, and buying more shares when you can afford to, until you eventually own all of your home. Buying an East Thames shared ownership property makes you a leaseholder. You start off buying a share in your new home on a lease. Your lease is a legal document that proves you own part of your home and sets out certain conditions such as: How often your rent & service charge goes up How much it will go up by What you should expect from us; and your rights and responsibilities as leaseholder You will have the same rights and responsibilities as a full owner-occupier. I ve chosen my East Thames home, what are the next steps? Step 2 Offer letter Step 3 Applying for a mortgage Step 5 Completion date! Step 4 Appointing a solicitor Step 1 Reserving a home Step 1 Reserving a home 1. Complete an application form 2. Complete a credit check form 3. Pay a reservation fee of 500 You will get your reservation fee back if: We are unable to offer you a home of your choice You buy a home with us (it will be taken off the purchase price) How do we prioritise applicants? We want to help people who cannot afford to buy a home on the open market and who are most in need. We give priority to; Local authority and housing association tenants People registered on local authority waiting lists Ministry of Defence (MOD) personnel Local residents First time buyers We will retain this fee if (after we make you an offer): You decide not to go ahead, for whatever reason, including if you change your mind; or We withdraw our offer of a home because you have given false or misleading information on your application form. You do not pass your credit check The size of the property (number of bedrooms) that you can apply for depends on the number of people that will be living with you and the demand for the property. For example if you are buying a property on your own, you are able to apply for a one or two bedroom home. 4 5
Step 2 Offer letter If you pass your credit check and we are able to offer you a property, we will send you an offer letter. Our offer will be to sell the maximum share that you can afford according to government guidelines. Step 4 Appointing a solicitor We will also ask you to provide details of your chosen solicitor. We have a panel of solicitors who are experienced in shared ownership sales. Your solicitor will: Progress the sale of your home to help you complete your purchase as quickly as possible Check the lease and speak to your mortgage lender and our solicitors Carry out what are known as searches, checking that we actually own the land and property that we are selling. Check that all the paperwork and your mortgage are in place in time for you to complete your purchase. You should make sure you get an estimation of the likely costs before you appoint a solicitor. It is likely to cost you between 700 and 1000 including their fee, the land registry fee, search fees and any expenses (known as disbursements). Solicitors charge for the amount of time it takes for you to buy your home, and everything involved within this, so the more often you write to or phone your solicitor, the higher the charge is likely to be. To help you decide which solicitor to use we send you a panel of solicitors with your offer letter who are experienced in shared ownership purchases. The solicitors on our panel have fixed fees which will help you to budget. You do not have to use a solicitor from our panel but buyers who do, generally buy more quickly and easily. If you decide to use a solicitor that is not on our panel it would be worth checking that they do have experience in shared ownership. Step 3 Applying for a mortgage If we offer you a home and you accept, we will ask for an independent financial advisor to contact you to arrange an interview to apply for a mortgage. The independent financial advisor will check that the information on your application form is correct to help choose the right mortgage for you. You will need to bring the following items with you: 1. Your payslips for the last 3 months. (Please bring 3 months worth even if you are paid weekly) or 2. If you are self-employed, your audited accounts for the last two years from a certified or chartered accountant or the last 2 years tax assessments from the inland revenue 3. Your passport 4. Last 3 months bank statements for all applicants (original) 5. Your latest p60 (original) 6. A photocopy of your marriage certificate, if applicable 7. Details of previous surnames if applicable 8. Child benefit and other benefits 9. A recent rent statement or copy of your rent book 10. Proof of residency for all addresses you have lived at for the past three years. This can be in the form of utility bills or council tax documentation or bank statements. If you are unable to provide any of this for any addresses, a letter from your bank confirming that correspondence was sent to you at this address will do If you have any hire purchase or personal loans then please bring along with you the original agreement and current statements Proof of savings A cheque book or payment card in case it is needed to pay mortgage valuation or arrangement fees. If you do not attend the interview you could lose your reservation fee, and the home you want may be offered to someone else. If you do not bring the information listed above, the interview will not be able to go ahead. If you would rather arrange a mortgage directly with a mortgage lender, you must tell them that you are buying a shared ownership property and the share that you plan to buy. Please give consent for East Thames to speak to your mortgage lender and provide details of a nominated contact person. Please note, we will not accept mortgage applications from adverse credit lenders. 6 7
After the interview After your interview we will issue a Memorandum of Sale (MOS) to your solicitor. This summarises the details of your proposed purchase. The MOS will give a date by which we want you to exchange contracts (this makes your intention to buy a home through East Thames a legally binding agreement). You usually exchange contracts four weeks after your interview. During this time your mortgage lender will be preparing your mortgage offer and your solicitor will be doing the legal paperwork. Early on, a valuer will inspect your new home on behalf of your mortgage lender to make sure it is worth what you are paying for it. Your lender will also be getting references about you from your employer, your bank and your landlord. Our Sales team will be in touch with you on a regular basis to make sure your sale is progressing well. When you receive your mortgage offer an East Thames solicitor will need to approve it. You should contact your solicitor straight away to arrange an appointment to sign your contract. Once you have signed your contract, it s time for the exchange of contracts. You are then legally bound to buy the home and we are legally bound to sell it. We ll give you a date on which you can move into your home as soon as it is ready. This date is called the completion date and will normally be within 10 working days of when your home is ready to move into. If your home is still under construction we will let you know when it is ready and then arrange a completion date. This is known as completion on notice. If you are renting please do not give notice on your current home until you have had notice from us that your home is ready to occupy. Step 5 Finally the completion date arrives! On the completion date, your mortgage lender will give your solicitor the money to buy your home. Your solicitor will then pass that money on to our solicitors. Once this is done, we can give you the keys to your new home! A sales executive will meet you at your new home and show you how everything in your home works. You will also receive instruction manuals for your central heating and other appliances. You will be provided with a National House Building Council (NHBC) handbook or equivalent which explains all of the building warranties, as well as information about any services you will receive from East Thames as a leaseholder. 8 9
How much will it cost to buy and run my own home? Buying costs You must have at least a deposit of around 5-10% of the share that you can afford to apply for a mortgage. The reservation fee This is the 500 you pay to reserve your home (it is taken off the purchase price). The mortgage valuation fee Your mortgage lender will arrange a valuation of your home, to check that it is worth the price you are paying. This costs around 400-500 but it may vary from lender to lender. You pay this when you apply for your mortgage. Mortgage arrangement fees For fixed rate mortgages there are usually arrangement or application fees. These vary from lender to lender but you should allow 400-1,500. Generally, the longer the interest rate is fixed for, the higher the fee. These fees are not returnable, so if you pull out later, you may lose this money. Your lender will tell you when you pay it. Solicitors fees These are likely to be between 700 to 1000 including Land Registry fees, local search fees and other expenses. You pay these on the completion date. Stamp Duty Land Tax (SDLT) This is a government tax on buying a home. You will need to check the stamp duty thresholds with your solicitor when buying a home as these can change. You can usually choose to pay SDLT on the share that you are purchasing or on the full market value of the property. SDLT rate depends on the value of the property. Deposit We ll ask you for 5% of your purchase price when you exchange contracts. This deposit is taken off the price of your home. 10 11
What do I pay each month? Each month you will pay the following: Your mortgage (on the percentage share of the property you own) Your rent (on the percentage share that East Thames own) Your service charge Your mortgage payment Each month you ll make your payment to your mortgage lender, usually by direct debit. The mortgage payment is between you and your mortgage lender, but as we own part of your home, we want to make sure our investment is protected, just as much as you do. Your rent On the first day of each month you ll pay your rent to us by direct debit. This makes payment simple and convenient for everyone as the payments are taken directly from your bank account. Your rent will go up every April by a set amount as agreed in your lease. We ll tell you the amount you will have to pay for your new rent every February/March. Your service charge Your service charge is calculated as a monthly rate and covers building insurance, management charge plus the following: Apartment You will be responsible for maintaining the interior of your apartment. Under the terms of your lease either us or, at some developments, an independent management company will be responsible for insuring the building and maintaining the exterior and structure. They will also be responsible for maintaining, cleaning and lighting any communal areas, such as staircases, corridors, car parking and communal gardens. The cost of the services they provide will be split between all the residents and your service charge will be calculated accordingly. You will be advised annually how the service charges have been spent. We will also notify you of any proposals to carry out major maintenance or repair work. House If you purchase a house, you will usually be responsible for all your repairs. You will pay a small charge to cover the cost of insuring the structure of your house and meet the cost of collecting the rent and general management. 12 13
What does my warranty cover? Your new build home will be covered by the National House Builders Council s (NHBC) warranty or equivalent which covers your home for defects in the building workmanship for the fi rst two years after you move in and for structural problems for ten or twelve years. The builder will inspect your home, usually after 12 months of handover and arrange to put these right. How do I increase the share of the property I own? If you are ready to buy more of your home, you can through staircasing. The price that you pay will be based on the current market value of your home. The value of your home will be determined by an independent valuer. There will be some costs involved in staircasing such as a valuation fee, solicitor s fees and administration fees. What if I want to sell my property? Under the terms of your lease East Thames has normally 8 weeks to fi nd a buyer for your home. This helps you as it saves you the expense of going to an estate agent and doing all the hard work yourself. The price that you can sell your home will be determined by an independent valuer. There will some costs involved such as valuation fee, cost of an Energy Performance Certifi cate (EPC) which is a legal requirement and a fee payable to East Thames on completion, for selling your home. However, after the inital period, if we are unable to fi nd a buyer, you are able to sell your home through an estate agent. Customer service and communication East Thames will provide you with information when you move into your new home about the services provided to you as a leaseholder. This can vary depending on the type of home you move into. For example, if you buy a fl at, we ll provide services to maintain any landscaping and clean the communal areas of the building. We have a customer charter which sets out our customer promises, the standards we aim to achieve and the different ways you can get in touch with us. You will also receive regular information, such as service charge statements, information about staircasing offers and a regular resident magazine. Please note: All homes are subject to availability and eligibility. Your home is at risk if you fail to keep up payments on any mortgage, rent, service charge or other loan secured on it. Please make sure you can afford the repayments before you take out a mortgage. 14 15
East Thames Group 29-35 West Ham Lane Stratford London E15 4PH Telephone 020 8522 2000 Fax 020 8522 2638 Email properties@east-thames.co.uk Website www.east-thames.co.uk 16