Finding a 70k Mortgage for Shared Ownership First Time Buyer

minikarter

So i'm a first time buyer, and am eager to get out of rented accomodation. Knowing that a place is my own and having monthly payments being invested in something I own is a big enough reason for me. To make this easier, I've decided to go for a Shared Ownership scheme where I'll get a mortgage for around 70,000 (this will also pay off an existing bank loan I have outstanding) so I'll have roughly 40-50% share of the property.

I'm usually very good with my money, and at doing reasearch top to bottom to know exactly what I'm doing. Being good at maths kinda helps too. BUT there's so much to know when it comes to mortgages, that I'm finding it difficult. and I'm hoping someone here can lend me some advice?

I want a repayment mortgage, for £70,000, with very cheap or no fees. Fixed, to start with at least - I've heard of people getting mortgages where they're fixed for 2 years and then become variable? (I like this idea if its possible). Current outgoings for rent and the small loan this mortgage would pay off come to about £700 a month, so keeping the rent+mortgage payments around this level would be very preferable.



I also have a couple of general questions. Firstly, buying into a house share scheme - does this mean I don't need to pay a deposit at all since the rest of the property isn't being bought by me, but is owned by the sharing company?

I did have another question but now can't remember! I'll post again when it comes back to me.. but for now, I hope someone might have the patience to read this and just give me a tiny bit of advice? I've an appointment to talk to someone about mortgages at HSBC on Friday, and I'm hoping to go in armed with new wisdom, and some benchmarks to compare them with.

Many many thanks!

poppy10_2

minikarter wrote: »

I want a repayment mortgage, for £70,000, with very cheap or no fees. Fixed, to start with at least - I've heard of people getting mortgages where they're fixed for 2 years and then become variable? (I like this idea if its possible).

Almost all mortgages are on a repayment basis currently. You can either go for a tracker, where the interest rate goes up and down depending on the base rate, or for a fixed rate, where the rate is fixed for a period (anywhere from 2-5 years) and becomes variable after that. Remember that rates can go up as well as down, and you may end up paying considerably more in a few years if rates return to their long-term average.

Current outgoings for rent and the small loan this mortgage would pay off come to about £700 a month, so keeping the rent+mortgage payments around this level would be very preferable.

Judging by the stories of other people who have been suckered into the shared ownership scam, you can expect your rent and service charges to rise sharply, well above inflation

I also have a couple of general questions. Firstly, buying into a house share scheme - does this mean I don't need to pay a deposit at all since the rest of the property isn't being bought by me, but is owned by the sharing company?

No, you still need a deposit for the proportion of the property you are buying. If your share is worth £70,000, you will generally need at least 10% (£7000) as a deposit.

I did have another question but now can't remember! I'll post again when it comes back to me.. but for now, I hope someone might have the patience to read this and just give me a tiny bit of advice?

Shared ownership is an utter scam, designed to prey on the financially naive. Stay away, you'll regret it.

minikarter

ok, so not quite the kind of answer I was expecting, can others back this up, or not if that's the case please?

minikarter

An edit: It's a "Homebuy Scheme" shared ownership. I believe this is slightly different to a standard "Shared Ownership" scheme.

Poppy10, would your answer change in light of this?

ViolaLass

Whatever it is, you'll need a deposit.

minikarter

ok, so what exactly is the deposit for? who does it go to? The homebuy scheme specifically says a deposit of £1500 is needed, but that's mainly to cover costs.

It may seem like a basic question, but I've read a lot of material and unfortunately somehow this hasn't been made crystal clear for me.

I assume you mean a deposit for or with the mortgage? Why is that necessary? Do you need the deposit in order to get the mortgage or do you need the deposit as well as the mortgage to get the property?

poppy10_2

minikarter wrote: »

The homebuy scheme specifically says a deposit of £1500 is needed,

Not sure where you're getting that figure from. Read the Homebuy FAQ
It says you should budget £3500-4000 for initial expenses (mortgage valuation/survey, solicitors fees, stamp duty , removals etc).

Separate from that is a requirement for a 10% deposit for the share of the property you are buying. If you are buying a £70,000 share, then you need to pay £7,000. That money goes to whoever is selling the house. The mortgage lender pays the seller the remaining 90% (£63,000). You then pay back the mortgage lender the £63,000 over the next 25 years.

The deposit reduces the risk for the mortgage lender. If they gave you a 100% mortgage (i.e. paid the whole £70,000), then if you end up get repossessed and the house has dropped in value, the mortgage lender will lose out. If the house has fallen in value to £65,000, then even if the repossess and sell the property, the are still £5,000 out of pocket.
If you have paid a £7,000 deposit, then the mortgage lender is in a less risky position - even if they repossess and the house value has fallen to £65,000, they can still recoup their whole outlay.