Shared Ownership properties - negative equity

Miss_Muppet

I'll try to keep this short and sweet, but would appreciate anyone's advice or experience.

I bought a 40% share of a shared ownership property in 2007. I've never missed a payment, and since my fixed rate mortgage deal came to an end a few months ago, I've been overpaying the mortgage.

In 2007 I was unbelievably allowed to get a 100% mortgage (on my share), and the flat (as a whole) is worth about £30k less than it was 3 years ago, making my LTV currently around an eye watering 111%.

For personal, rather than financial reasons, I need to sell up and move on. I'm not in dire straits yet, but I could do with getting out while I can. I'm not allowed to sub-let under the terms of the lease.

Does anyone have experience of this, particularly in a shared ownership property? I wonder if the housing association may be open to coming to an arrangement - after all it's not in their interests for me to leave the property empty (even if I'm paying for it) or at worst, to default.

I realise these are all risks I should have taken into account back then, and it may be a case of tough bananas, which is absolutely fair enough.

Richard_Webster

Your buyer's solicitors will want your mortgage paid off.

So unless you can persuade your lender to agree to discharge the mortgage and convert part of your loan to an unsecured basis - or you can find the 11% in cash, you won't be able to sell.

It is unlikely that the HA will have any real say in the matter.

If you handed in the keys to your lender then it would take advantage of the "mortgagee protection clause" in the lease to buy the 100% in from the HA for the difference between the now market value and the amount owed to it and would then sell on the open market to somebody else - but that would ruin your credit rating for some time.

Miss_Muppet

I was thinking more along the lines of that the HA would possibly agree to jointly rent the property out. Surely they have some kind of contingency in place for when their tenants look as though they may default? It can't possibly be in their interests to allow things to go to the wall. I'm just interested in how an HA reacts when a tenant admits to financial difficulties.

If I could sell, they would insist on vetting any buyer, which limits the market. Plus, shared ownership mortgages are pretty rare these days, so there isn't anyone to sell it to!

The idea of course is that I staircase, but until I can bring that LTV down considerably, that's not an option.

In essence, I want to keep it ticking over as cheaply as possible, and I'd rather not leave it empty.

Richard_Webster

I suppose if the rent that could be collected would exceed the exiting "rent" and any service charge and your mortgage payments it might be a runner - but your lender would have to agree to it as well and they might not play ball.

Also HAs are very bureaucratic organisations and they don't usually have many staff capable of original thought because of the way they operate - so they may well simply say "No" because it is too complicated for them.

Miss_Muppet

Richard_Webster wrote: »

Also HAs are very bureaucratic organisations and they don't usually have many staff capable of original thought because of the way they operate - so they may well simply say "No" because it is too complicated for them.

Unfortunately, that's something I've come across too...

Kazby

Hmm to be fair to the HAs, if they received any funding from the Government to build the property they were probably obliged to include a term in the lease to prevent you from effectively using tax payers money to become a buy to let landlord. So it's not just that they're not willing to think outside the box. The HA I work for and many others will consider allowing shared owners to sublet for a fixed term if they are in a difficult situation - try talking to them about this option.

kevinlad

If you can wait, maybe keep overpaying the mortgage until you are not in negative equity?

The question is how easy to sell a shared ownership property nowadays. I am in one and wonder if I ever decide to sell it, I will attract any buyer, for two reasons. One, house prices have dropped so much that they might as well buy a 100% owned flat. Second, if for some strange reason they decide to buy a s/o property, why should they buy a second hand one, given there are now plenty of empty new s/o in the market?

Miss_Muppet

kevinlad wrote: »

If you can wait, maybe keep overpaying the mortgage until you are not in negative equity?

The question is how easy to sell a shared ownership property nowadays. I am in one and wonder if I ever decide to sell it, I will attract any buyer, for two reasons. One, house prices have dropped so much that they might as well buy a 100% owned flat. Second, if for some strange reason they decide to buy a s/o property, why should they buy a second hand one, given there are now plenty of empty new s/o in the market?

All very valid and thoroughly depressing points! Plus, I'm not massively far from the Olympic site - this time in two years, the market will be flooded with post-Olympics flats.

I am overpaying the mortgage and doing a little prayer that interest rates stay low enough to do this for a bit longer.

££sc££

I think subletting would be a good option. I know it proabably says in your lease you can't as your HA would have based this on the then Housing Corps standard lease, but more and more housing assocaitons are devising policies to allow shared owners to sublet for a fixed period, if there are exceptional circs, e.g cannot sell due to negative equity and has a need to move. If I was in your position, I would go on a load of HAs websites, find some that allow it, print off their leaflets and send them in with a covering letter, asking them to reconsider. If your HA are aware that other HAs are doing it they probably won't be so nervous. I might even mention handing in my keys to them, as that'll get them panicking that they could be about to lose a shedload to a MPC claim. Worth a try, the worst they can say is no. Best of luck

giddypenguin

Richard_Webster wrote: »

Also HAs are very bureaucratic organisations and they don't usually have many staff capable of original thought because of the way they operate - so they may well simply say "No" because it is too complicated for them.

I think this is called working for the public sector... if you have an original thought, which does not comply with 'standards of procedure' (no matter what the circumstances) then your name is put to that decision and if it goes t*t's up in the end then you'll either get sacked, and worst case senario sued - and no one will back you up as you didn't follow SOPs.