Refused mortgage from Leeds on part buy part rent scheme..what next?

poppy10_2

Yasmina wrote: »

Thank you, yes I have found out since that you are correct. A&L don't do shared ownership mortgages.

That's because shared ownership is a scam. Avoid, and run as far as you can.

Yasmina

Thanks
I am hearing this a LOT now from a lot of different people - shared ownership is a scam, etc...anyone got any facts, figures or reasons why?

jgallcash

I agree in places shared ownership isn't suitable at all and there are also a lot of unscupulous agents wanting to shift these, so you do have to be on the ball.

However i bought 60% of my london property as that was all i could afford at the time. I had a great mortgage advisor who has literally saved my thousands of ££ when getting a good mortgage.

In the current market the value of my flat has gone down so i can buy the remaining 40% at a much reduced cost using the money saved through my financial advisor's recommendation of mortgage.

Of course I may be in negative equity in the short term but if anyone thinks the London market will not increase in the medium to long term quite frankly they are dreaming.

There are lots of potential pitfalls when buying shared ownership and i have to agree that the properties are over priced generally. but i'm sick of hearing constant negativity around shared ownership as soon as its mentioned and mostly without sound reasoning.

If you have an opinion and resoning as to why its a con (and i'm not totally disagreeing) then please explain, we would all be grateful for hearing the advice and perhaps we may duck a potential pit fall as there are many. But to just say "thank Leeds for not accepting you! its a con!" i think is quite unhelpful.

Yasmina

jgallcash wrote: »

I agree in places shared ownership isn't suitable at all and there are also a lot of unscupulous agents wanting to shift these, so you do have to be on the ball.

However i bought 60% of my london property as that was all i could afford at the time. I had a great mortgage advisor who has literally saved my thousands of ££ when getting a good mortgage.

In the current market the value of my flat has gone down so i can buy the remaining 40% at a much reduced cost using the money saved through my financial advisor's recommendation of mortgage.

Of course I may be in negative equity in the short term but if anyone thinks the London market will not increase in the medium to long term quite frankly they are dreaming.

There are lots of potential pitfalls when buying shared ownership and i have to agree that the properties are over priced generally. but i'm sick of hearing constant negativity around shared ownership as soon as its mentioned and mostly without sound reasoning.

If you have an opinion and resoning as to why its a con (and i'm not totally disagreeing) then please explain, we would all be grateful for hearing the advice and perhaps we may duck a potential pit fall as there are many. But to just say "thank Leeds for not accepting you! its a con!" i think is quite unhelpful.

Thank you, great answer.

I must admit I am a little baffled by some of the replies...I really want this property so I won't be sighing with relief at being turned down, at all!

At the very least I would like to know why I was refused a mortgage.

I live with my mum, and while I love it, I really need my own place now! I can't afford to just "thank my lucky stars" I was refused. I need to live somewhere and no way can I afford a property on the open market.

Conrad

The reason for the dicontent on S/O is down to the fact the purchase price tends to be well over what you would pay if S/O were not part of the equation.

As an example I was looking a 2 bed repo's in Colchester and they were around £80,000 for a nearly new nice flat, yet the same offered under S/O were more like £140,000.

Conrad

As for mortgage refusal it is highly likely to be due to the fact the underwriters considers you to be a higher risk.

He will think to himself something like this; "Mmm I've never paid anything a day late, there is no excuse for paying catalogues late, this smells bad to me, this person has a general laxidaysical approach to paying thier obligations, so in certain circumstances they will exhibit this trait again when it comes to paying for the mortgage - for example if the applicant has a close relative die, or other life changing events - they are more likely than the ideal candidate to fall behind with the mortgage".

This stems from many statistical studies done on the type of person to get into arrears. Almost in every case there has been some late payment history on other debts in the past.

The point here, is that the bulk of people would never miss a payment, because something deep in thier pysche makes them feel awful if they pay anyone late no MATTER what else has gone on in thier life.

Yasmina

Thanks Conrad.
I appreciate that.
However, this is a New Build in a very posh area of Fulham, London.
It is quiet, it is near a lovely large Sainsburys, it has beautiful parks, and is near enough 2 tube stations and buses.
It is probably walking (ish) distance from Chelsea's Kings Rd.
A similar property on the open market is at least double the price of the S/O one.

Bargain_Rzl

I am a shared owner myself (40%) and have posted on here in detail about the pros and cons. Do a search for my posts on the subject as I believe they take a pretty balanced view.

There are multiple inherent disadvantages to being a shared owner, and you just have to decide whether these are outweighed by the advantages you stand to gain from the scheme you buy into. IMHO these advantages are likely to be far fewer in a falling market than in a rising one.

Having a mortgage+rent+service charge is not inherently crippling. It's only crippling if it's more expensive than the alternatives. I am a single householder on an average salary and have a small flat in London (i.e. considering a smaller, cheaper property wasn't an option, as I'm already at the bottom end of the scale) which costs me considerably less than either buying outright or renting would have done. This has given me the freedom to accelerate the repayment of my mortgage and in 2.5 years I have cleared well over a fifth of the original loan. I'm going to talk to the Nationwide (my current lender) next week about the possibility of going onto a 5-year fixed rate - if I continue to make overpayments, and if a couple of small investments of mine come through on target, there is a good chance I will clear the mortgage completely by the end of those five years. How I move on after that (whether to buy a greater share, or stay as I am with a low rent, or sell it on and move elsewhere) is still very much under consideration. If I do buy the remainder and take on a new mortgage for it, I'll automatically start off with 40% equity...

Similarly, an experience like the one Robin Banks has described is not inherently the case with shared ownership properties either. Yes, the fact that SO properties tend to be newbuilds mean that they are likely to be overvalued from the word go, but that doesn't mean that every single one is. The value of mine was set at a rate that was comparable to the lower end of similar properties on the open market at the time. If it had been overvalued, I wouldn't have touched it with a barge pole.

Yes, the value of my flat will have dropped over the past couple of years like everybody else's. But if I'd been renting for the 2.5 years I've had the flat, I'd have shelled out over £20k in rent - which is less (edited to say - sorry, I did of course mean MORE) than the amount that my flat has devalued. In that time I have had a pleasant and secure home which I can easily afford.

Yasmina

If a mortgage application is declined, does that count as another black mark on your credit report, and take you back to sq 1?

Bargain_Rzl

It's not a black mark per se - though the search itself will obviously show up.