Own Home Scheme Pros and Cons

Geeves1980

I can see the pitfalls of this scheme and for cerain people for whom this will not be a good idea.

The main problem will come from those that choose a 25year mortgage and choose let the equity loan run for the entire term of that mortgage. Although this will seem ok for some, as it is a realitively low rate, over 25years it's madness. Interest alone for a 40% (£56k)share of a £150k property is around £35k, no capital is paid and then the actual amount you need to settle the loan could be £???k on top.

For some people who enter into this naively, without proper planning, it will be a very bad idea.

However you could plan well, save and pay the loan back in one lump sum after 5 years, before any interest is paid. Although it is still uncertain how much that 40% share will amount to in the end, keeping on top of the property market and making adjustments to savings as required could take away some of the uncertainty. Also if you then agree a 15 year mortgage term and choose their 10 year fixed rate deal, make overpayments as allowed, you should be in as good as position as possible to re-mortgage for the remainder of the owed amount.

Wickedkitten

michael1983l wrote: »

What you are missing is that if the house price rises, the new home will have risen when you lok to buy in the future if you wait without going on the scheme. Except 100% has risen rather than the 20-40% that would rise on the scheme. So actually you will be better off in this circumstance.

That has absolutely nothing to do with what I just said which was regarding a person that already owns a house with a 100% mortgage and someone that owns a house on a shared equity scheme.

Yes thats correct, except they take your outgoings into account and deduct them somehow, so if you have a stack of debt your ammount you are asked to borrow will be much lower.

That will be the same as any lender. There is a theoretical maximum than you can borrow, and then there is a maximum that they are willing to let you borrow once they take all of your debts into account. I noticed in another thread that you said they would loan you 133k but they are letting you borrow 90k.

Yes within the terms of your conditions with the lender, however once you've paid the mortgage the own home expect you to settle also.

Right so you can't reduce the term of the mortgage by overpaying without paying off the equity loan and you can't pay off any of the capital on the equity loan as well

I have just entered the scheme this month.

And you haven't even bought the house yet?

british_2

Round and round in circles. :money:

michael1983l

Wickedkitten wrote: »

That has absolutely nothing to do with what I just said which was regarding a person that already owns a house with a 100% mortgage and someone that owns a house on a shared equity scheme.






That will be the same as any lender. There is a theoretical maximum than you can borrow, and then there is a maximum that they are willing to let you borrow once they take all of your debts into account. I noticed in another thread that you said they would loan you 133k but they are letting you borrow 90k.





Right so you can't reduce the term of the mortgage by overpaying without paying off the equity loan and you can't pay off any of the capital on the equity loan as well





And you haven't even bought the house yet?

Yes my funding has been allocated and I have bought. You can pay off 5% chunks of the loan whenever you like. I'm tired of explaining things over and over again. I suggest you read their website if your that interested.

Craig1

Hi I have been following the ownhome threads on this forum for some time now as I have my eligibility appointment booked for the 24th of this month, michael1983 just wondering how you got on with Thinksaving's post

If you could also let me know how you got around the "5%-10% deposit that needs to be paid by exchange" issue as described below when you are not putting down any deposit of your own??

The problem that we have come upon now is the fact that the solicitors say that a deposit of up to5%-10% is needed by the time of exchange (which apparently is common practice) and Places for People only pays their part one day before completion, which shouldn't be any less than at least 10 days after exchange to enable them to claim the money from the Corporation.

Fact is that this wasn't made clear to us from the beginning and we do not have money for a deposit, unless we "borrow" it from somewhere after which the solicitor will repay that back to us pending all funds are received by completion -but we do not want to "borrow" this money.

Places for People and the Co-Op said that they do not know of any buyers that couldn't go ahead with their purchase because of this. My solicitor is adament that potential buyers might just not be reporting these issues and that this is part of the conveyancing process.

Both Places for People and the Co-Op have been great but this legal clause appears to be a problem for us so if anyone have been able to get around this please advice.

Also how long did it take from the eligibilty phonecall to getting the full approval and putting in an offer?

I have been doing a lot of research into these schemes and the CoOp's one definitely seems to be the best option, I cannot believe the amount of animousity that some people have towards these schemes. I agree that the scheme's were the building company have a stake in the property are designed to fix a house price but by being able to buy on the open market means that the opportunity to get a bargain with the current house price situation cannot be passed up.

The house I plan to buy has potential for a lot of improvements (extension loft conversion etc..) and I would plan on being there long term which would mean that I can wait for the next economic downturn to come along and purchase back the share that places for people give, also the reduced cost of a mortgage in comparison to rent will also enable me to save up a ''deposit'' to buy back some equity.

In the mean time my financial situation should have improved greatly as my partner will have gone back to work (have two young girls) and I realistically should be earning a bigger salary.

Apologies for ranting on this is my first post on this forum and I have been reading a lot of threads on this scheme for the past few weeks.

thinksaving

Quote:
michael1983 just wondering how you got on with Thinksaving's post


Thank you Craig1 I am also still waiting for someone to respond to my post. It would really be nice if someone that have experience with this scheme can comment about issues they've encountered and also more specifically aboutt my current issue with the nil deposit at exchange.

At the end of the day as long as you make your sums, you know what you're getting yourself into and are willing to take calculated risks, you should be fine.
After you've had your eligibility appointment and they've confirmed that you are eligible, they sent you a confirmation letter in the post. However, your funds are only secured once you've had an offer accepted on a property and the Co-op has approved your mortage application (they inform Ownhome when your application has been approved and then they ask for proof of your income, ID etc afterwards and then they get on with your valuation). They've secured our funds for 3 months but it could be that they might secure yours for up to 6 months, not sure how they decide this. The time it takes for you to find a property and get an offer accepted is totally up to you.

If everything goes through for us (if we can somehow get around the nil deposit issue) then our plan is not to make any improvements to the property until we have settled the whole Places for People share. Otherwise we will be paying 100% costs for the improvement and Places for People will benefit from that later on. I just mention this as you say the property you are looking at has a lot of improvement potential.

We are also planning to save as much as we can during the first 3 years (as our plan was anyway whilst renting but in the meantime we can rather pay money off our mortgage). Hopefully after our first mortgage arrangement (which we plan on being 3 years) we will be able to remortgage for the difference between the outstanding mortgage, the deposit that we saved up for and the Places for People loan which will mean we then own the property ourselves without needing to pay any interest for the moment on the Places for People loan. This is the issue I saw with the MyChoiceHomeBuy scheme as that they charge you 1.75%p.a. from year one. MyChoiceHomeBuy also wants to see that you've got about £4000 in savings to ensure you can afford the costs towards buying a house e.g. solicitors costs, valuations, stamp duty etc where as Ownhome doesn't.
The Co-Op's products are not the best but it's also not the worst and you only need to use them for your first mortgage (as long as you can find a nother lender that's happy with a percentage of the property tied up in Places for People.

Hope that answers a few of your questions.

Once again I am hoping someone with experience of this scheme can comment how they got/ didn't get around the "nil deposit at exchange" issue. - Many thanks

michael1983l

I have had no mention of nil deposit at exchange from the scheme, maybe they have adjusted the way they operate now. As if you cannot afford to pay a deposit then how could you possibly raise this money for 10 days?

Craig1

Thanks for your response, I hope it all goes to plan for you. It is so nerve racking because I have been around the mill with a few different schemes trying to find out what is available, my fiance just won't talk to me about them anymore as she is finding it all quite confusing. I believe after a lot of research that the Co-Op scheme is the best for our current situation , just hope I can get approved for a mortgage.

Does anybody know if the Co-Operative are quite strict?

I have an arrangement to pay on my credit file, which when I entered into the agreement was assured it should have no bearing on my credit rating. Turns out the lady in the bank didn't know what she was talking about and it could cost me dearly.

michael1983l

Craig1 wrote: »

Thanks for your response, I hope it all goes to plan for you. It is so nerve racking because I have been around the mill with a few different schemes trying to find out what is available, my fiance just won't talk to me about them anymore as she is finding it all quite confusing. I believe after a lot of research that the Co-Op scheme is the best for our current situation , just hope I can get approved for a mortgage.

Does anybody know if the Co-Operative are quite strict?

I have an arrangement to pay on my credit file, which when I entered into the agreement was assured it should have no bearing on my credit rating. Turns out the lady in the bank didn't know what she was talking about and it could cost me dearly.

My experian credit score was 750 and I got accepted, I hope that helps.

fogma

stanleyfox69 wrote: »

Fogma,

I've checked co-op mortgages online and considering BoE dropped interest rates to 0.5% earlier this week, their mortgages are somewhat poor.

If you don't mind me prying too much;
what were the mortgages that were offered to you from co-op like?

I.e; a deposit for w; mortgage of x, fixed rate over y years, z amount .

What are the costs like to set-up.
Ball park figures given on web are approx £3.5k.
But considering the property i'm looking at is 1 bed house, St.Albans area, for £155k; surely the associated costs won't be that high?!
(Shame the property prices are!)

soon to find out i suppose.

Hi,

Not sure if i can help too much, we were just offered the mortgages that are listed on their website.

We are applying for a 75% mortgage which would have enabled us to go for the better tracker/discount rates but have decided to go for a fixed rate for peace of mind, even though the rates are the same as having a 90% mortgage and have a £995 application fee.

On the more detailed ownhome leaflet that they send you in the post, it says that you can only take a 25 year mortgage but the coop said we can definitely have up to 35 years which we have taken so as to reduce our monthly repayments to try and pay back the equity loan asap.

We've just had an offer for a house accepted and are currently having our mortgage approved as it didn't go through straight away (apparently 90% of places for people mortgage applications have to go to the co-ops underwriters before being accepted). Hopefully there won't be too many problems with the credit checks!

I'll keep you posted how we get on if anyone's interested...