Buy extra 50% shareowners or not? Please advise on Financials

HARSA

I need help from people who are smarter than I am (especially Mortgage Advisors or Financial advisers)

I currently have £45k left to pay on my 50% mortgage and i have been successful in obtaining a remortgage with BB society - offset mortgage @ 3.69%

They are going to carry out free valuation this week and so will another independent valuer (I paid £103 to the Housing Association to arrannge this). I reckon the property is worth £160k but either way I will have £20K equity on the property. I also have a spare 10K to put down on top of my equity. This will enable me to reach the 75% LTV hence the offset deal with BBS @ 3.69%

I am paying £1,338 (£327 mortgage and £811 overpayment) a month. Also an extra £184 p/m rent/service charge of the HA 50%. It is a three bed end terrace leashold (will be freehold when I acquire the remaining 50%. OTHER THAN THE £103 VALUATION FEE THERE ARE NO OTHER HIDDEN COST ON THE HA PART.

I initially planned on living at this property until June 2015 and buy a bigger property in the same village.

I have worked out I will be MF on my 50% share in OCT 2014 with a continued payment of £1,338 and a one off payment (10K, the same amount I will use to reach my 75% should I decide to buy the whole share) at the end of Feb 2012.

Now the financials:

Option 1 = Buy the whole property thus needing a mortgage of £120K means that at the end of OCT 2014 the outstanding balance will be £83K and would have paid 10K worth of interest. With equity of 77K provided that the property is still worth £160k (Doubt that will be case - with falling house prices).

Option 2 = Continue as I am and become mortgage free end of OCT 2014 but would have paid £5,888 in rent + £1,861K in mortgage interest (£7,749). The equity would be £80k as long as property is still worth £160K.

Now the equity on option 2 is greater than option 1 by just £3K but if I take the extra £5,888 rent into account then I will better off option1 by just over £3K.

Both option 1 & 2 are based on me continuing to make the £1338 mortgage payment. Option two payment is split by £869 mortgage repayment & £469 overpayment.

Other points to take into account:

1. It is irrelevant if both sets of valuation comes lower than the £160k. Infact a lower valuation will make option 1 more attractive allowing me to buy the other 50% cheaper. My mortgage repayment and interest will also be lower making option 1 more attractive.

2. The house is a really nice village and cannot ever see us moving from the village. There is a extra piece of land and a sizeable two-car private drive for an extention, a garage and conservatory. This means that we don't have to buy a bigger house. The bigger properties 4/5 bedrooms here cost sub 300K

3. I can pay off my share a lot earlier than OCt 2014. I initially planned on paying it off in Sept this year - Looking to sell my shares and use the money to pay it off - the shares are worth £30-35K.

4. Owning the whole property I guess will give me the joy of owning my whole property. Although the HA have been brillant and have never given me a single bother. The property was built in 2003 so I am aware of new builts been over priced and more so that mine is a SO. Similar or two bedroom properties SO or Ownright have sold in the past and recently with the amount of equity (modest compare to others) as mine. Although mine is split two ways between the HA and my share.

Thanks for reading such a long post but please tell me which option to go for and why.

PS. Please don't hijack this thread into the pros and cons of Share Ownership and the value of new builts. I wish to do the right thing for my family and I know you guys will help me do just that.

Many Thanks

BitterAndTwisted

Too long and too complicated for me. Sorry. How good are you at mathematics? I suspect that is what you need rather responses to the emotional side of things.

HARSA

BitterAndTwisted wrote: »

Too long and too complicated for me. Sorry. How good are you at mathematics? I suspect that is what you need rather responses to the emotional side of things.

Yeah you are right

It's too long and the mathematics side is what I am more interested in.

Cheers for your time though:beer:

HARSA

BitterAndTwisted wrote: »

Too long and too complicated for me. Sorry. How good are you at mathematics? I suspect that is what you need rather responses to the emotional side of things.

Funny that I just realised that my Maths is terrible the moment you questioned it :rotfl:

Option 1 is definitely the better of the two so looks like I will be going for it unless someone (with time on their hands to read such a long post) can correct me otherwise.

Also the offset mortgage will reduce my interest payment as I tend to have spare cash which can be offset against my mortgage.