Advice please

nigelkc

Hi All
I need some sound advice pleasem it seems i'm not getting anywhere and am starting to bang my head against a wall.
Myself and my partner have been accepted for a new build shared equity scheme with a housing coorporation. We need to buy 66% and they will purchase 34%. We need to pay them 1.75% a year on there 34%.
My partner is a nurse hence why we qualify for the scheme. We have managed to find a new house and have knocked the price down from £249'995 to £205'000. They are going to pay our stamp duty and throw in loads of white goods, carpets etc.
So it's worth bargaining if anyones interested with new builds at the mo.

However! heres the problem, we need to get a mortgage from a lender who accept the shared equity scheme. (the one brought in from April this year). We then also need one that gives to a not so good credit rating.
The main brain teasing problem is that my partner was a student nurse for three years so we have a few missed payments and defaults on our files. However, we are both on good salaries now and both have fairly secure jobs. So is there anyone that knows who we can turn to.
I followed Martins advice on the mortgage page and phoned London & County but in all honesty the guy didn;t understand this new sheme, he thought we needed a deposit for our 66% when we don't as the LTV is 66%, the 34% is classed as a contribution or deposit or whatever. (this info is from the housing corp)

If anyone can help what so ever please let me know. Otherwise we will have to let this great bargain go and i'll end up chucking £700 a month down the drain by paying our rent for another year or two.

Thanks in advance........

sarkin

From what I have read these schemes are not good for you over the long term.

At what point do you pay off the deposit and what happens if you want to move?

Just a quick calculation for you.

If you pay 12 months rent this will be £8,400

If you purchase at £200,000 with property falling at 2% a month you will loose £48,000

I think you may find that renting is the safer and cheaper option IMO. I do

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sarkin wrote: »

From what I have read these schemes are not good for you over the long term.

At what point do you pay off the deposit and what happens if you want to move?

Just a quick calculation for you.

If you pay 12 months rent this will be £8,400

If you purchase at £200,000 with property falling at 2% a month you will loose £48,000

I think you may find that renting is the safer and cheaper option IMO. I do

And this advice Nigel is coming from a mortgage adviser, best to take heed of these words.

nigelkc

Sarkin
Thanks for your reply, however, this is the problem i face, you are a mortgage advisor yet you are telling me that i will be paying rent on the property.
Again, the mortgage advisor from London & Country thought the same thing.

IT IS NOT A PART BUY PART RENT SCHEME.

It is a New Build Shared Equity Scheme.
We get a mortgage (or trying to) for 66% of the property.
The housing corp buys 34%
We pay the mortgage PLUS 1.75% (PER YEAR) on the 34% the corp have purchased. It Is Not RENT! its interest on the 34%
It also means the deeds are solely in our name, not like part but part rent where it is joint with the housing corp.

I'm really really sorry for sounding rude but this is the problem we are facing. he government bring this scheme in from April 2008 yet mortgage advisors are sending us in the wrong direction.

Please, anyone with any advice please help!

My sentence at the bottom of my original question said that i didn't want to stay in a RENTED property as i will be chucking £700 a month down the drain. When i could be spending it on a mortgage on my own home.....

HELP! :-(

SouthCoast

If you post on the House Buying, Renting & Selling Board you will not find many fans of these [STRIKE]scams[/STRIKE] schemes.

BYALPHAINDIA

And you have all the 'HIPS' to go through with as well.

I live in a new house - I wouldn't buy one again that's for sure.

Best Of Luck.

neverdespairgirl

So you will need a mortgage for £131,200?

At, say, a 6% interest rate, that would be interest-only payments of £656 per month, this is what you are paying to rent the house from the bank.

You would also be paying about £100 a month to the HA on their equity loan.

So without paying a penny off the actual mortgage sum, you will have £756 a month going out.

If you go on a 25 year repayment mortgage, it will cost you £855.27 per month, plus the £100 to the HA.

Suddenly, £700 a month looks like a bargain. You will be paying more than that every month, without any running costs, and without paying the sum back at all. You won't be using £700 a month to pay off the mortgage at all.

And that ignores the fact that house prices are dropping off a cliff at the moment, particularly new builds.

Ian_Griffiths_Halifax

nigelkc wrote: »

Sarkin
Thanks for your reply, however, this is the problem i face, you are a mortgage advisor yet you are telling me that i will be paying rent on the property.
Again, the mortgage advisor from London & Country thought the same thing.

IT IS NOT A PART BUY PART RENT SCHEME.

It is a New Build Shared Equity Scheme.
We get a mortgage (or trying to) for 66% of the property.
The housing corp buys 34%
We pay the mortgage PLUS 1.75% (PER YEAR) on the 34% the corp have purchased. It Is Not RENT! its interest on the 34%
It also means the deeds are solely in our name, not like part but part rent where it is joint with the housing corp.

I'm really really sorry for sounding rude but this is the problem we are facing. he government bring this scheme in from April 2008 yet mortgage advisors are sending us in the wrong direction.

Please, anyone with any advice please help!

My sentence at the bottom of my original question said that i didn't want to stay in a RENTED property as i will be chucking £700 a month down the drain. When i could be spending it on a mortgage on my own home.....

HELP! :-(

Sarkin knows exactly what you have and he's not assuming it's a Part Buy/Part Rent scheme, which is Shared Ownership.

The £8400 rent figure he mentions is the £700 per month rent which you have mentioned you will continue paying to rent a place.

What he says is EITHER 'lose' £8400 by carrying on renting, OR 'potentially' lose £48000 of equity IF you go on to buy the house and it drops in value by 2% per month.

nigelkc

Thanks for all your replies.
Desn't help with the original question but hey.

I notice that two mortgage advisors have given advise and both have mentioned the drop in house prices.
This is the ideal time to buy. Remember the 80's? well the cycle is hear again. I agree, things will get worse before they get better, but look where we were a year ago when first time buyers couldn't get on the property ladder, this is the oppertunity to do it and if you ride out the next 3-5 years things will turn around again.

So, although i agree that initially it will be cheaper to stay in a rented house, without assurity in a house in 3-5 years time add the fact that i leave nothing to my kids when i pop off i think this is sound advice. However, i thought the whole idea of a mortgage advisor was to advise on a mortgage, not against one.

It looks like this scheme is really new and not understood buy the official organisations out there. Shame, the equity part of the house rises or falls with the value of the house so even if we don't purchase the other 34% we will only ever have to give back 34% of the value when sold.
Down here you can't buy a decent 3 bed for £135k, this scheme gives you that footing.

Anyway. thanks for the comments.

Ian_Griffiths_Halifax

nigelkc wrote: »

I notice that two mortgage advisors have given advise and both have mentioned the drop in house prices.

NO! One mentioned the drop in house prices, the other clarified for you.

nigelkc wrote:

However, i thought the whole idea of a mortgage adviser was to advise on a mortgage, not against one

It is also to give sound financial advice and steer people away from problems. Unless, that is, you work for a Lender and then the whole idea of a Mortgage Adviser is to SELL you a mortgage.

nigelkc wrote:

It looks like this scheme is really new and not understood buy the official organisations out there.

I understand it perfectly well and I can see a disaster waiting to happen.

Unless you pay a MINIMUM of 5% off the mortgage and have a further 5% equity in your house by the time you need to remortgage, you will be stuck with whatever the lender you go with has to offer. Or, you may be lucky and be able to find a lender who accepts a remortgage of this type of mortgage. Too many ifs, buts, and what its. There will be a charge on the house in favour of the housing corporation just like Council Right to Buys, and during the pre-emption period it is difficult to remortgage these away from the original lender.

If you must go ahead with this, try the Halifax. Even now with all the troubles they've had recently, their mortgage rates on low Loan to Value cases is competitive.

Locoblade

nigelkc wrote: »

This is the ideal time to buy. Remember the 80's? well the cycle is hear again. I agree, things will get worse before they get better, but look where we were a year ago when first time buyers couldn't get on the property ladder, this is the oppertunity to do it and if you ride out the next 3-5 years things will turn around again.

So, although i agree that initially it will be cheaper to stay in a rented house, without assurity in a house in 3-5 years time add the fact that i leave nothing to my kids when i pop off i think this is sound advice.

If you agree that things will get worse before they get better though, why not wait until you feel things might NOT get any worse, and jump on the housing ladder at that point? That way, you benefit in the short term by renting, AND grab the maximum benefit long term from buying when the market is pretty much at rock bottom.

Obviously nobody can predict when that turnaround point will be or even how you spot it when it's happening, but unless you feel we're at the low point now (which you seemingly don't), then why make the jump yet? I can understand its tempting to pick up what seems like a bargain now but if you believe things will drop further, will it look such a bargain in the future?