HIV positive ex-housing association tenant
Marcel Wiel found buying into a shared ownership scheme a
great way to get on
to the property ladder
Illustration Raffaele Teo
Like
many HIV positive people living in housing association properties in London,
I didn’t believe I’d ever be able to afford to buy my own home.
Prices aside, what if I got sick and couldn’t make the payments? Thus
I prevaricated for years.
Things came to head when my partner Pierre moved into my smallish one-bedroom
flat near Euston station and what had seemed ‘bijou’ suddenly
became ‘cramped and pokey’.
Our joint income wasn’t enough to get a two-bedroom flat in central-ish
London. So when in December 2005 we heard my landlord had a shared-ownership
scheme just up the road in Camden Town we jumped at the chance to buy into
it.
As existing housing association tenants, we were in a priority group for such
schemes, because going ahead meant we’d release our flat and so wouldn’t
be a drain on the social housing system. In practical terms, this meant we
had a right to buy a 25 per cent share of an allocated flat; any larger share
had to be agreed.
Nine months later, on September 1, we moved in to our new brand new two-bedroom
flat and have never looked back. It was the best decision we could have made.
So what exactly is a shared-ownership scheme; how do they work and why might
they suit first-time poz housebuyers?
Staircasing
Shared ownership schemes have in fact been around for quite some time but
it’s only in the last two or three years they’ve really taken
off, most people no longer being able to get on the property ladder at all
- especially in London.
In essence, a shared ownership scheme involves buying a share of a property
and paying rent on the remainder. The minimum share that can be bought in
one go is 25 per cent, the maximum 75 per cent.
With the scheme Pierre and I bought into, we get three chances to buy 100
per cent of the property and the rent we pay on the part we don’t own
is based on housing association rent levels for a two-bedroom flat, ie about
£480 per month.
Selling
If ever we wanted to sell, our landlord would have first refusal to buy our
share back from us, but at market value. So if we bought a 50 per cent share
of a £320,000 flat and five years later the property was valued at £515,000
(assuming an increase in value of 10 per cent per annum), then our landlord
would have first refusal on a share valued at £258,000 that we’d
bought for £160,000. If our landlord didn’t want to buy us out,
then we could sell our share on the open market.
It was only after checking various property websites and seeing that some
shares of properties were being sold that we decided to go ahead. Although
only a tiny minority of properties advertised were shares of properties, it
seemed clear this was the beginning of a trend that was likely to become ever
more popular.
Drawbacks
The most obvious is the rent element that has to be paid, week in week out.
Going back to the example above of buying a 50 per cent share of a £320,000
property, with a base rent of £480 per month, that makes rent payable
of £240 per month. This might not seem a particularly significant amount
compared to all the other costs involved, but over ten years that’s
almost £30,000 that could have gone towards paying off a mortgage. Also
for people considering letting their property, our contract stipulates that
this can only be done once we own 100 per cent of the equity.
The next big disadvantage is that extra shares are not only sold at market
value, they are also bought at market value. Again referring to the example
above, if after five years we wanted to buy another 25 per cent share in the
two-bedroom property which would then be valued at £515,000, that extra
25 per cent share would cost us £129,000 instead of £80,000. So
with shared ownership schemes, the longer you leave buying more shares, the
more expensive the whole thing becomes, especially in London.
Worse, every time you want to buy more shares, you have to pay for the valuation,
and there are all the legal costs to consider.
Stamp Duty
This is a tax payable by the purchaser when land or property changes hands
and is based on the value of the transaction. The current levels are:
0% if the sale price is less than £125,000
1% if between £125,001-£250,000
3% if between £250,001-£500,000
4% if above £500,000
This relatively simple tax suddenly becomes quite complicated in the case
of shared ownership schemes. One option is to pay all of the stamp duty irrespective
of the amount of shares acquired. But on a £320,000 property that can
work out at an extra expense of £9,600, a huge amount, especially if
only a 25 per cent share is bought.
The advantage in this case is that future purchases of shares would incur
no further charges for Stamp Duty, which could work out to be a considerable
saving if a property rises significantly in value.
Another option is to only pay Stamp Duty on the shares bought. So if buying
that 50 per cent share of a £320,000 property, Stamp Duty in this case
would work out at one per cent of £160,000, ie £1,600. But be
aware that this route is to an extent deferring an inevitable payment at some
point in the future. The best thing to do is to seek professional advice bearing
in mind long-term plans and always to remember the adage about only two things
in life being certain: death and taxes.
So with all these drawbacks, why did Pierre and I go ahead?
A
place to live
The most important reason we bought our property was that it was a lovely
flat in an area we wanted to live in. I hadn’t before experienced the
feeling of coming home and feeling happy just being there. Is it doing my
CD4 count any good? Who knows, but the feeling is great.
Also, like many shared ownership schemes coming online now, another plus was
that the building was brand new and the flats were already decorated with
any defects covered by a ten year guarantee. It met all the necessary environmental
and sound insulation standards, including high quality double-glazing, which
should keep the heating bills down.
Lastly, being a new building, it has the latest security systems including
a street-level video-entry phone plus a security door on every landing.
Will it be easy to sell?
This is a difficult question to answer and depends on the person. The only
way to answer it is to ask “would you buy it?” Referring to the
example above of a 50 per cent share in a £320,000 two-bedroom flat
in Camden Town with monthly rent of £240 on the remaining 50 per cent,
some would be put off by the rent element that they would see as ‘lost
money’, while others would be encouraged by the fact they’d only
need to raise £160,000 to have a spacious pad in a trendy part of town.
What is quite likely though is that demand for property in London, and therefore
prices, is set to remain strong. It’s also likely that in the future
most people will not be able to afford to buy flats or houses outright in
the same way their parents did.
Already we’re seeing people clubbing together to buy their first property.
Buying a share of somewhere might be a way not to end up permanently sharing
a home with co-owning housemates.
Investing in the future
It sounds corny but it’s true: buying a home and paying off a mortgage
does feel like investing in the future. Like many poz people I tend to feel
anxious when thinking about the future. Apart from the stigma, I think HIV
infantilised me in terms of my aspirations. Buying my own place with my partner
feels like a very adult decision and is completely in keeping with poz people
today working on their careers, starting families and having kids.
Shared ownership tips
1. If possible, pay off all debts before applying for a mortgage.
This is because mortgage lenders will deduct loan repayments from your disposable
income in order to calculate the size of the mortgage you can afford to take
out
2. For first-time buyers with only a small amount of savings, 100 per cent
mortgages are available. Be aware though that there will be costs associated
with buying into a shared ownership scheme, so you’ll need £3,000-£4,000
in the bank before going ahead.
3. Disability Living Allowance counts as income
4. For 100 per cent mortgages, it’s possible to exchange contracts and
to complete on the same day. To minimise stress, if possible, do not also
make this the day you move.
Shared ownership key facts
• Housing association tenants are automatically in a priority group
• Initial shares are minimum 25 per cent and maximum 75 per cent
• Shares are bought and sold at market value
• Freeholder has right of first refusal to buy back shares
• Properties can only be let when 100 per cent of the equity has been
bought
• 100 per cent mortgages are available
Getting a mortgage
• How much you earn will determine how much you can borrow
• Ideally clear all debts as repayments will be deducted from disposable
income
• Information usually required includes last 12 months of bank statements
and payslips; proof of residence for •ast three years; proof of any
outstanding debts including credit cards; proof of any savings; passport
• It is not necessary to take out life assurance in order to take out
a mortgage. If your lender insists, take your business elsewhere
• The only HIV-specific life assurance available is against death and
is very expensive. There is currently no life assurance product on the market
to protect mortgage repayments against permanent disability caused by HIV
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