Selling my property to buy shared ownership. Advice needed!

sophj83

I currently own a 3 bed end terrace with a £71,000 mortgage. My house is valued around £87,000.
I am looking to downsize and raise some capital to pay off a few debts amounting to around £7000.
I am interested in a 50% shared ownership scheme run by a local housing association. The 50% share of a 2 bed semi is £49,975.
I am confused as to what will happen when I sell my house in terms of the mortgage as the purchase price for the new property is less than my current one.
Would my mortgage simply be transferred to the new property and any diff between what I currently owe and the sale price paid to me?
Or would I have to apply for a totally new mortgage on the new property, leaving me with the equity from the sale of my current property?
Also, my credit rating is poor, although I have never missed a mortgage payment. I am hoping my current mortgage can just be transferred to the new property, therefore avoiding applying for a new mortgage and being declined.
Does anyone have any advice?
Thanks in advance

Tuscan

based on what ive read on these forums and ive read a lot, you will have to pass the current lending criteria of your mortgage company so it will be treated as a new application with credit checks etc and they may not even lend on shared ownership properties as it seems a bit of a grey area..

I also suspect you may need some sort of deposit on the new house? plus legal fees and also agent fee's from the sale of your old house, all of which would come out of your equity or any saving's you have...

opinions4u

sophj83 wrote: »

I currently own a 3 bed end terrace with a £71,000 mortgage. My house is valued around £87,000.
I am looking to downsize and raise some capital to pay off a few debts amounting to around £7000.
I am interested in a 50% shared ownership scheme run by a local housing association. The 50% share of a 2 bed semi is £49,975.
I am confused as to what will happen when I sell my house in terms of the mortgage as the purchase price for the new property is less than my current one.
Would my mortgage simply be transferred to the new property and any diff between what I currently owe and the sale price paid to me?
Or would I have to apply for a totally new mortgage on the new property, leaving me with the equity from the sale of my current property?
Also, my credit rating is poor, although I have never missed a mortgage payment. I am hoping my current mortgage can just be transferred to the new property, therefore avoiding applying for a new mortgage and being declined.
Does anyone have any advice?
Thanks in advance

A mortgage is specific to a property.

When you sell a house, the mortgage is repaid with the sale proceeds. Any residual funds (after solicitors, estate agents etc have been paid) are yours.

e.g. sell for £87,000, repay mortgage of £71,000, estate agents and solicitors £2,000, £14,000 for you. Oh, you may have early repayment charges (ERC) on your mortgage too.

If you're buying a new property for £50k, you will need to fund a deposit for that. Shared ownership lending will typically require a deposit of 15%-20% minimum (£7,500 to £10,000).

You will also need to fund survey fees, new mortgage product fees, solicitor fees to buy the new property. The mortgage on the new property will require a completely new application that will be credit scored.

While your idea is one that may work, it's more than possible that a mix of deposit on the new place and fees to others will eat up most of your equity and give you little leeway to pay off the debts.

Do your sums and research carefully before going ahead with this plan!

What is your current mortgage deal (rate, fix/tracker and time period), who's it with, and what SVR will it go on to?

You may benefit from visiting the Debt-free Wannabe part of this site and working at spending less and earning a little more in order to reduce your debts.

poppy_f1

before you do anything i would make sure i was eligible for shared ownership as these are usually for FTB and people who normally wouldnt get a mortgage any other way, y you already having a mortgage may disqualify you

Marsh_Samphire

I used to work for a HA and you would have been very low priority as you already have a home and a mortgage. You need to find out if you are eligible at all because often there are legal restrictions (S106) on who the HA can offer the shared ownership properties to.

The HA sales people have targets too and, even if you were eligible, they would not be happy to wait for you to sell your house which could take months. They would prefer to allocate to someone who could buy the shared ownership property quicker than you e.g someone in a rented property who only has to give notice or somone living with parents/family.