David Gilman is partner in charge of Blacks Connect
With the mortgage industry currently digesting the Chancellor’s new mortgage initiatives, the fact that this is Shared Ownership Week (18-22nd March) may have passed you by.
I know that a small number of brokers are active in this sector of the market, but many aren’t.
However, it is a growing market and it presents intermediaries with an appealing business opportunity – not only to help first-time buyers onto the ladder (and hopefully keep them as long-term loyal clients), but also to earn an additional revenue stream. As well as arranging the mortgage and related insurances, you can also receive a fee for referring the client to a conveyancer.
Growing demand
Average monthly rent has sky-rocketed in recent years to £784 and it’s expected to rise to £1,061 by 2018. Plus, over the past 10 years house prices have risen three times faster than incomes. It’s easy to see why it is both difficult to buy, and expensive to rent for many aspiring homeowners. Shared ownership schemes represent one of the cheapest ways onto the housing ladder for many of these people.
It’s already helped almost 200,000 households into home ownership and there are currently over 166,000 active applications for shared ownership in the system.
There are now over 20 lenders offering mortgages to shared ownership clients, including some of the biggest players in the market, so customers need advice to help them choose the best deal.
That’s why I believe there is a real opportunity for brokers to help in this area. One proactive way to access this market, for example, would be to contact your local housing associations to see if they can arrange a referral relationship.
The legal work
With any property purchase there is conveyancing to be done, and the legal work required on a shared ownership deal is different and more complicated than on a standard residential transaction.
If your client is buying a property in this way it is vital that you protect their best interests by recommending a conveyancing partner that specialises in this niche area, such as Blacks Connect.
There are important differences that the solicitor needs to be confident about when dealing with the purchase of a shared ownership property. It sounds obvious but you are dealing with a property that is to be owned by two separate parties – a buyer and a housing association. The legal paperwork must be watertight.
In addition, the whole point of the scheme is that over time the balance of ownership can change, as the buyer purchases more shares in their home from the co-owning housing association. There needs to be clear terms in place regarding ‘staircasing’, and fresh legal work must be done each time the buyer purchases another share.
This is very important, because the client is expected to pay for this legal work each time they buy another portion of their home, and it is crucial they understand this cost from the outset.
There are also Stamp Duty implications to consider too.
Shared ownership is an innovative scheme for first-time buyers, and a potential new business stream for brokers. Just be aware that you need an expert conveyancer on hand.
