Unit 6:25 Buying Schemes Flashcards
(15 cards)
1
Q
Shared ownership (buyer x usually housing association)
A
- Helps first-time buyers enter property market by purchasing partial share (typically 25-75%)
- Provider retains ownership of remaining share
- Can be taken court for missed rent payments
- Allows for “staircasing” - buying additional shares over time until potentially reaching 100% ownership
- CANNOT LET OUT PROPERTY
- minimum share increase 5%
2
Q
Shared ownership property sale
A
- When sold, equity is split between seller and housing association/local authority according to ownership share
- Seller may be required to offer property back to housing association/local authority first (right of first refusal)
- Sale value based on independent market valuation at time of sale
- Requires coordination with provider to ensure all sale conditions are met
3
Q
SDLT on shared ownership property
A
- Can either pay SDLT on 100% of property value at purchase OR pay only on share purchased initially
- All initial purchases must be reported to HMRC regardless of price
- Staircasing up to 80% of property value does not incur additional SDLT
- Further staircasing above 80% ownership must be reported and may trigger SDLT liability
4
Q
Equity share schemes
A
- Typically involves borrower financing majority (around 80%) of property purchase through deposit and repayment mortgage
- Provider takes second charge over remaining portion (approximately 20%)
- Provider’s stake based on straightforward equity arrangement with no interest charged
- Provider receives their percentage of sale proceeds when property is sold
- Main Risk: if house prices fall it could make it difficult for borrower to move as there is no equity
5
Q
Help-to-Buy Shared Ownership (England)
A
- Where Local authorities provide shared ownership properties
- Income restrictions: applications not accepted from households with combined income above £80,000 (£90,000 in London)
- Minimum 5% deposit required from buyer to qualify for scheme
6
Q
Help To Buy Equity Loans
A
- Was a government funded scheme
7
Q
Right to Buy Schemes (Vulnerable)
A
- To be eligible for any kind of discount you must have had to live in your council house for min 3 years
- 35% for 3-5 years and 1% per year for every year you’ve lived there
- If you sell your property within certain time you must give back discount
- 70% max discount
8
Q
Right to Acquire scheme
A
- Allows housing association tenants to buy their rented home at a discount after living there for 3+ years
- Offers fixed money-off discounts (£9,000-£16,000) depending on where the property is located
- Not all properties qualify - both tenant and property must meet specific conditions
- Final purchase price is simply the market value minus the discount
9
Q
Hybrid Lifetime Mortgage
A
- Gives you the option to make interest payments every month or roll it up
10
Q
Equity release
A
- Financial products allowing homeowners aged 55+ (some schemes 70+) to access equity in their property
- Three main types: lifetime mortgages (loan secured against home), home reversion plans (sell portion of property)
- No repayments required during lifetime; loan repaid from property sale when owner dies or moves to care
- Reduces inheritance potential but provides funds for retirement needs
11
Q
Retirement interest-only mortgage
A
- Regulatory category introduced by FCA in March 2018
- Allows lenders to offer interest-only mortgages with no specified term for older borrowers
- Affordability assessed on interest-only payments with no requirement for separate repayment vehicle
- Loan repaid from property sale when borrower dies or moves into long-term care
12
Q
Home Reversion Scheme
A
- Sells all or part of property to provider while retaining right to live there
- Receives tax-free cash lump sum, regular income, or combination of both
- No interest payments or loan to repay; provider receives agreed percentage of property value when sold
- Provider benefits from any property value appreciation on their share
13
Q
Home reversion plan key points
A
- Legal ownership transfers to provider while homeowner becomes tenant with right to reside
- Tenant responsible for basic property maintenance
- Minimum age typically 60+ (higher than for lifetime mortgages)
- Lump sum received is tax-free as it comes from sale of main residence
- Provider sells property when homeowner dies/moves to care, retaining proceeds from their owned share
14
Q
Legal advice for equity release
A
- Applicants must seek independent legal advice
- Protections include: no negative equity guarantee, lifelong residence right
- Features may include portability and penalty-free payment options
- Adviser must explain inheritance and benefits implications
- Wont pass down to kids
15
Q
Government Equity Max
A
- £240,000 and repaid when sold or after 25 years based on the value of the property at the time
