Quick question - Shared equity and mortgages

michellej1980

I purchased a property in August 2010 using the HomeBuy Direct scheme. I have a shared equity mortgage with a 2 year fixed rate. When that comes to an end, am I still limited to a 'shared equity mortgage' or can I look at other types - offest,tracker etc?

Also, why do you have to have a specific 'shared equity' mortgage in the first place?

brit1234

michellej1980 wrote: »

I purchased a property in August 2010 using the HomeBuy Direct scheme. I have a shared equity mortgage with a 2 year fixed rate. When that comes to an end, am I still limited to a 'shared equity mortgage' or can I look at other types - offest,tracker etc?

I'm pretty sure your limited to another shared equity mortgage due to the loan part.

michellej1980 wrote: »

Also, why do you have to have a specific 'shared equity' mortgage in the first place?

Because it is a scam to keep prices up, benefit the builder and rip off the buyer.

kingstreet

A mortgage on a shared equity property isn't a "type" so it's not a question of having a shared equity mortgage, or a tracker or whatever.

First, you need to know how much equity you have in the property.

Next you need to research which lenders offer remortgages on shared equity property and what they might offer you. There may be fixed rates, trackers, discounts and you need to see which would suit you best...

Before you do this, you need to check what "customer retention" products your current lender has to offer those in your position so you have a point of comparison.

You also need to ask the holder of the second charge if it will be willing to grant you a deed of postponement. This allows you to change your mortgage from one lender to another without "promoting" the second charge to a first, which won't be acceptable to a the new mortgage lender.

michellej1980

Thanks kingstreet. That's helpful.

I've realised that moving to another lender isn't as simple as I first thought. Not that I particularly want to (yet) but I was just making sure I knew all my options.

I'm wondering whether to try and increase my share of equity in the property as I'm worried that in 3 and a half years time, 30% will cost me considerably more. I could probably afford to pay back 10% in cash now, but not sure my lender would let me increase my mortgage. I am earning more than I was when I purchased the property but the question is, do I continue saving to pay back the equity loan in 3 years' time, or do I pay some back now and increase my mortgage before the value of the equity loan increases? Is it best to rid oneself of the equity loan ASAP?

kingstreet

Only you can decide if repaying part of an interest-free loan now makes sense against what the value you have to repay might be in a few years time.

Who can tell if property prices will be higher, leaving you with a bigger second charge to repay? Crystal ball time, I'm afraid.

michellej1980

Thought so. I might wait a few months and consider this again but I think I'd rather get rid of the other loan quickly. I don't want to have to start paying interest on it yet also don't want to be forced to sell up to pay it back. My guess is prices are more likely to rise than fall...