Shared Ownership Loans – Information

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Shared Ownership Loans – Information Powered By Docstoc
					Shared Ownership Loans – Information
The following circulars from the Department of the Environment and Local
Government are of particular relevance to the administration of this scheme:
Circular HRT 10/91, HGS 3/92, Sections 2 to 4 of the Housing (Miscellaneous
Provisions) Act, 1992, HRT 7/95, H 10/97, H 4/98, HRT 7/98, H 10/99, H 05/00,
HMS 05/03 and HPS 10/05.

In this scheme a dwelling is purchased jointly between the local authority and the
applicant. The applicant then rents back the Council owned portion of the house.
The scheme requires the applicant to initially own a minimum of 40% (by way of
loan) with 60% owned by the local authority (equity portion). However, the %
ownership by the applicant can be increased over the life of the agreement. The
Council equity must be purchased outright within 25 years.

The full amount of the initial loan plus the purchase of the equity portion from the
local authority must be fully paid before the applicant is 70 years old. This is
because the Mortgage Protection Insurance ceases at age 70. A deposit of
€1,270 is required when approval has been granted.

Do I qualify for the Shared Ownership Scheme?

If you are:

   (a) A tenant of the local authority who wishes to buy a private house and return
       your present home to the local authority.
   (b) A person whose application for local authority housing has been approved
       by the local authority.
   (c) A tenant for more than 1 year of a house provided by a voluntary body
       under the Rental Subsidy Scheme who wishes to buy a private house and
       return your present house to the voluntary body.
   (d) A person in need of housing
   (e) A first time buyer
   (f) Aged between 18 and 70 years
   (g) Earning under €50,000 as a single applicant and under €75,000 as joint
   (h) In the case of the primary earner on the application, in continuous
       employment for at least two years and the second applicant must have at
       least one year.

The Local Authority will perform a credit check for each applicant and a check of
any judgement filed against the applicant. Credit checks will be carried out using
information provided by the Irish Credit Bureau (ICB). The credit checking system
is based on the sharing of information by all those providing lending and using the
system, which includes the majority of lending institutions in the state. Applicants
must consent to the carrying out of credit checks and reporting.

It is important that you do not enter any commitment to purchase or build before
getting approval in writing from your local authority.

What happens next?
Obtain an application form from the local authority.
Telephone 071 9620005, Ext 321 - or call in person to the
office in Carrick.on.Shannon.

Complete the form and submit to :-

                                   Finance Department – Loans
                                   Aras an Chontae
                                   Co. Leitrim.

If you satisfy the above, provisional approval may be given by the local authority.

This provisional approval will establish entitlement to a Shared Ownership Lease
provided the selected house complies with the requirements of the local authority
and the terms of the scheme are otherwise met.

What happens next?

Once you have received provisional approval from the local authority, you can then
look for a house. The house can either be new or second hand. The house will be
inspected by the local authority technical staff to ensure it is adequate, of a good
structure, and is good value for money.

When the house has been approved, agreement is reached with the applicant on
the loan/equity split on the value of the house including legal fees. The loan must
represent at least 40% of the total, but can be higher.

The process of purchasing the house and completion of all documentation can take
time. First of all the local authority must purchase the house and transfer the
ownership into the name of the local authority. This process can take a number of

What documents will I sign?

   (i)     A tenancy agreement, which will cover your tenancy for the Council
           owned equity portion.

   (ii)    A lease agreement, which refers to the loan element of the house.

   (iii)   A deed of mortgage for the loan, which you will take out with the local

So how much rent will I pay?

For shared ownership transactions entered into on or after 1st January , 2003, rent
will be equal to 4.3% of the equity portion of the house.       This 4.3% is made
up of (i) 3.8% interest and (ii) .5% administration fee. For transactions entered
into after 1st January 2003, rent will be increased each year by 4.5% on 1 st July.
The earlier schemes require that rent is calculated each year at 4.5% of the equity
value increased by the most recent CPI figures available.

Can I qualify for rent subsidy?

For shared ownership transactions entered into on or after 1st January, 2003, an
applicant whose household income in the proceeding tax year was €28,000 or less
qualifies for a rent subsidy.

Subsidies vary between €2,550 and €1,050. A minimum rent of €2 per week
applies, even if the maximum subsidy qualifies. The amount of the subsidy will
depend on your household income as follows: -

Household Income Subsidy ranges:-

                        Less than €13,000         €2,550
                        €13,001 and €15,500       €2,300
                        €15,501 and €18,000       €2,050
                        €18,001 and €20,500       €1,800
                        €20,501 and €23,000       €1,550
                        €23,001 and €25,500       €1,300
                        €25,501 and €28,000       €1,050

How do I buy out the remainder of the House?

The local authority owned share of the house can be bought out in full at any time and
must be purchased within 25 years. Alternatively you may purchase additional shares
from time to time, either by adding to your loan or paying in cash. Both loan and equity
must be paid off by the applicant on reaching age 70.

For transactions completed before 1st January, 2003, the cost of purchasing
additional shares in the house will be the initial cost of that share updated in line
with inflation, using the most recent CPI (Consumer Price Index) figures available
at the time of purchase.

For transactions completed after 1st January, 2003, a different formula is used for
calculating the cost of the additional shares. The basic principles associated with
increasing ownership still applies. Details of the calculations can be obtained from
the local authority, Finance Section on 071 9620005, Ext 321.

What happens when I sell my House?

You can resell your house at anytime. The local authority will of course be entitled
to claim any outstanding equity they have in the dwelling (updated in line with the
Consumer Price Index).

In addition, if the local authority originally provided you with the house under the
shared ownership scheme and it was provided at a discount from market value you
must refund to the local authority a % of the proceeds from the sale of your house.
The % of the proceeds to be repaid will be equal to the % discount originally
received from the local authority. A full refund must be paid if you sell your house
in the first ten years of occupancy. A reduction of 10% per annum is given for each
full year of occupancy between 10 and 20 years. After 20 years of full occupancy
no refund would be due to the local authority on the resale of the house.

Applicants must be resident and working in the surrounding area.

How much am I entitled to?

Generally two and half times the household income. Repayments should be no
more than 35% of applicant’s nett income. Each case is assessed individually and
depends on ability to repay.

Sample Calculation

Cost of House (incl. Legal fees)       €120,000
50% Loan         €60,000
50% Equity €60,000

Cost of rent on equity portion of €60,000
= 4.3% per annum = €2,580.00
        per month = € 215.00
        per week = € 49.62

Cost of loan repayments

Loan            €60,000
Deposit        (€1,270)
Total Loan     €58,730
Interest Rate         =             2.75%
(November 2010)
Period of loan        =            20 years
Monthly Repayments =               €312.15 incl. MPI (at 0.5615% and TRS (at 25%
for FTB/Yr 1&2)

Total Repayments = €312.15 + €215 = €527.15
This excludes any rent supplement.