Help needed on shared equity flat

lydo33

Hi, I need some help here. I have a bit of a catch 22 on my hands.

I bought a flat 2 years ago on the LIFT Scheme in Inverclyde, Scotland. Its a shared equity and i own 60% of it. It was valued at £120,000 at the time and my mortgage is £72,000.

It was a good deal at the time for me as i could move out of my parents house without having to put down a deposit on the flat as the governments share acts as that.

Now, 2 years on, i'm looking to move and buy a house. But here is the thing - i am not allowed to let/rent it out because its a government scheme and thats in the agreement.

If i was to buy it ouright i dont think i'd be able to sell it on for the £120,000 as nobody would pay that for a flat as there are better houses are going for a lot less than in this area. Plus i wouldn't want to lose money on it and sell it for less than i paid.

Here's the dilemma - If i was to buy it outright i would only get a 90% mortgage and i'd need to put down the other 10% which is £12,000. I would then be in a position to rent it out, but i have no savings left for a deposit for another place of my own.

So basically i feel im stuck here, and im trying to find out if i have any options.

I'm just wondering if anyone can give me any advice, or help or if anyone is in the same situation as myself and could point me in the right direction.

Thanks in advance.

lydo33

Bump.

Anyone?

lvm

This isn't the advice you are looking for BUT....

I own a shared equity property in Edinburgh (50% share) and I rented the flat out for about a year and a half without telling anyone.

I'm sure the contract says you can't rent WITHOUT PERMISSION - have you tried calling them? At best, you would have to pay a higher interest rate on your mortgage, at worst they will tell you where to go.

Another problem - if you did rent it out without telling them and tried to get another mortgage there'd probably be some questions around you already having a residental mortgage.

Could you wait a while before making a decision and save up more money? How many rooms are in the property? Could you take in a lodger (I've done that and it's the best thing I've done) and save up the money from that to buy your SE property in full?

Talking about a lodger - if you have 2 rooms, could you rent property out to a single person or couple under the agreement they rent the one room but you have access to other if you want it? That way, you can stick to a lodger agreement rather than tenancy and gets you around the renting out problem. Don't know how easy it would be to get a 2nd home mortgage though - -you'd probably need a 75% mortgage.

Other option - sell and make a loss on it. Good thing is you only have a 60% share so your loss is limited to that.

Sorry I can't think of any other options...

lydo33

Thanks for the reply.

Sorry, but i never mentioned that i currently live with my fiance and we are expecting our 1st child hence the reason i want to get out of the flat, dont want to be lugging a baby and pram etc up 4 flights of stairs every day. So i'm not in a position to take a lodger or rent out. another thing is that if i do buy this out to rent it, i was thinking of getting the new house in my fiances name therefore it wont be a 75% mortgage.

theartfullodger

lvm wrote: »

............

Could you wait a while before making a decision and save up more money? How many rooms are in the property? Could you take in a lodger (I've done that and it's the best thing I've done) and save up the money from that to buy your SE property in full?

Talking about a lodger - if you have 2 rooms, could you rent property out to a single person or couple under the agreement they rent the one room but you have access to other if you want it? That way, you can stick to a lodger agreement rather than tenancy and gets you around the renting out problem. Don't know how easy it would be to get a 2nd home mortgage though - -you'd probably need a 75% mortgage.
...........

If Landlord is not genuinely living in the property then regardless of the paperwork the tenancy is a tenancy, not a lodger agreement.

Further, in Scotland a Landlord must be registered (criminal offence if not..) see...
www.landlordregistrationscotland.gov.uk

and, further, in Scotland (but not Engerland..) you need a court decree(=order for Engerlish readers..) to get a lodger(="Common Law Tenant") to leave.. see..
http://scotland.shelter.org.uk/getadvice/advice_topics/eviction/eviction_of_common_law_tenants

btw if taking dishonest/cheating actions (eg not telling HA you are letting the place...) don't be surprised to find the neighbours and the tenants/lodgers thinking you've said it's OK for them to be dishonest/cheats...

Cheers!

Artful

lydo33

theartfullodger wrote: »

btw if taking dishonest/cheating actions (eg not telling HA you are letting the place...) don't be surprised to find the neighbours and the tenants/lodgers thinking you've said it's OK for them to be dishonest/cheats...

Cheers!

Artful

thanks, but i'll not be doing that anyway, not worth all the hassle of getting caught.

theartfullodger

lydo33 wrote: »

Thanks for the reply.

Sorry, but i never mentioned that i currently live with my fiance and we are expecting our 1st child ............

Congrats on Baby!!!

mightymouse

Hi

Could your fiance afford to buy a house ie deposit, pregnancy (reduced income) etc?

Do you need an income from the flat to help pay your 'flat' mortgage?

I ask because if there were void periods or non payment of rent would that cause you financial problems.

If not then on the basis that the flat is worth say £80,000 to £90,000 immediate sale value ask for permission to rent it out from both your mortgage company and your equity partner on the basis that you need to move and cannot sell it for £120,00.

Maseillo

We're in a similar situation - we bought 3 years ago on the ownhome scheme which sounds similar to what you have - didn't need a deposit and we own 60% with an equity loan of 40%, and it's in the agreement that we don't rent it out. We have it on the market at the moment as we are relocating 4 hours away for work. There's not much interest in the house though and we can't afford to drop the price any more than we already have as we haven't got enough equity - we can only just pay the fees as it is! I spoke to Ownhome and they have said that they can give permission to rent the property out in exceptional circumstances. I've put a request in to them detailing why we have to move. As far as I see it, the "no renting out" clause is so that people don't buy on the scheme specifically to rent out, and so renting out because you can't sell is different. I'm waiting to hear back from them about it. I'm a bit worried because we don't HAVE to move - but it is a great opportunity for my family which I didn't feel we could turn down. So I don't know if we will qualify for their "exceptional circumstances".

Have you asked them? You never know, they might give you permission.

brit1234

All I can say is either increase the equity in in or wait for price rises again (which in all likelihood be over a decade away).

Good luck in what you choose to do.

Personally I believe shared equity is a scam and advise first time buyers to avoid it like the plague. It is designed for the developer to get the buyer to overpay for the property. It also acts as a time bomb when the loan needs a repayment in 5 or 10 years time.

Link to:Shared ownership/equity is a scam thread
https://forums.moneysavingexpert.com/discussion/comment/44767426#Comment_44767426


Shared Equity Time bomb

Maseillo

brit1234 wrote: »

All I can say is either increase the equity in in or wait for price rises again (which in all likelihood be over a decade away).

Good luck in what you choose to do.

Personally I believe shared equity is a scam and advise first time buyers to avoid it like the plague. It is designed for the developer to get the buyer to overpay for the property. It also acts as a time bomb when the loan needs a repayment in 5 or 10 years time.

Link to:Shared ownership/equity is a scam thread
https://forums.moneysavingexpert.com/discussion/comment/44767426#Comment_44767426


Shared Equity Time bomb

Thanks for that. For people like myself and the OP who already have a shared equity property, pointing this out is really helpful! Whether it's a scam or not - it's done now!