Your monthly outgoings
There are a number of ongoing costs that you will need to take into account when deciding whether Social HomeBuy is affordable for you.
Mortgage repayments
Unless you can afford to buy a share with savings you will have to arrange a loan or mortgage from a bank or building society or other lender which you will be required to pay back in monthly instalments. The maximum amount you can borrow will depend on your income. You should ask your lender how much you can borrow and the costs of the mortgage. There are different sorts of loans you can get and you should obtain your own independent advice about which is most appropriate for you. Remember, if you do not keep up repayments on a loan secured against your house you could lose it.
Rent
You will be charged rent on the share that you do not buy so if you buy 50% then you will pay rent at 2.75% on the remaining 50%. The rent usually increases every year by the Retail Price Index.
Service charges
This figure will differ depending on the characteristics of your home. Service charges cover buildings insurance, any ground rent, and where applicable the costs of maintenance of any external or communal areas e.g. gardens and lighting, and the costs of long term or cyclical maintenance in the future e.g. new roof, repainting etc. Service charges can be quite substantial, particularly in large blocks of flats but are minimal for individual properties.
Repairs and maintenance
Don’t forget that, as a homeowner, you will also be responsible for all the repairs and maintenance of your home. The costs of maintenance will differ from property to property and will largely depend on the condition of your home when you buy it. As a guide, we would expect to spend roughly £300 each year on repairs and maintenance for each of our rented properties. Tenants in blocks of flats will not be responsible for external repairs or communal areas but will pay a higher service charge to cover these costs.
What happens if I can no longer afford the costs of home ownership?
Our checks should establish whether the costs of Social HomeBuy are affordable for you. But if you can no longer keep up the payments on your home due to a change in financial circumstances then it may be possible to reduce your share (also known as ‘staircasing down’) or, as a last resort, to go back to renting your home as a tenant. However this will not be an automatic right, it will only be allowed in very exceptional circumstances and is subject to your lender’s approval.
If you become unemployed or unable to work because of ill health or disability, you may be able to claim Jobseeker's Allowance or Income Support. You may then get help with your mortgage interest payments, although usually this will not apply until you have been on benefit for 39 weeks. You should consider taking a mortgage protection policy to cover periods when you cannot afford payments.
If your income is low enough, or if you are claiming Income Support or Jobseeker's Allowance, you should also get Housing Benefit to help with some or all of your rent (and Council Tax Benefit to help with some or all of your Council Tax).
Will the valuation take into account the value of any property improvements I have undertaken?
Any major alterations to your property must have been carried out with the approval of Mercian. You should therefore have a letter giving consent to the works. This letter may give a value for the works which can be taken into account in valuing your property. If the letter does not give a value then you will need to supply proof of the costs of the works you carried out - such as receipts. It will not be possible for the independent valuer to take into account any work you have done in the past without the necessary consents and unless there is evidence of the value or costs of the works.
What alterations and improvements can I make once I have bought my home?
You can make home improvements – but leaseholders must get our written permission first. We’ll only say no if you’re doing something to cause structural damage or reduce the value of your home. You don’t need to ask permission for minor things like decorating, putting up shelves, or simple repairs. If in doubt, ask first.