Shared Equity Question

DeadCat

brit1234 wrote: »

No one can tell you when prices will hit rock bottom. What we can tell you though prices will be going down for a long time and then stagnate for years.

You can't be certain of that and no-one can, not even the sages at HPC.

brit1234 wrote: »

Yes quality of life is important, but negative equity and the shared ownership restrictions will make it difficult to trade up. Its a balance you have to weigh up.

NE is not guaranteed. I am in a shared equity arrangement and not shared ownership so I'm not sure what restrictions you are talking about. The SE is an interest free loan which I have voluntarily chose which I have put together with my own 15% deposit to get an LTV of 70%. You are assuming I am sub-prime which I am not. I plan to take advantage of SE to overpay my mortgage.

brit1234 wrote: »

I myself will buy when properties get to 4 times my salary despite likely further falls but at the moment prices are very overvalued. As well as newbuilds being smaller than ever and cheap quality.

There are probably properties for sale which are 4 times your salary at the moment. What you are actually saying is "I will buy when the property I WANT is 4 times my salary". You may be on a low salary or want a house in Knightsbridge in which case your view of affordability could be skewed and may forever think property is over valued and end up never buying as a result.

The issue of value is very subjective and differs for everybody depending on their individual circumstances. The date you achieve 4 x salary will be different to everybody else therefore this alone is not a good indicator of when house prices have reached their bottom. I know you are not saying this but I thought I would mention it anyway.

I agree with much of your general sentiment that houses are 'overvalued' and new builds are small and low quality but is this ever going to change or do we accept it as a fact of life?

DVardysShadow

I have read your first post again, and I think I was mistaken to describe it as gifted deposit. I can now see that at exit time, the builder gets 18% of the resale value - which does actually make it true shared ownership.

DeadCat wrote: »

NE is not guaranteed. I am in a shared equity arrangement and not shared ownership so I'm not sure what restrictions you are talking about. The SE is an interest free loan which I have voluntarily chose which I have put together with my own 15% deposit to get an LTV of 70%.

As it is true shared ownership, if the lender has any sense, they will calculate the LTV as

loan/ [82% * value]

because if they have to repossess, they will only be able to recover 82% of the value. So it should put you no further forward in terms of LTV.

hundredk

DVardysShadow wrote: »

I have read your first post again, and I think I was mistaken to describe it as gifted deposit. I can now see that at exit time, the builder gets 18% of the resale value - which does actually make it true shared ownership.


As it is true shared ownership, if the lender has any sense, they will calculate the LTV as

loan/ [82% * value]

because if they have to repossess, they will only be able to recover 82% of the value. So it should put you no further forward in terms of LTV.

I think you are saying the same as I did in post 2.

However, I am now thinking there may be a separate contract between builder and buyer where the builder contributes 18% towards the deposit (to the buyer, not the lender) in return for 18% of value on resale. In this case, LTV would be calculated as usual on 100% of the value.

DeadCat

hundredk wrote: »

I think you are saying the same as I did in post 2.

However, I am now thinking there may be a separate contract between builder and buyer where the builder contributes 18% towards the deposit (to the buyer, not the lender) in return for 18% of value on resale. In this case, LTV would be calculated as usual on 100% of the value.

You're correct in saying that I have a separate contract with the builder to repay the 18%. To complicate things though LTV has been calculated based on the valuation of the property (70% LTV @ 160k valuation). I am buying the property for 170k as the builder would hardly budge on the price and threw in incentives so I have effectively taken out an additional loan to pay the difference and this means the builders stake is now 18%.

tek-monkey

brit1234 wrote: »

Yes quality of life is important, but negative equity and the shared ownership restrictions will make it difficult to trade up. Its a balance you have to weigh up.

Why do you assume all SO properties become NE? And what SO restrictions are you talking about? Your advice seems to be 'Nobody buy anything', but you just like to vent at SO schemes. Do you own or rent?

When did you change your sig? You seemed so positive house prices would drop 50%, what changed your mind?