Own Home Scheme Pros and Cons

shanqs1

Presido wrote: »

I understand the angle Shangs1 is coming from which I believe ozzyozzy and ladybird3 may not yet fully appreciate. If Shangs1 has used the £45k deposit to buy a BMW X5 I believe there would be no issue of £45k at the first instance. Or used the money within the past six years to have excellent vacation and stayed in very good hotel. There are others whose parents have their own houses and it would be unfair to tell those people the scheme may not be best for them since their father may willed the properties to them once they became very old and then they later died. It is a matter of perspective.

Looking it another way with the following assumptions and scenarios you will see that it makes very good sense for Shangs1 to make use of this scheme to achieve a suitable accommodation.

Assumption:
a) Someone earns £40k p/annum, excellent credit history, and has £45k deposit.
b) Currently renting a three bedroom flat in Fulham Broadway costing 1800 per month.
c) Office in Oxford Circus in central London.
d) Maximum mortgage multiplier with salary to be by 4.5. This gives £180k.
e) An average quality house to buy in Ealing Borough cost £285k. It should be noted that this similar type of house will cost differently in different areas in London.

Hi Presido, your assumption is not far from the fact, the illustration is quite pertinent: apart from that my income is not yet 40k. I certainly need the scheme to help me, as without this scheme, with my salary multiples, I could only afford a property of 185k, pretty much a crappy two bed flat somewhere out skirt; whereas with the scheme, I could go and look for a £285k house, at least that can be a 3 bed house, although still not possible in central area.

Ladybird: I mentioned my 45k deposit when I had my eligibility interview over the phone, they didn't seem to be bothered with that, just told me that I need to take a minimum mortgage with Co-op of £105k, I can buy up to 4 bed house (me, my wife and 2 sons), because we are in London, we can buy property up to £730k (astronaumical figure, but that's the average 4 bed house price in London).

Superfran: Based on the above figure, the math works out like the following: the minimum mortgage 105k, minimum 20% P4P loan, that means the minimum property price I should start with is 131250. This is a very low amount if you consider that I am going to buy in London, therefore I have no problem with the minimum mortgage. According to the P4P people, I have the choice of property price ranged from £131k - £730k, as long as I have the appropriate deposit to go with it. It might sound unbelievable, but that is exactly what the P4P interviewer told me!

Presido

superfran_uk, There is no such rule within OwnHome to render you ineligible if you have £45k in your Bank. I guess you will agree with me that 15 percent of £300,000 is £45,000. Tell me what is wrong in accepting only 25 percent equity loan and topping it up with the said £45k?

There is a minimum and maximum amount of mortgage that can be given by the Coop Bank. There is also a minimum amount and maximum amount of equity loan that is permissible. The Coop Bank would only approve a mortgage for you if you can take at least the minimum equity of 20% from OwnHome. The OwnHome on the other hand will only accept your application provided the Coop Bank can approve at least the stated minimum amount of mortgage.

Please note that for administrative reason some areas within the UK may never be allowed theoretically to purchase property above £250k which translate to £2500 in stamp duty. There are areas in London where OwnHome has approved beyond £300k to purchase thus in such area you would obviously pay the higher premium stamp duty of 3% of value of property. The theoretical maximum that OwnHome is allowed, under the rules, is £412,500.

superfran_uk wrote: »

Presido... thanks for that, but I really think the people on here are quite clued up about the scheme! And actually, contrary to what you say in your first post a 45k deposit may in fact make you ineligible as you are expected to take out a minimum mortgage. As for the rest I'm afraid I didn't read it, font too small! But the maths is explained in the application pack...

superfran_uk

Presido wrote: »

superfran_uk, There is no such rule within OwnHome to render you ineligible if you have £45k in your Bank. I guess you will agree with me that 15 percent of £300,000 is £45,000. Tell me what is wrong in accepting only 25 percent equity loan and topping it up with the said £45k?

There is a minimum and maximum amount of mortgage that can be given by the Coop Bank. There is also a minimum amount and maximum amount of equity loan that is permissible. The Coop Bank would only approve a mortgage for you if you can take at least the minimum equity of 20% from OwnHome. The OwnHome on the other hand will only accept your application provided the Coop Bank can approve at least the stated minimum amount of mortgage.

Please note that for administrative reason some areas within the UK may never be allowed theoretically to purchase property above £250k which translate to £2500 in stamp duty. There are areas in London where OwnHome has approved beyond £300k to purchase thus in such area you would obviously pay the higher premium stamp duty of 3% of value of property. The theoretical maximum that OwnHome is allowed, under the rules, is £412,500.

I think we are essentially arguing the same point - certainly if you had £45k and you wish to use this towards a deposit and you mention this, in 99% of areas, and for pretty much all 2/3 bed houses, it could mean that because of the figures involved you do make yourself ineligible.

We are here giving advice to real people in real situations, the theoretical stuff behind it is kind of irrelevant to most of us here.

We were eligible for a 190k home, 2 bed. No more. We had to take a minimum mortgage of 127k. If we had told them we wished to put a 45k deposit down then this would have meant we would have 145 left to pay on a mortgage. Even the minimum equity loan would be 38k, taking the amount on a mortgage down to 107- BELOW what Ownhome say you have to take.

I'd say outside London that being offered up to a £412,500 home is pretty unlikely to the point of just not going to happen, basically unless you live in knightsbridge and have a massive family and a huge income to match (who else could possibly take on a mortgage of 250k?! Certainly not a single person or a couple earning under 60k, as you have to on this scheme!) there's just no way that's going to be a reality. Certainly the most I've heard about on these boards is in the area of 250k which is enough to buy you a nice house almost anywhere (and I live in the south east - even here).

superfran_uk

shanqs1 wrote: »

Superfran: Based on the above figure, the math works out like the following: the minimum mortgage 105k, minimum 20% P4P loan, that means the minimum property price I should start with is 131250. This is a very low amount if you consider that I am going to buy in London, therefore I have no problem with the minimum mortgage. According to the P4P people, I have the choice of property price ranged from £131k - £730k, as long as I have the appropriate deposit to go with it. It might sound unbelievable, but that is exactly what the P4P interviewer told me!

Wow - 730k! How on earth would anyone pay the mortgage on that?

Obviously being in London and having such a low minimum mortgage you will probably be fine to use your deposit. As said above - for most people outside of London this would cause a problem.

ladybird3

Hi Shangs

I completely relate to the situation you're in with regards to P4P giving you a huge maximum budget! When I first applied I was given a maximum of £380k for a 2 bed flat as I wanted to buy in central north london, obviously the 700 and something they have set for you is completely plausible given the area and size of property you want, are you wanting to still buy in ealing or will you be looking elswhere? Good luck anyway!

Tommy my mortgage offer was recieved by the co-op on 17th July, hoping yto exchange end of next week or sometime in the week after. Would love to exchange by the 11th as I then have a week off work (decorating!) but will just have to wait and see :j

ozzyozzy

superfran_uk wrote: »

I think we are essentially arguing the same point - certainly if you had £45k and you wish to use this towards a deposit and you mention this, in 99% of areas, and for pretty much all 2/3 bed houses, it could mean that because of the figures involved you do make yourself ineligible.

We are here giving advice to real people in real situations, the theoretical stuff behind it is kind of irrelevant to most of us here.

We were eligible for a 190k home, 2 bed. No more. We had to take a minimum mortgage of 127k. If we had told them we wished to put a 45k deposit down then this would have meant we would have 145 left to pay on a mortgage. Even the minimum equity loan would be 38k, taking the amount on a mortgage down to 107- BELOW what Ownhome say you have to take.

I'd say outside London that being offered up to a £412,500 home is pretty unlikely to the point of just not going to happen, basically unless you live in knightsbridge and have a massive family and a huge income to match (who else could possibly take on a mortgage of 250k?! Certainly not a single person or a couple earning under 60k, as you have to on this scheme!) there's just no way that's going to be a reality. Certainly the most I've heard about on these boards is in the area of 250k which is enough to buy you a nice house almost anywhere (and I live in the south east - even here).

Hi there, I am in the London area. I want to ask a question : As a single person I want to buy a 2 bed home in the London area. I want to go for something in the £250k region. Am I correct in saying that as long as I meet the equity stake limits - I want to go for 40% i.e. £100k AND my Salary Income multiples allow me to borrow say £150k, that I am allowed to go ahead and purchase a £250k property via the Ownhome scheme ?

I have assumed this should not be a problem if I meet these criteria.

Your answer would be appreciated....Ozzy

shanqs1

ozzyozzy wrote: »

Hi there, I am in the London area. I want to ask a question : As a single person I want to buy a 2 bed home in the London area. I want to go for something in the £250k region. Am I correct in saying that as long as I meet the equity stake limits - I want to go for 40% i.e. £100k AND my Salary Income multiples allow me to borrow say £150k, that I am allowed to go ahead and purchase a £250k property via the Ownhome scheme ?

I have assumed this should not be a problem if I meet these criteria.

Your answer would be appreciated....Ozzy

1. When you tell them that you are a single person, they will set you a maximum number of bedroom, as in my case we are 4 in the family (couple plus two kids) they set it to 4 bed. I don't know whether they would allow a single person to get a 2 bed property.

2. Based on the maximum number of bedroom you are allowed, they will then give you a maximum property price based on the average price of your registrered region, the same time you will also be given a minimum mortgage figure you need to take, and this is based on your salary multiples.

3. The above two points then set a framework for you to manoeuvre in terms of property price. The minimum price is [minimum mortgage required/80%], the maximum price is [(maximum mortgage allowed by Co-op+your deposit)/60%], or P4P stated maximum price in your area, whichever is the lower.

4. You are then free to choose whichever property you wish, as long as they matchs all above 3 points.

ladybird3

I understand the bedroom situation to be that you're able to have 1 more bedroom than the number of people applying, I applied as a single person and was told I could purchase a 2 bedroom property

poppycat1_2

Hi, I'm new to this post, but has been interesting reading. I had my inteview with P4P and have been told I need to have a minimum mortgage of 134,000. However, that is more than I wanted my monthly outgoings to be and could easily find a property with a 30% deposite with a minimum mortgage of 100,000. Does anyone know why you have to have a minimum, or it's possible to lower this? The person I spoke to on the phone wasn't helpful.
Thanks.

ozzyozzy

shanqs1 wrote: »

1. When you tell them that you are a single person, they will set you a maximum number of bedroom, as in my case we are 4 in the family (couple plus two kids) they set it to 4 bed. I don't know whether they would allow a single person to get a 2 bed property.

2. Based on the maximum number of bedroom you are allowed, they will then give you a maximum property price based on the average price of your registrered region, the same time you will also be given a minimum mortgage figure you need to take, and this is based on your salary multiples.

3. The above two points then set a framework for you to manoeuvre in terms of property price. The minimum price is [minimum mortgage required/80%], the maximum price is [(maximum mortgage allowed by Co-op+your deposit)/60%], or P4P stated maximum price in your area, whichever is the lower.

4. You are then free to choose whichever property you wish, as long as they matchs all above 3 points.

Yes i am allowed a 2 bed property. I am well aware of the calculations and I guess the answer to my question is probably yes - if I meet the criteria I specified. I would think that a 2 bed home at the average value of £250k in the London area would be acceptable by PFP...I hope !!

Thanks a lot - Ozzy