Shared equity scheme

naav

Hi everyone.

I bought a home on a shared equity scheme in 2008 for around £120, 000. I borrowed 75% and am paying that off. The other 25% is to be repayed to the builder within 10 years of buying the property (so 2018). The 25% would either be 25% of the market value of the property (at the particular time I wish to repay them) or 25% of any sale.

I checked via an independent advisor and the most anybody would lend is 90% of the current market value. My current mortgage provider values my property at around £100, 000. I have, at the moment, around £85, 000 of the £90, 000 left to repay.

Could I please ask:

1. Am I correct in saying the following: if I was to sell my property today for £100, 000, I would give my mortgage provider £75, 000 and my builder £25, 000. But I would have to owe my mortgage provider around £10, 000. Is that correct?

2. If by 2018, I have £80, 000 left to pay on the mortgage and hopefully (!) my property is worth £120, 000. Does that mean my mortgage provider gets £80, 000 back; the builder gets £30, 000; and I get £10, 000?

3. If by 2018, I don't wish to sell the property and say it is still worth £100, 000. If, like today, I can't borrow the 25% (£25, 000 in this case) to repay the builder, is my only option to sell the property?

4. Should I be hoping that the value of my flat rises between now and 2018?

Thank you!

twinkle10

As per the real estate and property current rates are concerned both are increasing day by day with lot of hike. So I think You can definitely hope that your property investment can give good returns in future.

Leeaquila

Your thoughts are right, you will have to repay the builder 25% of whatever the value is at the time, not what it is now.

So if it is worth £200,000, you would owe them £50,000

It is to be expected that property prices will rise, however you cannot be sure of this.

It is generally a clause in the contract that if there isnt the equity in the property to raise the 25% then it can be defered for a further X amount of time, however you would need to check this.

Hope this helps.

Cheers
Lee

Idiophreak

naav wrote: »

Could I please ask:

1. Am I correct in saying the following: if I was to sell my property today for £100, 000, I would give my mortgage provider £75, 000 and my builder £25, 000. But I would have to owe my mortgage provider around £10, 000. Is that correct?
Basically.
2. If by 2018, I have £80, 000 left to pay on the mortgage and hopefully (!) my property is worth £120, 000. Does that mean my mortgage provider gets £80, 000 back; the builder gets £30, 000; and I get £10, 000?
More or less.
3. If by 2018, I don't wish to sell the property and say it is still worth £100, 000. If, like today, I can't borrow the 25% (£25, 000 in this case) to repay the builder, is my only option to sell the property?
Not normally. As leeaquila says, there's normally something that gives you the option of extending a little in certain circumstances, but this varies. And you may start paying interest on the equity loan.
4. Should I be hoping that the value of my flat rises between now and 2018?
It all depends, but from the sounds of your post, I'd suggest so. There are two options:
1) Property prices go down. You buy back the equity cheaper and hopefully have a little equity in the place. You sell up and use the equity as a deposit on another cheaper place.
2) Property prices go up. You probably don't buy back the equity, but the 75% you do own grows enough that you can use this growth as a deposit on another house.
I've not seen anything in the OP to suggest you're planning on paying back the loan any time soon, so I guess option 2 would work better for you...

My thoughts above...

naav

Thank you to everyone above. Appreciate it.