Mortgages and Shared Equity.

Disney_Pluto

Hi Guys,

Sorry if this is posted in the wrong place and apologies if this turns out to be a long story, I will try and keep it short.

Myself and my Boyfriend brought a £125,000 house from Bovis. We brought 75% of it and Bovis Have the other 25%. We dont pay rent on the other 25% we just have to pay it back within 10 years or sell the property. As I was still a student nurse at the time of buying the property the mortgage is only on my boyfriends wages. So calculations look something like this:

Mortgage for : £86,000
Deposit put down by us : £11,000
Bovis 25% : £28,000

As our mortgage is now coming to an end we are looking for a new deal and to buy the rest off Bovis. We need to have a valuation done on it and we will owe Bovis 25% of whatever the house is worth now. We plan to obviously get a larger mortgage with my wages now taken into consideration. Is it really this simple of am I missing something completly here?

Will we need to have another deposit etc? We will need roughly a mortgage of £114,000 if the house price has stayed the same.

Has anyone done this before or knows any information about this?

Hope someone can help. Thanks for reading. :beer:

dimbo61

Can you put any savings into the property?
10% of £125K is £12,500 and if you could get a few thousand pounds more you might be able to get a 85% LTV mortgage and hence a better deal!
You need to find out how much the place is worth today and why take on the extra 25% now when you are not paying any interest!!!!
What does your existing mortgage revert to after the DEAL ( is it a fix?) comes to an end?
Read the mortgage paperwork CAREFULLY ( it could be 2/3 years old !!!) and may well be worth staying with your current lender.
Do you go onto the SVR ? or some kind of tracker deal for the rest of the mortgage?

dimbo61

You have an interest free loan for 10 years so dont take on the debt until you have to or can afford too.
Better to overpay the mortgage you already have

opinions4u

dimbo61 wrote: »

You have an interest free loan for 10 years so dont take on the debt until you have to or can afford too.
Better to overpay the mortgage you already have

Got to agree with this. Why take on debt with interest until you need to? Unless it's a means to an end to get a better mortgage deal.

The alternative would be to negotiate a reduced purchase price for the final 25%.

A couple of questions:

1) What's it worth today?
2) How much do you have to pay for the Bovis share - is it 25% of current value or 25% of value at the time of purchase?
3) How much is your debt today?

Disney_Pluto

We could probably get maybe £1000/£2000 together to put towards the new mortgage.

The reason we want to do it now is the value of the house is most likely at its lowest now so we want to buy the 25% when its at its lowest rather than 5/6 years time when the property value has probably gone up meaning the 25% has also gone up. We can easily afford the morgtage if we buy the other 25%.

Our mortgage deal at the moment is 2 years fixed rate of 4.9% which ends in a couple of months.

As you can probably tell it is our first house and we dont intend to sell for at least another 4 years so trying to understand a bit more about mortgages.

Disney_Pluto

opinions4u wrote: »

Got to agree with this. Why take on debt with interest until you need to? Unless it's a means to an end to get a better mortgage deal.

The alternative would be to negotiate a reduced purchase price for the final 25%.

A couple of questions:

1) What's it worth today?
2) How much do you have to pay for the Bovis share - is it 25% of current value or 25% of value at the time of purchase?
3) How much is your debt today?

We dont get a chance to negotiate the 25% its just 25% of the current value.

Debt as in what we still owe on mortgage? I have no idea to be honest and if your talking about other debts neither myself or my other half have any debts.

kingstreet

The bad news is, your property may not be worth as much as you paid for it. That's a worst case scenario.

If it is the same £125k, then £114k is 91% of the value of the property and you will not get a mortgage for that in the current market.

When you bought, you probably got a deal based on a 75% mortgage because of the builder's equity loan. The mortgage product available to you now, at 90% LTV if you can fit that, will probably be more expensive than your current deal.

If you did nothing and stayed with your current lender, what is the reversion rate your mortgage will go onto?

As there is no imminent likely increase in property values, why not drop onto the (more than likely) lower reversion rate and use the money you'll save to overpay your mortgage to buy yourselves more equity?

Reconsider the redemption of the second charge when it's more advantageous to you to do so.

dimbo61

Hi Caroline and John ! I can fully understand your desire to buy the other 25% of your home!
but you have at the moment a 10 year interest free loan ( well 8 years left)
You need to find out what your current mortgage reverts to at thye end of the fix.
Any paperwork you have will be nearly 2 years old so give your lender a call and ask!
You would be much better off overpaying the existing debt which you are paying interest on over the next 8 years and hopefully by then you will have a better LTV when you decide to buy the rest of the prooperty