First time Buyers, Shared Equity Help

scobie140

Hi basicly me and my parter are looking into getting a house on shared equity together as it would take ages to try and save up a big enough deposit for an older house. We have seen one we like the look of but there stil in the process of being built. What should we be looking out for whilst doing this? I know the question is a big vague but we don't really know anyting about buying house to even know what to ask.
all input is appreciated, Thanks

poppysarah

When you were a kid did you ever dream of owning 50% of a house?

No, I doubt it.
Save and buy a whole one.

Prices will fall.

badmoon

scobie140 wrote: »

Hi basicly me and my parter are looking into getting a house on shared equity together as it would take ages to try and save up a big enough deposit for an older house. We have seen one we like the look of but there stil in the process of being built. What should we be looking out for whilst doing this? I know the question is a big vague but we don't really know anyting about buying house to even know what to ask.
all input is appreciated, Thanks

Is it Shared Equity or Shared ownership? There's a significant difference. If it's S/E then you own the whole of the house but you will have a 2nd charge on the house, if it's a developers scheme, the amount they lend to you would normally be repayable after 10 years and based on the valuation at that time or when you sell the house (whichever is sooner).

Shared Ownership I believe is where you do literally own a certain percentage of a property and then pay rent on the rest, you can increase your ownership percentage in the house dependent on affordability and approval by a mortgage lender.

Things to ask/look out for? If you're looking at new builds, find out what you can get thrown in as extras. I've had my carpeting, fencing and turfing etc., thrown in. You also need to look at house prices in the area and consider the risk of the valuation being too low (have a look at rightmove and also google the postcode of the developments you're looking at to see prices of previous properties bought on the development)

There are only certain lenders who deal in Shared Equity mortgages. Halifax and Nationwide to name two. Nationwide have a history of valuing new builds a little lower. With Halifax there were no issues personally speaking but I do know it can happen.

Other things to consider, if you're considering buying off plan ensure that at the minimum you ask for a long stop date to be included in the contracts when they're exchanged so that you can walk away should the mortgage offer expire prior to the property being complete and should you not be successful in having the mortgage offer reissued. It is possible to get mortgage offers that last for longer than 6 months, 9 months in my case.

With shared equity, also consider strongly what your strategy would be for repayment after 10 years of the 2nd charge on the property.

I'm due to complete this Friday (touches anything wood like in the vicinity) I also bought off plan which according to some on here is a no no. I'm not saying too much till I hopefully have the keys in my hand come Friday afternoon but upon my snagging inspection last Friday it looked fantastic.

Do feel free to PM with any further questions and I'll try my best to help.

x

scobie140

poppysarah wrote: »

When you were a kid did you ever dream of owning 50% of a house?

No, I doubt it.
Save and buy a whole one.

Prices will fall.

It's shared equity not ownership so we will own the whole house, its just a way to get round saving up for a few years to get a deposit.

badmoon wrote: »

Is it Shared Equity or Shared ownership? There's a significant difference. If it's S/E then you own the whole of the house but you will have a 2nd charge on the house, if it's a developers scheme, the amount they lend to you would normally be repayable after 10 years and based on the valuation at that time or when you sell the house (whichever is sooner).

Shared Ownership I believe is where you do literally own a certain percentage of a property and then pay rent on the rest, you can increase your ownership percentage in the house dependent on affordability and approval by a mortgage lender.

Things to ask/look out for? If you're looking at new builds, find out what you can get thrown in as extras. I've had my carpeting, fencing and turfing etc., thrown in. You also need to look at house prices in the area and consider the risk of the valuation being too low (have a look at rightmove and also google the postcode of the developments you're looking at to see prices of previous properties bought on the development)

There are only certain lenders who deal in Shared Equity mortgages. Halifax and Nationwide to name two. Nationwide have a history of valuing new builds a little lower. With Halifax there were no issues personally speaking but I do know it can happen.

Other things to consider, if you're considering buying off plan ensure that at the minimum you ask for a long stop date to be included in the contracts when they're exchanged so that you can walk away should the mortgage offer expire prior to the property being complete and should you not be successful in having the mortgage offer reissued. It is possible to get mortgage offers that last for longer than 6 months, 9 months in my case.

With shared equity, also consider strongly what your strategy would be for repayment after 10 years of the 2nd charge on the property.

I'm due to complete this Friday (touches anything wood like in the vicinity) I also bought off plan which according to some on here is a no no. I'm not saying too much till I hopefully have the keys in my hand come Friday afternoon but upon my snagging inspection last Friday it looked fantastic.

Do feel free to PM with any further questions and I'll try my best to help.

x

We can afford to save up the %15 over the ten years to own it all, its just we hate staying where we are the now and this seems a good way out.

By off plan do you mean not built yet/ in the process of being built or not even started? this is one of the things that confused me, as would the mortgage be taken out/applied for after the reservation has been paid or would it be nearer the time of compleation? as i have only just finished my apprenticeship and dont have any payslips of my new wage as evidence of income. do we pay the %5 deposit required before we move in or when the house is ready to be moved into? I will need to remember and try to bargin some extra's in as carpeting the full house could save us a fair few quid

badmoon

scobie140 wrote: »

It's shared equity not ownership so we will own the whole house, its just a way to get round saving up for a few years to get a deposit.


We can afford to save up the %15 over the ten years to own it all, its just we hate staying where we are the now and this seems a good way out.

By off plan do you mean not built yet/ in the process of being built or not even started? this is one of the things that confused me, as would the mortgage be taken out/applied for after the reservation has been paid or would it be nearer the time of compleation? as i have only just finished my apprenticeship and dont have any payslips of my new wage as evidence of income. do we pay the %5 deposit required before we move in or when the house is ready to be moved into? I will need to remember and try to bargin some extra's in as carpeting the full house could save us a fair few quid

Sounds like you've thought about it which is good, just be aware that if house prices at some point go up, you'll be paying a lot more than you currently anticipate.

Re off plan, it can mean any one of those things. In my case if I can recall rightly (worst memory ever), I paid a reservation fee of £100 to reserve the plot, they then waited for the other houses in my phase to be confirmed as being reserved. Then applied fully for mortgage (it was an AIP till then) and once that was in place, went into the process for exchanging contracts (that's when you need to really delve deep into the contracts and insist on a long stop date - i personally wouldn't go sign the contracts unless it's agreed) Also think about things like if you want a garden shed, I requested permission at the time and that's all fine and confirmed rather than strictly speaking have to ask the developers for formal permission now.

You need apply for the full mortgage now (or when you go into reserve the property) as valuations etc., need to be done. As I said though most mortgages are just for up to 6 months, the Halifax did mine to expire end of July. Which worked very well as there were some delays. The developers worked towards the long stop date too of this Friday.

As for the 5% deposit, no reason to think it's any different than in my case so you'd pay it just prior to completion. I arranged the bankers draft last week.

Not sure how it'd affect you re the lack of payslips, best to speak to your mortgage broker/advisor should you decide to proceed.

Hope this helps a bit.

wymondham

The main thing is that it's shared equity to help them sell the property, not to help you buy it - nobody is doing you any favours here (although you may think they are), so look very carefully into this, especially as the market is all over the place at the moment.....

If the property was a reasonable cost and quality then this scheme would not be necessary as the property would sell normally.

badmoon

wymondham wrote: »

The main thing is that it's shared equity to help them sell the property, not to help you buy it - nobody is doing you any favours here (although you may think they are), so look very carefully into this, especially as the market is all over the place at the moment.....

If the property was a reasonable cost and quality then this scheme would not be necessary as the property would sell normally.

If that's the case then why was there no issue with the valuation of the property I hope to complete on? And the quality looked fine to me on Friday.

wymondham

badmoon wrote: »

If that's the case then why was there no issue with the valuation of the property I hope to complete on? And the quality looked fine to me on Friday.

I'm not talking specifically .... these schemes were introduced to enable the large housebuilders to shift their houses. Had nature taken it's course and the prices reduced naturally then these schemes would not be needed..

Make no mistake there will be a price further down the line to pay for entering into these schemes - you don't get a free ride. What does the small print say about who owns what and what happens in the various circumstances such as if the house is valued at much more, or much less than now when you come to sell?

brit1234

Buying Shared equity schemes at the moment is high risk as prices continue to fall.

If not built yet it is even bigger risk especially if you agree to buy in contract. This is because your mortgage offer may be out of date and you can not get one at the price you are contracted too. This has been very common in last year. The other problem is if the valuation when completed is far below the sale price you have agreed, you may not be able to get a mortgae and get sued by builder.

If you do buy in this horrible scheme get one which is built.

Personally I would save a bigger deposit and enjoy the price falls for at least 6 months.

DVardysShadow

Do look at what happens if you need to sell the property - whether there are any restrictions on who you sell to or whether anyone has to approve them.

And consider this. If you need to sell, you may need to redeem the shared equity or ownership. If it would be a problem for you to buy 100%, you will almost certainly have problems finding a buyer who can afford to buy the property.

And finally, understand what negative equity is and how you get into it. Really understand it, so you could explain it so a lamppost would understand. Do this before you go further.

scobie140

From my understanding of what we were told is that if within the ten years we pay back the equity then it will be at the price of when the house was purchased but should we sell then the company get that % of the sale value or should we want to buyback after 10 years then the house must be re evaluated and you would have to pay back the % of the new evaluation, this won't be a problem for us as we will be paying back the equity within the ten years. Ok so from what you's are saying that we should make sure that if we go ahead with this then we should make sure that the mortgage has a long as possible stop date beyond the planned completion date? if we put the deposit down would we need to apply for the mortgage straight away?
The company is only doing shared equity on a few of the properties on this plot, There is only two houses half built on the plot so far and the rest are in the very early stages/not even started yet, this was the appeal for us as we could get one reserved and still have plenty of time to save up as much as possible to get all new furniture and the deposit etc whilst they were being built. as for the value of the property falling thats not really an issue for us as we don't plan on moving hence why were looking into moving into a 3bed when we don't have kids yet but plan on them in the future. In an ideal world we would be well of off or have well of parents who could help us with a deposit for a proper mortgage but were not that lucky so have to make the best of what we do have.
Badmoom it would be nice if you could give me a update of how you got on with all the final part of the deal, any hiccups or issues which i may have to look out for etc, once you are settled in and have time as i know how hectic moving can be.