Mortgage Offer

KLICK365

I'm in the same boat as this. Got a mortgage in principle for £158k from the Halifax then found our ideal house at £78k. Applied for a mortgage with a 10% deposit of £7800 and am now waiting to hear if the mortgage will go through. Anyone any idea about this?

Forgot to add the house was on the market for offers over £82k and is valued in the survey at £85k.

Cheers

Eric1

GMS wrote: »

How is this low risk? Bank would have security over 60% of the property. ..

well, I could be wrong, 68K just looks quite affordable compared to the average salary, but I guess it depends on the area

MrsJT_2

Deposit is 5% of the mortgage we'd have (68,000) so 3,400.

GMS

Eric1 wrote: »

well, I could be wrong, 68K just looks quite affordable compared to the average salary, but I guess it depends on the area

Applicants are putting in 5% deposit meaning lender is advancing 95% of the applicants share of the property.

Remaining value will be subject (I assume) to a charge by the shared equity holder so a 95% mortgage is high risk regardless of the amount of loan and income.

No income details given by OP so impossible to say if they are on average salary or not.

Area is irrelevant. A 95% mortgage in any area is a risk.

BadgerFace_2

A shared equity charge, or second charge, is secured on the property and is only paid after the mortgage has been paid in full. Therefore, this is not as big risk a for the lender, as they are giving less than 60% LTV and could recoup that without any dangers at auction.

The second charge would only be paid after the mortgage had been settled in full.

Your problem may be more to do with new build and valuations.

GMS

Shared equity is not a second charge.

The share is defined. Many shared equity schemes contain restrictive covenants meaning a lender cannot repossess if necessary without the permission of the shared charge holder.

Second charges are as you point out second in the queue. This is the reason the rates are much higher to allow for the extra risk.

Eric1

Hmm, 95% LTV, I thought they didn't really exist anymore.
Unless that "local new deal scheme" gives some incentive to lenders, the OP's chances are not looking great.

MrsJT_2

Just a couple of facts for you;

Partners income is 18,500

He does not pay anything on the shared ownership, no rent no interest nothing, they have there 40% if apartment is sold. (This is 40% of whatever the home is sold for not the value they originally put in)

anything else you would need to know?

spud211

Eric1 wrote: »

Hmm, 95% LTV, I thought they didn't really exist anymore.
Unless that "local new deal scheme" gives some incentive to lenders, the OP's chances are not looking great.

It's likely to be a scheme similar to what was homebuy direct - many builders are now doing their own versions of such a scheme, lending (interest free for 10 years) anything up to 40% of the house to the purchaser.

There are only 3 main lenders that will provide these kinds of mortgages at the moment as far as I know - Halifax, RBS and Nationwide, and Halifax seem to be the most common/the ones who accept people the most, from my research into this.

We can't predict the likelyhood of being accepted as there are too many factors, and unless we know your circumstances (income, employment + employment terms, credit history, age, area etc etc) its very difficult. Anything could change their mind.

In reality though if you have got as far as this then you are fairly likely to get approved if nothing catastrophic shows up on the searches.

BadgerFace_2

GMS wrote: »

Shared equity is not a second charge.

The share is defined. Many shared equity schemes contain restrictive covenants meaning a lender cannot repossess if necessary without the permission of the shared charge holder.

Second charges are as you point out second in the queue. This is the reason the rates are much higher to allow for the extra risk.

You are mistaken with shared ownership, which is what you are describing.

I take it you haven't dealt with this before, as shared equity is where the purchaser will own 100% of the property, for a lesser amount, usually 75%-85%. The builder (or sometimes government scheme) then places a second charge over the property for the remaining money from the sale (note an actual cash value, not %). The mortgage company has the primary charge over 100% of the property and classes the value the builder has put in as cash deposit with regards to mortgage rates.

Therefore in this scenario, the bank would have more than adequate security. It is the person supplying the 40% who is taking the risk.