Buy remaining share of shared ownership?

soop_2

Hi All, I'm not sure if I should post this here or in the mortgage forum, sorry.

We own 50% share of a S/O house with a value of £180,000. When we purchased the house, it was valued at £210,000 but not much we can do about that Our current mortgage is £93,000 (for the 50% share).

Thanks to a job promotion and a very low tracker mortgage (base+1), we have lots of disposable income. Now, ideally we would move to a new bigger property but although we would be able to afford the mortgage repayments, we do not have the deposit for a more expensive property.

So, should we buy the remaining share of this house while the house prices are lower? Or should we keep our 50% low cost tracker and save the spare money?

I am not sure what to do. If we wait and save, we may never have enough to move to that bigger house if the prices rise as we save.

If we buy the remaining 50%, we lose our low cost mortgage (we would need to get a new one for the whole 180K) and have to spend all our savings on a £180,000 10% mortgage deposit.

What would you do? Are there other options?

DVardysShadow

In your position, I would just keep saving. If you think the value is going to go up, then buy, but I don't think it is, so save.

bitsandpieces

You're in negative equity, then, on the mortgage? And do you have anything much saved up?

If you've got lots of disposable income, one option is not to see the extra you're earning as disposable: put it in a high interest account or (if you might be tempted to spend it!) use it to overpay the mortgage, so at least you get yourself into a situation where you've got enough savings/equity that you can afford to sell the current property if needed; then start building up a deposit for when you do move...

If you are confident prices will rise, it could make sense to buy more of a share: rising prices would give you a deposit. Have you got quotes for a new mortgage: might make this seem more or less appealing. Falling prices, on the other hand, would sink you deeper into negative equity. Higher mortgage payments would make it harder to build up a deposit through saving. Also, would a 100% share be easier/hard to sell than 50%?

DVardysShadow

bitsandpieces wrote: »

... If you've got lots of disposable income, one option is not to see the extra you're earning as disposable: put it in a high interest account or (if you might be tempted to spend it!) use it to overpay the mortgage, so at least you get yourself into a situation where you've got enough savings/equity that you can afford to sell the current property if needed; then start building up a deposit for when you do move...

For selling, negative equity is not an issue if it is covered by savings. But the rule for putting it into savings or paying off the mortgage is always put it to the one with the highest interest rate.

bitsandpieces

DVardysShadow wrote: »

For selling, negative equity is not an issue if it is covered by savings. But the rule for putting it into savings or paying off the mortgage is always put it to the one with the highest interest rate.

Thanks - read the post too quickly. Missed that they have (it seems) £18,000 in savings, so you're right in terms of negative equity.

soop_2

bitsandpieces wrote: »

You're in negative equity, then, on the mortgage? And do you have anything much saved up?

If you've got lots of disposable income, one option is not to see the extra you're earning as disposable: put it in a high interest account or (if you might be tempted to spend it!) use it to overpay the mortgage, so at least you get yourself into a situation where you've got enough savings/equity that you can afford to sell the current property if needed; then start building up a deposit for when you do move...

If you are confident prices will rise, it could make sense to buy more of a share: rising prices would give you a deposit. Have you got quotes for a new mortgage: might make this seem more or less appealing. Falling prices, on the other hand, would sink you deeper into negative equity. Higher mortgage payments would make it harder to build up a deposit through saving. Also, would a 100% share be easier/hard to sell than 50%?

Thanks for the replies. Do you think there's a case for the house prices staying as they are or dropping then? I read that they increased the last month and thought that was the direction now?

I really dont know what to think about the house prices. If they drop or stay the same, I think saving is a better move. The trouble is, it I wait and save then the house prices jump, I'll have missed the opportunity to gain.

Ideally, we would buy a new place, that way we would be spending deposit/fees etc only once and be in a better home/area. Trouble is, I can only afford a 95% mortgage and they are rare now and costly. I'm just not sure that I should go from paying a mortgage of £400/month to £1380! I could afford that but would be worried that the interest rate could jump up and I would end up with no disposable income at all!

Would anyone here consider 95% mortgage in this situation? We'd get the home we like (and before any price rises) but be very tight on money then. Hmm..

DVardysShadow

soop wrote: »

Thanks for the replies. Do you think there's a case for the house prices staying as they are or dropping then? I read that they increased the last month and thought that was the direction now?

I really dont know what to think about the house prices. If they drop or stay the same, I think saving is a better move. The trouble is, it I wait and save then the house prices jump, I'll have missed the opportunity to gain.

It seems that the market average is moving up, but the expected price for any individual house is staying put or dropping. I think this is because the activity in the market is moving to the higher value houses - so the average now is based on a nicer set of houses than a year ago.

If you are afraid of losing out, then buy, buy, buy. But if you don't buy, you can save all your spare income rather than paying most of it over as interest on a larger mortgage.

If interest rates rise and you have committed to a larger mortgage, then you could end up very tight on money.

soop_2

Thanks for the advice. It's a great help to be able to ask questions here. Appreciate you taking the time to answer.

tek-monkey

Can you not staircase your share, using your savings? Or is it a fixed 50/50 arrangement?

e.g. say the house is worth 200k, they own 100k of it. If you gave them 20k, could you change this to a 60/40 ownership ratio?

soop_2

I believe it's in 25% increments so yes, I could if I had enough savings. Perhaps that's an option; save, pay off 25% in cash rather than a new mortgage.

My concern is doing so and then finding the house prices dropping more.

I suppose my best bet is to save all we can, can keep an eye on the market.

tek-monkey

Is your repayment linked to current house prices, or does it have a fixed floor? If properly linked, then you want prices to drop as that way its cheaper to buy back a portion of the house. Some schemes I have seen however have a minimum repayment value, often at the price you purchased at, meaning you lose out. Do not buy back any shares unless they represent true market value of your property, you will be better off overpaying the mortgage instead (or saving).