My Shared Equity Success Story

thriftychap_2

Ok - some figures for you

Purchase price - £109,500
Loan - £43800
mortgage - £61,100
deposit - £4600

Sale price - £131,000 (1000 comes straight to us) 130,000
loan - £52000
remaining mortgage - £49000

EQUALS - £30,000

estate agent fees - £1300
solicitors fee sale and purchase - £1500

EQUALS - £27,200

Monthly mortgage payment - £294
x 36 months = 10,555 (5327 interest, 5227 capital paid)

EQUALS £27,200 - £5327 interest = £21,873 profit.

Over payments - 61900 - 5227 = 56,673
remaining mortgage - mortgage without overpayments = 7673

Therefore total over payments have been £7373

£21,873 - 7373 = £14500 profit.

HOWEVER - i have lived here for 3 years, and my original point was not over profit, it was how the scheme has enabled us to live in a great flat and put us in the position to buy a house so we can start a family. Profit is 14,500 but the scheme has enabled us to live in our flat while enabling us around 30,000 to put down on a house.

This is why its been successful for us.

I hope this makes more sense now. Please let me know if I have ballsed up my calculations.

martinsurrey

troffasky wrote: »

How does this work from a lender's point of view? Surely they would only want to lend what a property is worth, otherwise they don't have security? And how do they repossess 50% of a house? :-S

say you get a house as follows

5% deposit paid by you - £5000
35% developer shared ownership - £35,000
60% mortgage - £60,000

The bank has a first charge while the developer has a second charge,

so if you don’t pay the mortgage the bank takes the house, sells it (for say £80k) and gets their 60% back (so from their point of view it’s a 40% deposit mortgage) and anything left goes to the developer to pay off their 35% interest (so in the above case £20k).

Only after that do you as the ex owner get anything.

The clever bit is that the developer is also in a good position, you paid 10% MORE for the house than they originally would have sold for it, in the above example they would have sold the house for £85-90K, after they recover their £20k from the repossession they have actually received £85k, which isn’t too bad considering this is a worst case scenario.

The developer will have a portfolio of these shared equity properties, and in order to lose out in the long run they would need over 50-75% of them to default, which will never happen, which means the developer wins.

thriftychap_2

martinsurrey wrote: »

say you get a house as follows

5% deposit paid by you - £5000
35% developer shared ownership - £35,000
60% mortgage - £60,000

The bank has a first charge while the developer has a second charge,

so if you don’t pay the mortgage the bank takes the house, sells it (for say £80k) and gets their 60% back (so from their point of view it’s a 40% deposit mortgage) and anything left goes to the developer to pay off their 35% interest (so in the above case £20k).

Only after that do you as the ex owner get anything.

The clever bit is that the developer is also in a good position, you paid 10% MORE for the house than they originally would have sold for it, in the above example they would have sold the house for £85-90K, after they recover their £20k from the repossession they have actually received £85k, which isn’t too bad considering this is a worst case scenario.

The developer will have a portfolio of these shared equity properties, and in order to lose out in the long run they would need over 50-75% of them to default, which will never happen, which means the developer wins.

You keep saying developer but my second charge was a government scheme.

Catblue

thriftychap wrote: »

Ok - some figures for you

Purchase price - £109,500
Loan - £43800
mortgage - £61,100
deposit - £4600

Sale price - £131,000 (1000 comes straight to us) 130,000
loan - £52000
remaining mortgage - £49000

EQUALS - £30,000

estate agent fees - £1300
solicitors fee sale and purchase - £1500

EQUALS - £27,200

Monthly mortgage payment - £294
x 36 months = 10,555 (5327 interest, 5227 capital paid)

EQUALS £27,200 - £5327 interest = £21,873 profit.

Over payments - 61900 - 5227 = 56,673
remaining mortgage - mortgage without overpayments = 7673

Therefore total over payments have been £7373

£21,873 - 7373 = £14500 profit.

HOWEVER - i have lived here for 3 years, and my original point was not over profit, it was how the scheme has enabled us to live in a great flat and put us in the position to buy a house so we can start a family. Profit is 14,500 but the scheme has enabled us to live in our flat while enabling us around 30,000 to put down on a house.

This is why its been successful for us.

I hope this makes more sense now. Please let me know if I have ballsed up my calculations.

OP, thanks for the figures. It really does help clarify things. Hope you didn't feel bulldozed into posting your financials on here. Hope your details will help others considering similar schemes.

Just one thing.

Your deposit of 4600 was a cost so you'd need to take that off your profit of 14500.

It means that you come out with 9900.

Kynthia

Wow, so even including all of the interest and charges you actually made thousands instead of paying out thousands in rent. Well done as most people won't do that well whether the part own or fully own. Most if us at the moment are selling for less than we bought plus have paid out mortgage interest, buying and selling costs. However that's the risk with home ownership.

brit1234

Just wondering from the original poster did their buyer buy the property outright or did they also take responsibility for taking on the equity loan as well?

thriftychap_2

Catblue wrote: »

OP, thanks for the figures. It really does help clarify things. Hope you didn't feel bulldozed into posting your financials on here. Hope your details will help others considering similar schemes.

Just one thing.

Your deposit of 4600 was a cost so you'd need to take that off your profit of 14500.

It means that you come out with 9900.

How can a deposit be a cost, it's an asset.

thriftychap_2

brit1234 wrote: »

Just wondering from the original poster did their buyer buy the property outright or did they also take responsibility for taking on the equity loan as well?

No has to be outright

thriftychap_2

Kynthia wrote: »

Wow, so even including all of the interest and charges you actually made thousands instead of paying out thousands in rent. Well done as most people won't do that well whether the part own or fully own. Most if us at the moment are selling for less than we bought plus have paid out mortgage interest, buying and selling costs. However that's the risk with home ownership.

Got lucky, developer needed to sell the flats and the scheme allowed me take advantage of it.

To balance the argument, I would not have used this scheme or one similar had it not been an open market scheme. I agree that most existing schemes only allow new builds that buyers pay over the odds for.

My kind of scheme is no longer available unfortunately, again I concede my timing was fortunate.

brit1234

I think you were wise or lucky to sell before the equity loan payments kicked in.

I still think shared equity is a scam however and 2013 will be the year to show this when those on the 5 year plans start to face equity loan payments on top of their mortgage payments when inflation and wage freezes/cut and unemployment and reduced the petty cash.

If you can like the original poster I would sell before those additional payments are required.