The FAQs below explain HOP in all its detail with worked examples. These are designed to be a guide and are subject to change. Upon being accepted into HOP, you will receive a Buyer’s Product Guide with all the key facts. We hope you enjoy reading it and look forward to hearing from you.
Is HOP available now? Can I buy any property?
You will soon be able to choose your own property to buy alongside HOP’s investors.
Are there types of properties and locations that HOP will not consider?
Types of properties: HOP is unable to offer co-investment on flats at this stage due to the complicated leasehold structure.
Locations: HOP is unable to consider properties within Scotland and Wales at this time. However, we hope to extend to Wales as HOP progresses. This will be before Scotland, due to its different property laws.
How much does it cost?
For budgeting purposes you should allow:
How do you assess whether I can afford to buy with HOP?
As responsible partners, we will check that you can afford the monthly HOP Payments. We know that most people’s wages rise over time and factoring this into our affordability assessment allows our investors to co-invest more than a typical mortgage lender may lend you. As a guide, HOP would expect to arrange investment of an average of up to 6 times of your household income less any large or unusual annual commitments and living costs, provided this is no more than 90% of the property cost and valuation.
How do I work out my household income?
Household income is the combined Gross Annual Income (before tax & deductions) of all the members of a household who are of a legal working age and are going to be applicants and own a share of the property, up to a maximum of 2 applicants per property.
Do I qualify if I already own a home?
No, you will not qualify if you want to enter into a HOP arrangement on a home that you already own.
However, you will not have to sell existing buy-to-let property or other investments, but your HOP home will need to be your principal primary residence. Sub-letting is not allowed.
Is a lease involved?
HOP, like most shared ownership providers, uses a lease as the basis of our partnership. A lease is a recognised shared home ownership instrument that protects both parties’ rights in law, and is what allows us to give you flexible home ownership options. Property interest acquired by you will be on a HOP shared ownership lease, which will be 125 years for a freehold property. For leasehold properties, such as flats, we use the remaining period of the current lease, up to a maximum of 125 years. Leasehold properties must have a minimum 80-year lease to be eligible for HOP.
Who organises the Homebuyers Report or RICS Valuation Survey?
The Homebuyers Report or RICS Valuation Survey is a condition survey and valuation report. We will arrange and pay for this report and share it with you.
What are the legal fees and associated costs?
You must retain and pay for your own solicitor to advise you on the terms of the HOP Lease. Your solicitor will advise you throughout the process and will have a sole duty of care to you. We suggest you allow £1,000 for this for budgeting purposes.
How will HOP calculate my purchase percentage?
Your HOP Percentage will be calculated as the percentage of the property value that you pay. So if the property costs £100 and it is also valued at £100, and you pay £10, then your HOP Percentage is 10%. If you pay £15 then your Percentage is 15%. If the valuation of the property does not match the ‘cost’ or price you are willing to pay, then you either need to negotiate the price down or make up the difference as per the next FAQ below.
What happens if the property is valued lower than I offered (down-valued)?
If the property is valued at less than you offered then you will need to look for a solution so that HOP is only contributing up to 90% of the property value. You can try and negotiate with the vendor to reduce the price; or increase your cash contribution so that HOP’s investors are only providing a maximum of 90% of the valuation. The increase in the cash contribution works like this, where the ‘value’ is the figure that a surveyor values the property at and ‘cost’ means the price that you have offered to pay:
If I change my mind at any time, can I withdraw from the process?
Yes, until the exchange of contracts you are not legally bound and can withdraw. However, you will bear the costs of withdrawal, as none of the fees you incur will be refundable.
What if I pay the fee and the purchase does not go through?
Can I have a lodger?
You can rent a room to a lodger as long as the property is your primary residence and you are still living there.
Can I have pets?
We understand that a pet can be part of your family, so yes you can have pets living in the home.
What are HOP Payments?
In return for HOP arranging co-investment in your home, you make a “HOP Payment” each month, with the first year’s payment being 5% of the HOP investors’ co-investment amount.
How do my HOP Payments increase each year?
This payment then increases each year in line with inflation (also known as the Retail Price Index, or RPI), plus 0.5%. HOP caps these payments to never increase more than 5%, however high the inflation rate.
What is Retail Price Index (RPI)?
In the United Kingdom, Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and services. The RPI is used by the government as a base for various purposes, such as social housing rent increases.
What else will I need to pay in addition to HOP Payments?
You will need to pay for the buildings insurance for the property. We will arrange the insurance and recharge this to you. Our group policy will be at a lower cost than you could find on the open market. You will pay the Service Charge if there is one. This charge is common across the UK for properties where there are communal areas. It normally pays for items such as the upkeep of the communal areas, the block management costs and external repairs.
Who is responsible for the upkeep and repair of the property?
You are responsible for the upkeep of your property. You may also need to pay a service charge towards maintenance of communal areas such as shared gardens or un-adopted roadways. This information on the services and estimated costs will come from the property vendor or the management company and be advised to you by your solicitor. Most shared ownership leases are full repairing leases. This means that as a leaseholder and home owner you are responsible for the costs of all repairs and maintenance both internally and externally. This is the case with our lease as well.
What about improvements?
With co-ownership we want you to feel 100% “at home”. So it is right that you can decorate your home. But like any mortgage lender, we just ask that you run all internal and external alterations by us beforehand.
The lease does not allow structural or exterior changes; this is common across most shared ownership leases. In practice, if we agree with any upgrade or structural proposal that you put forward we can create a side agreement between you, the buyer, and HOP to allow it. HOP’ investors may also help with the cost of the improvements and we will agree the change in HOP payments with you.
How is any growth in value shared?
If you put in 10% of the purchase price, on day one your share in the growth is 10%. But with HOP you also get a part of the growth on the HOP’s investors’ share. From day one you receive an extra 25% of the HOP’s investor’s share of the entire home’s value growth, not just your share 1, and after each complete year this 25% goes up by an extra 2%. This is all on top of your 10% stake. So if you buy 10% initially, after 8 years you will be entitled to 46.9% of the of the value growth since day 1 – your 10%, plus 25% and 8 years of 2% of the HOP’s investors’ 90% share = 46.9% of the gain in the property value. View Gain in Value Share calculator
Can I increase or decrease my share in the property?
You can increase the share that you own in your property over time, up to 100% if you wish. If you increase your share in the property, the amount of HOP Payments you pay will be re-calculated and reduced accordingly. You can buy an additional share at any time up to a maximum of twice a year and a minimum amount of £10,000. We call this HOP Up. As you will be buying more of your property there will be associated costs including the cost of a new valuation report, possibly some additional Stamp Duty to pay and a solicitor to provide you with a calculation for how much to pay. We can help you with this at the appropriate time for budgeting purposes.
What happens if I run into financial difficulties?
If you run into financial difficulties, get in touch with us as soon as possible so that we can help. We will work with you and support you as much as we can so you may be able to stay in your home or move on if that is what you want. As every person’s situation is unique, we would work hard to find a solution that suits your circumstances. Our aim is to ensure you are able to stay in your home for the long term.
Can I sell anytime?
You can choose to sell anytime, but we hope you will stay for many years. When you sell you benefit from an increase in the value of the whole property, not just your share. See Sharing the gains question above. There will be selling fees associated with selling your home, which reduces to one month’s HOP Payment after 8 years.
What happens if the property goes down in value and I sell it?
With a normal mortgage you absorb 100% of the loss in value. With HOP you share the losses with the HOP’s investors the same way that gains in value are shared. To illustrate: if you have been in a HOP property for 3 years, with an initial 10% of the purchase price, and then sell it in the fourth year, then your share of gains or losses is 37.9% (initial 10%, plus 25% and 3 years of 2% of the HOP’s investors’ 90% share – this gives 37.9%). If the whole property is sold for less than it was bought you would receive 10% of the sale proceeds less 37.9% of the drop in value. For example, a property costs £100 and you contribute 10% of the sales price. After 3 years, the value has fallen by 10% and is sold for £90. After the sale you would receive your initial investment (£10) minus 37.9% of the loss (37.9% of £10 is £3.79) so you would receive £10-£3.79 = £6.21 The HOP Partner would receive their initial investment (£90) minus 62.1% of the loss (62.1% of £10 is £6.21) which is £83.79. Had you bought with a mortgage in the normal way, you would suffer 100% of the reduction in value (£10 investment minus £10 loss = £0 return) rather than just 37.9% with HOP. To give another example, let us assume you have lived in a property for 13 years. Your initial investment was 10%. Your share of the change in value is 55.9% – this is 10% plus 25% and 13 years of 2% of the Partner’s 90% share. If you buy a property for £100 but it is sold for £80, then you would receive your initial £10 minus 55.9% of the change in value. 55.9% of (£100-£80=£20) is £11.18. So in this case you would need to pay the Partner the £1.18 (£10-£11.18). Properties can go down in value. We want all our buyers to understand the implication of both a mortgage and of HOP.
Who is HOP?
HOP Homes is the company that has developed the HOP product. We bring people like you together with HOP’s investors to buy the home you want without the need for a mortgage. HOP remains involved throughout the life of the agreement, managing the arrangement for HOP’s investors. Learn more about About us.
Who are HOP investors?
HOP Homes is working with a variety of different investment providers who are referred to as “HOP’s investors”. In short and long-term we expect that retail investors will also provide investment funding. In the longer-term, we expect HOP’s investors to be large-scale institutional investors, such as pensions funds, banks and large organisations with interest in the property sector.