Barratt shared equity deals

Glasgow12

Sorry if I am posting in the wrong section...I wondered if anyone has any knowledge of the Barratt shared equity scheme where you get a mortgage for 70% you provide a deposit of 5% and Barratt give you a loan for the rest which you pay back later.

I don't know if this is a good idea. I am a 1st time buyer who will become homeless in April when my landlord sells this property. There is no way that I can physically save 10% for s deposit and don't know whether this shared equity scheme would be better long term that renting again.

thanks

brit1234

Hi
Your better off renting and saving a deposit. Shared equity is a con. You will end up over paying for a property, trapped in negative equity and then get hit by extra loan repayments after 5-10 years.

If it was such a deal Barrats wouldn't be selling off their shared equity loan books to others. The loan part is dodgy enough under barrats but you would have to read the small print in case the new loan provider can change the repayment details.

Read the debate below from both camps to give you a fairer view.

https://forums.moneysavingexpert.com/discussion/3177256

You have to ask yourself:

1. Is the property overvalued?
2. Do you feel that prices will fall 5% or more and wipe out your deposit?
3. What will happen if interest rates and you are in negative equity? Could you afford the repayments?
4. Could you afford the repayments to loan when they kick in with the mortgage?

poppy10_2

These schemes are almost all scams, designed to lure in the financially naive.
If you can't afford to save a deposit, then you can't afford to buy a house at present; getting trapped into one of these schemes is the last thing you need.

Glasgow12

thansk for your replies...i have been looking more into this on the internet. i can see how the builders get you hooked in, lovely new show home just makes you want to but it. i'm guessing with the money i can save for a deposit I would be better going for a second hand home and getting better value for money without the stress of wondering about negative equity and repaying the loan on the house.
how do the builders get to value these properties so high? how do they set the price...plucked out of the air? sounds like i should carry on saving!

brit1234

They try every trick under the sun. If they get one person to overpay they use it as evidence to fight all valuation disputes.

One trick they use to use before banned was gift deposit. The land registry figure was always the full price despite the first buyer getting a gift deposit off and paying less than the given land registry figures.

Your right to go for a 2nd hand home, the dimensions are bigger and quality better.

shortchanged_2

Glasgow12 wrote: »

Sorry if I am posting in the wrong section...I wondered if anyone has any knowledge of the Barratt shared equity scheme where you get a mortgage for 70% you provide a deposit of 5% and Barratt give you a loan for the rest which you pay back later.

I don't know if this is a good idea. I am a 1st time buyer who will become homeless in April when my landlord sells this property. There is no way that I can physically save 10% for s deposit and don't know whether this shared equity scheme would be better long term that renting again.

thanks

Ask yourself, why does a property developer need to offer you a loan to buy their house?

Answer, because it's overpriced in the first place.

You are basically going to get yourself a 95% mortgage and go straight into negative equity.

Glasgow12

shortchanged wrote: »

Ask yourself, why does a property developer need to offer you a loan to buy their house?

Answer, because it's overpriced in the first place.

You are basically going to get yourself a 95% mortgage and go straight into negative equity.

is that really how grim it is? in that case i would be better staying with my original plan of saving a deposit and going through a mainstream lender. it all seems a bit iffy with having to use their mortgage broker who then arranges the survey...they are all in cahoots together! day light robbery springs to mind!

ssmith.73

Is it possible to work these schemes to your advantage?

I had considered this as an option on a 2 bed flat. The plan was to let out the 2nd bedroom, and if I managed to let for 5 years, the rental income would cover around 80% of the equity loan (less and property value increase), thereby negating a lot of the negative equity risk.

I know there is the possiblility of not being able to let out the room for a proportion of the 5 years and circumstances might change where I might not want to let it out, but the alternative at present is to rent/houseshare to try to save a bigger deposit to buy outright and in turn losing the rent I pay to someone else.

I appreciate this may be a little simplistic, and if anyone spots anything obvious please let me know.

brit1234

ssmith.73 wrote: »

I appreciate this may be a little simplistic, and if anyone spots anything obvious please let me know.

The big one is your overpaying for the shared equity property from the start say 15-20%.

Now with the maths I'm sure if you save a bigger deposit and buy a 2nd hand 2 bed flat over a couple of years you will be far better off. If you add further house price falls in saving that deposit then your be even better off. Throw in your lodger with this and you are better off.

Under your plan won't you have to pay tax on the lodger as well?

ssmith.73

Not on the 1st £4000 or so.

Also, if I wait to save up to have a big enough deposit to buy outright, I lose that period of time to rent out a room. So probably no better off in that regard, I get a cheaper property, but lose out on rental income until I can afford the deposit and in that time have to pay rent myself to someone else.

brit1234

ssmith.73 wrote: »

Not on the 1st £4000 or so.

Also, if I wait to save up to have a big enough deposit to buy outright, I lose that period of time to rent out a room. So probably no better off in that regard, I get a cheaper property, but lose out on rental income until I can afford the deposit and in that time have to pay rent myself to someone else.

Yes but the rent you pay is far less than the 20% overpayed for shared equity and then you have the interest costs of the loan on top. That is if prices stay static but they are falling so your loses will be more.

Whats wrong with taking the time to save a deposit nowadays all of a sudden? Its the I want now, property speculation, can't be bothered to save attitude that led to this economic crisis.