Shared Ownership company have a problem with 40 year mortgage-why?

sturgeon

This isn't a thread to discuss the fact I'm buying a shared ownership home...as it's definitely the right decision for me.

My purchase of a new build is just about finalised and I've had my mortgage offer, we were trying to exchange today and the company behind the FTBI scheme gave me authorisation to exchange. My mortgage broker initially proposed a 40 year term mortgage with Halifax, I believe this was because that was what they would offer to me according to my salary and the mortgage required etc. Anyway, the broker mentioned he needed to clear this with the company behind the FTBI scheme and said they agreed it. This was several months ago.

Today it's suddenly decided they seemingly aren't happy with a 40 year mortgage and would like it to be 25 years. Now, I understand why this company wanted certain things which are beyond norm for a regular house buy and mortgage-i.e. they wanted to ensure I'd have enough disposable income after my mortgage and bills etc. This is to ensure the scheme is allowing a FTB to still stay financially secure etc. I also understand why you'd need to obtain permission to make structural or internal changes to the property as they own a portion. However, I don't get why it affects them if I have a 25 or 40 year mortgage. If they're so keen to ensure I can afford this all, surely allowing me to have the 40 year mortgage if offered, will make it more affordable?

My plan is to take the 40 year offer, with the fixed rate for 3 years then remortgage to a 25 year term. This allows me to save up as much as possible in those 3 years to try and buy as much of the unowned percentage as possible in that time. This also ties in with the time I will need to start paying rent on the share I don't own (after 3 years).

I have to see tomorrow if they'll accept the 40 year term or try and convince them to do so, the reasons behind this apparent change of mind weren't clear as I was only told by my solicitor about 6pm. However, could anyone, hopefully those who have bought shared ownership properties, shed any light on why me having a 40 year mortgage over a 25 year one has any impact at all on this company? Or why it's their business and would not like me to do it?

It's not a great problem if they don't agree for 40 years, as Halifax' original offer was a 25 year deal, then they amended it to 40 at my brokers request as that's what we originally discussed. So if this company blank refuse to take a 40 year deal I still have a 25 year offer, it just means my mortgage will be around £100 more than budgeted per month.

Dan_1976

From memory its a standard condition that the housing association will have in place. A bit like that they wont allow fees to be added to the loan. I think it has to do with the rental side and how they calculate affordability.

The rental side of the deal is normally a form of lease, they may want your mortgage to end within a set time.

I am surprised this got this far, most HA's i dealt with inspected the offer or even the KFI asap.

Good luck

sturgeon

Hmm OK then, I guess it could tie in with the rental side if they don't want me to potentially pay rent on the bit I don't own for 37 years....in an obviously unrealistic but potential scenario. Also, the fees have been added to the loan as well but nobody has discussed that with me or highlighted it as an issue!

Dan_1976

You may want to ask about the fees. I dealt with about 3-4 housing associations and they all were funny about fees.

MarkNewby

Hi Sturgeon - we have been advised to do a 40 year mortgage by our mortgage broker due to salary not being high enough to afford [under the banks criteria, not ours] a 25 year one. Your post makes me nervous - what scheme / developer are you buying under? PM me if necessary.

Mark.

dmg24

Dan_1976 wrote: »

From memory its a standard condition that the housing association will have in place. A bit like that they wont allow fees to be added to the loan. I think it has to do with the rental side and how they calculate affordability.

The rental side of the deal is normally a form of lease, they may want your mortgage to end within a set time.

I am surprised this got this far, most HA's i dealt with inspected the offer or even the KFI asap.

Good luck

I agree it is a standard condition, or at least it was when I bought (nearly ten years ago!). Unfortunately I don't know the reasoning behind it, although I would guess it is to do with affordability.

MarkNewby, be careful dealing with Gladedale. My brother has just pulled out of a 'deal' with them, after having been told every lie under the sun.