Shared Equity Am i missing something??

tankie5753

After some advice
Im thinking of purchasing a 3 bed new build listed at £200000. With the shared equity of 15% in the form of a loan to be paid back after 10 years my mortgage will be £160000 after 5% deposit.

Now the 15% is paid at 15% of the rate of the value of the house on paying back the loan so potentially if the house price falls then as long as i keep the house then am i right in saying that it will become a good deal for me as i wont be paying back as much as first thought and if the price goes up then again its no problem as i will still make a 85% of whatever the house has risen buy.

I wont have to borrow to pay back the original 15% as i have a bond that will mature in 8 years that will cover it.

I think that it is a very low risk way of buying and the only way i can afford to at the moment.

Can anyone offer any advice?? Am I missing something??

tankie5753

Further question, Can i negotiate the price with the house builder even though im doing a shared equity scheme??

poppysarah

Negotiate hard. They're doing this 15% thing cos they know they're overpriced.

BUT if in 10 years the house is worth less, yes the 15% is less but where will you find the money from? You won't be able to add to the mortgage if your house is worth less.

brit1234

The good old shared equity time bomb thread again.

Type in shared equity and scam into the search at the top and select forum and it will come up with the main thread.

Its up to you if you want to vastly overpay for a house, we can't stop you. You might want to consider the future chances of you ever re mortgaging when you 5% deposit gets wiped out and also when your house price fall more than the equity loan on top.


Shared equity time bomb
Comes with 5 & 10 year settings

Shared equity is just a way to get buyers to pay way over the odds for a property. It will be about 2012 when you really start to see the shared equity owners start to really suffer, those with the 5 year loans.

To everyone else steer clear its a scam, buy normal with the falling house prices to assist you.

To the original poster please do your research on the scheme before signing up.

tankie5753

I have a bond that matures in 8 years which will more than cover the 15% and then the plan will be to let this property and then buy another family home.

The way i see it, it would be really benificial for the price to have dropped in 8 years so that the 15% will be alot less and then just keep hold of it untill mortgage has been paid off through rental income or the value has gone up to a point where it would be benificial to sale.

tankie5753

Thanks Brit1234, i understand that it is a massive risk, im just trying to work out if i can beat the system! as i said my bond in 8 years will more than cover 15% of whatever and leave me enough for a 20% deposit on another property. so if i keep the original property after paying back the loan then surely it wouldnt matter and would be better if the price had dropped??

brit1234

You can buy a bigger, better quality home and more importantly cheaper property than shared equity ones.

Just save a bigger deposit and enjoy all the price falls while you save.

GDB2222

What stops you from surrendering part of the bond and getting a 10% deposit together, so you can afford to buy somewhere that doesn't involve shared equity?

tankie5753

Its not a bond, its a £45000 golden hand shake for 22 years service in the army, thought it would be easier to explain it as a bond so i have no access to it untill 2019, at the moment im paying rent and just see it as dead money which is really frustrating me and it would take at least 2 more years to square away even a 10% deposit on the open market

cabbage

My son did this and I wasn't hapy but now it seems like a better deal. The lender ensured that the house wasn't overpriced and made the builder drop the price by £15k as it was down valued. He gets an interest free loan on the 15% for five years. At the end of five years he will probably move or remortgage and is making plans now to have enough to repay it by saving.

When I look at the type of property he would be able to buy he wouldn't have got such a nice property, for example many didn't have a downstairs loo and ensuite. Everything is shiny and new and covered by a nhbc certificate or similar.

In his case, its helped him get a second time buyer property but as a first time buyer. There are risks with the shared equity and time will tell if its a mistake but at the moment he has all mod cons, got £15k knocked off the price, the 30% is interest free and as long as he saves hard he will be able to pay it off by the five year mark or remortgage. By which time his salary should have increased. Its always a gamble though and could go t**ts up but its his choice.

We did look into this quite a lot and compared non scheme houses but in the end he wanted the better facilities of the new house. As a parent I can only point out the pitfalls and let him make his own decision and bail him out if needed.

poppysarah

cabbage wrote: »

the 30% is interest free and as long as he saves hard he will be able to pay it off by the five year mark or remortgage. By which time his salary should have increased.

Might not be able to remortgage even if his wage has gone up unless the price is at least the same as now.

Hope he can save hard.