Affordable Shared Ownership (Part-Buy Part-Rent)
Affordable, fixed monthly payments and no need for a mortgage means your household income goes further and you could afford to buy a more expensive home compared to buying with a traditional mortgage. Given that these monthly payments are also usually cheaper than private rents, why not save money AND get on the housing ladder? (Just check out the table below if you don't believe it...)
New build properties will be for sale at a stated deposit (set by the local planning authority) typically between 25% and 40%. To use the table below simply look at the most relevant full property value and read across depending on the discount level to identify your monthly leasing cost of a mortgage free 10% shared ownership.
Your Front Door payments are also linked to inflation (not interest rates) meaning they should more closely match your household income over the medium and long term. Plus you will be entitled to at least 75% of any value increase on the share you didn't buy which is additional value that you or your family will be able to access in the future.
If you have a sufficient cash deposit, ‘good credit’ and your household income is below £80,000 (£90,000 in London) Your Front Door helps you get on or move up the housing ladder in an affordable way. (Just check out the indicative gross salary requirements for various property values for sale with different discounts in the table below...)
As with the table above, find the most relevant full property value and read across depending on the discount set by the local planning authority to find the indictaive annual gross salary requirement for a mortgage free 10% share of a Your Front Door property.
Your Front Door is only available on selected new build properties for sale at a discount to full market value.
How does it work?
Assuming that you have been approved to buy with Your Front Door (contact us to find out how)...
Let's say you find a lovely, new 3 bedroom property for sale at a 25% discount to market value (because of an affordability restriction being imposed by the Local Authority as part of the planning permission for the development).
The property, which would normally be £200,000 is for sale at £150,000 and you agree to buy a 10% share with £15,000 in cash and enter into contracts, paying your 10% deposit.
On the day of completion heylo buys the whole property and at the same time sells you a 10% share via a 125 year plus shared ownership lease.
(The Local Authority will place a restriction on the title of the property to ensure that the original 25% discount is recovered if the property is sold outright but this does not affect your rights to buy a bigger share or buy the property outright - it simply determines who gets the money when you do.)
You pay an initial annual rent starting at 4.89% on the 90% funded by heylo (£135,000) - which is £6,602 per annum or £550 per month.
Each year the rent will be adjusted to reflect changes in inflation (Retail Price Index) plus 0.75% - meaning that rents are linked to inflation not interest rates. (As well as the rent you will also have to pay for building insurance and any service charges - which will be reviewed every year, clearly explained and notified well in advance.)
Being a Shared Owner with Your Front Door
When you buy Your Front Door, you become a leaseholder and owner occupier. Depending on the size of your cash deposit you can buy a 10%, 15%, 20% or 25% share or more (your initial share).
The Your Front Door lease clearly sets out your shared ownership position, rights to fully occupy the property as if you owned it outright and the terms of the monthly payments, rent, on the share you do not buy (the unpurchased share). This rent starts at 4.89% and increases with the Retail Price Index (RPI) plus 0.75% each year. If RPI is zero or negative your rent will increase by 0.75%.
The lease also sets out how you can increase your ownership position, reducing the rent, at any time in the future if you wish. Alternatively, if you want to move you can just sell your property on the open market.
Providing you keep up the Your Front Door Home monthly payments, you and any others in your household are entitled to live in the property as if you owned it outright. As with any shared ownership lease your home and cash deposit may be at risk if you do not pay the amounts due under the lease.
Whilst Your Front Door may allow you to buy the home you always wanted, if at some point in the future you needed to move, then just like any other house purchase you would simply seek to sell the property on the open market. As with any home purchase, the cash invested to buy your share may be at risk if property values fall.
With Your Front Door you’re firmly on the housing ladder, enjoying the usual security and control associated with home ownership and long leasehold property.
Added Benefits
With Your Front Door you will also be entitled to a 75% share of any value increase on the unpurchased share.
If you want to buy a bigger share and your property has increased in value your entitlement on the share will act as a discount.
Increased Value Entitlement in action... If you bought a 10% share of a £200,000 property which is now worth £300,000 the 90% unpurchased share has increased in value from £180,000 to £270,000. With Your Front Door you are entitled to 75% of this £90,000 increase if you sell... that's £67,500 on top of the £30,000 value of your 10% share!