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

Bargain_Rzl

HAZIEC wrote: »

I have heard (someone correct me if wrong!) that the Halifax at least credit scores these applications as though the person is borrowing 100% thus disregarding the part of the purchase that is funding by the scheme.

This will be the same for every lender and is the only logical approach (though for clarity, I think what you mean is "buying 100%" rather than "borrowing 100%" - we're talking about mortgages in general, not about 100% mortgages).

If you are buying part of a property, it's only that part of the property which is yours on which to secure a mortgage. You can't use somebody else's asset as security for your debt, so you don't automatically start off with 50% LTV.

If somebody is buying 50% of a £200k property, and the lender will only lend up to (say) 75% LTV, then the buyer will need to come up with a £25k deposit.

The lender will also want to know details of the amout of rent being paid on the remainder, as this affects how affordable the overall outgoings are for the purchaser.

SelbyJay_2

Shared ownership is not rubbish.

I bought SO three years ago and i've not looked back. I bought 50% share and rent 50%. Yes, my service charge shot up over a period of 12 months, but my mortgage, rent & service charge combined still cost me about £100 a month less than if i had a mortgage for the full value of my home.

I'm annoyed that some people have slammed these schemes as scams. As long as the Housing Assoc you are buying/renting off is audited by the Housing Ombudsmen, i think you're in pretty safe hands. I wouldnt buy SO from a private developer as you never know what they're going to do!

Make sure you've got a good solicitor familiar with SO properties and fully read the terms and conditions attached to your lease.

I have my mortgage with Halifax and i've always found them very good.

geoffky

Try selling a 40% share when house prices are at the bottom...think about it.. its going to be very very hard to shift a 40% when someone else is offering 100% for not much more money when this crash is over... shared ownership is for the financially illiterate...

Bargain_Rzl

geoffky wrote: »

Try selling a 40% share when house prices are at the bottom...think about it.. its going to be very very hard to shift a 40% when someone else is offering 100% for not much more money when this crash is over... shared ownership is for the financially illiterate...

I have no intention of selling my flat any time in the next decade, and (having been through this point in some detail before buying it) can foresee few circumstances which would mean I would need to do so.

Shared ownership is certainly NOT for people who are looking to move on within a couple of years. Nor for people who are looking for an "investment". In a rising market there is a chance that you might be able to get away with it on either of these points, but I would think it was inadvisable on balance.

However, if you are looking for a place to live, which suits your long-term needs, and you live in an area of permanently high (even including market fluctuations) prices - it is a viable consideration.

I stand by what I said in my earlier post:

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.

thepeachyone

The co-op will lend to us on a shared ownership scheme but they wanted lots of verification of income, job status etc and this takes absolutely ages. But they were willing to lend 100% of the 50% share we want to buy.

I wont be running a mile from shared ownership. The one I have managed to get has had a valuation at market value and that is the sale price. It is by a very reputable local housing association and fortunately in a place where property prices arent inflated. It is actually cheaper than renting in our case too. I did lots of research to find similar properties locally and the price was in line with ones of the same size etc.

I think the schemes which tend to overvalue are the shared equity ones advertised by developers such as Wimpey and Barratt. They work somewhat differently to shared ownership through a housing assocation.

Just check out all the facts before you take the plunge.

Bargain_Rzl

thepeachyone wrote: »

I think the schemes which tend to overvalue are the shared equity ones advertised by developers such as Wimpey and Barratt. They work somewhat differently to shared ownership through a housing assocation.

That's not the whole story. I have seen a LOT of overvalued part buy/part rent ones too. There are some appalling deals out there. Fortunately in this day and age no sane lender would give you a mortgage on one.

Just check out all the facts before you take the plunge.

Absolutely, as with anything. And check it out in relation to various scenarios which might happen to your personal circumstances, too.

robin_banks

AMILLIONDOLLARS wrote: »

This valuation would have worked in your favour! - you should have gone back to renegotiate. Before my daughter put herself forward for the one she is now buying, we asked the person in charge if the valuation came in low what would happen. We were told it would go before the head of the Association for his/her consideration, and like any other seller they would decide whether to proceed at the new valuation or not. In this market they would be stupid not to, as the whole point of this scheme is to get first-timer buyers on the first rung, either that or have loads of property unsold.

And don't forget it works both ways, once property prices start to raise, you'll have to buy your increase in share at the new price. so swings and roundabout.

AMD

PS. My daughter mortgage will be with the Leeds so watch this space for the outcome.

Why bother, when I did my research I felt the scheme to be madness !!!.

Properties in this development still remain empty as lenders valuations are considerably less than the vendors.

barnaby-bear

Yasmina wrote: »

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?

I know people who've moved in with an annual service charge of £600 and in 3 years it's at the £2k level (that's nearly £200 a month) on top of the rent and the mortgage, the rents can go up and they suffer from the full HA properties nearby which seem to house a bunch of chavs devaluing the development.... if they didn't flog all the SO they seem to move to rent to thugs...

joel10873

I believe the debate over this one could go on forever!!! i dont think it is productive to say ALL SO schemes are bad and prop up property prices as i think we can all see that from posts on here that is not necessarily the case.

Also for all people suggesting save longer or buy smaller that is not suitable for everybody, there is no way i could buy a four bed house on the open market plain and simple. However a fifty% share is possible and like many people have said before i am buying a home not a short term investment

i think what i am trying to say is i enjoy reading the debate but prefer more balance and objective posts rather than

stay away from these

or

they are all a scam

please provide evidence to back this up as this can be quite an alarming read otherwise and is certainly not the case for all people or the whole country

thanks

elle.woodz

I'll have my say because it really annoys me when people say "SO is a scam" and no explanation.

While it is not the best scheme, in places like South East England it could be the only solution for FTB. Prices are not falling that quickly there and ARE going to rise again in areas within London-commuter-belt.

Moreover, if I buy a share that is worth £60,000 and after say 5 years it is only worth £40,000, after selling I still get out £40,000 cash while if I would rent, I would get exactly £0.

I'm planning to go into SO scheme and because of the low mortgage (plus rent, plus service charge) my and partner would be able to comfortable save around £600 - £700 a month which would go for overpayments / paying in lump sum to pay off 25% share we would have a mortgage on.
You can't tell this is not a reasonable solution.

Alse, comparing the size, the rent of a similar apartment in area will cost us around £400pm MORE than mortgage and rent + service charge.

I think the people who disapprove of SO as a "scam" and "madness" are people who praise "buy to let" and "house is an investment" where the only thing they have on their mind is money they can get out of the property.
This is what inflates the prices. The constant demand to buy properties to let ...(uber-high rent will cover the mortgage repayments of course)

I'm still waiting for someone to come up with strong and reasonable arguments why SO is for "financially illiterate" as they claim because I don't feel like I'm such person!!