Shared Ownership - Choosing your share? Help?!

DazP1

Hi Guys,

I'm new to this forum and to home 'part' ownership.

My fiancee and I are looking to buy a share in a £160,000 2 bed house in my local area. We are currently saving for a house to live together and our wedding.
We filled out our assessment/application form for Affinity Sutton (the housing association) and they came back with an acceptance to proceed to reservation of the property with a calculated affordable share of 54% at £86,400 and that;

'Our guidelines state that we need to ask you to buy the maximum share that you can afford in your reservation letter. You must do your own research on mortgages and decide which deal will work best for you'

Having spoken to the mortgage advisor and going through our finances, we are in agreement for a mortgage with Halifax for 40% at £64,000 with a 90% LTV.

The costs are at 40%;
Rent £220
Service Charge ~£50 T.B.C.
Mortgage £390
=£660

and at 54%;
Rent £169
Service Charge ~£50 T.B.C.
Mortgage £530
=£750

Prior to reserving the property we stated that
'We have a decision in principle from Halifax for the 40% share at £64,000 which we believe is the most affordable option to us at present'
The agent that we have been dealing with is currently on holiday and so another agent took our reservation after reading through our email.

We have received the reservation APPROVAL via email with attached documents for the 54% share. I called the agent and asked why the share was stated as 54% and not 40%, her reply was that I/we cannot simply choose the share we pay...

Now I don't know if this lady is just misinformed or whether they can force us to buy the 54% share, even though the costs are too high for us to comfortably manage in the event of an increase in rent, utilities, or in the unexpected event that we have a child in the near future.
Using the M.S.E budget calculator we have ~£50-£150 at the end of the month with the 40% share and without saving for our wedding or greater deposit/mortgage overpayments.

Any ideas, past experience or advice regarding the share amount would be greatly appreciated.

bitsandpieces

Shared Ownership schemes all have different rules. As far as I know, they are legally within their rights to refuse to sell you a share for all kinds of reasons (as long as these don't clash with things like equality legislation). Of course, just as they can refuse to sell you a 40% share you can refuse to buy a 54% share - if it's unaffordable, this is what you should do! Even at 40% costs sounds a bit tight (what happens if, say, rent and service charge go up along with utility bills?)

They may be mistaken and you may be able to ask them to reconsider under the rules of the scheme - good luck if you do this. One thing to consider, though, is that if they're being this awkward with you now what can you expect after buying the place?

andyuk101_2

I went through this recently and the agent is correct, they are obliged to ensure you purchase the maximum possible share based on their financial assessment

Couple of options

Bigger deposit - my rough maths suggest a mortgage rate of over 6.2% - lowering the ltv on the share you buy opens up more mortgage options

Redo the financial assessment and see if you can bump up some of the costs of utilities, cc debt etc etc they factor this in to the calculation around what is affordable

I am in the process of buying a SO property myself and i am well aware of the pitfalls of this scheme but have have a clear plan to staircase to 100% in 2 years and earn enough to make this viable, if it would be a struggle to manage the difference between a 40% and 54% share then you should really reconsider buying until you have a bigger deposit or the wedding is out of the way - lots of stories of people trapped in SO properties unable to buy more, unable to sell and subject to above RPI rent increases each year

geoffky

I hope you all have done lots and lots of homework and then done some more because you don't want to look back and think you were mugged..

geoffky

DazP1 wrote: »

Hi Guys,


Using the M.S.E budget calculator we have ~£50-£150 at the end of the month with the 40% share and without saving for our wedding or greater deposit/mortgage overpayments.
.

OH dear this is madness...what will you do when interest rates revert back to normal rates? or the car brakes down or want a holiday ect ect ect.

DazP1

geoffky wrote: »

OH dear this is madness...what will you do when interest rates revert back to normal rates? or the car brakes down or want a holiday ect ect ect.

Thank you for your reply. We've have already factored into our budget, a small/local holiday, Christmas, birthdays, car maintenance and house maintenance, etc.
We've tried to be as realistic as possible with the budget calculator and although we can't rely on my fiancee's overtime as steady income it will certainly help to save a larger deposit/wedding.

I've acquired the housing association's affordability calculator and have used it to match our '54% offer' with the maximum affordable share that the spreadsheet will allow.
I spoke to the agent at Affinity Sutton today and she is willing to offer us a 47% share with the affordability calc. showing a 'debt to income ratio' of 36% which she insists is the minimum that they will allow.

The other issue is the fact that we currently have a 'decision in principle' for Halifax but will need to borrow £75,200 as opposed to £64,000, therefore our deposit is too small for a 90% LTV mortgage, but we have found a 95% LTV mortgage with Leeds Building Society and we are concerned that they may refuse a 'decision in principle' because of the one we already have.

(Apart from the current 'decision in principle' we have good credit history with no defaults, ccj's, etc and have 3 used and fully paid credit cards)

Kynthia

Do you have a mortgage broker with experience of shared ownership?

Mobeer

Are they insisting you buy 54%, or just asking you to buy this much? I would be tempted to reply that you have followed their advice in their letter (and quote it to them) that you have done your own research and cannot afford 54%.

I would also wonder what will happen when you come to sell - will your buyer face these problems too?

brit1234

DazP1 wrote: »

'Our guidelines state that we need to ask you to buy the maximum share that you can afford in your reservation letter. You must do your own research on mortgages and decide which deal will work best for you'

:eek:

1st alarm bell, a condition where you take as much of the risk as you can off them.

2nd alarm bell your paying a service charge on a house, a house, what the fnck. Also that service charge is unconfirmed.

Research this thread before you go any further:
https://forums.moneysavingexpert.com/discussion/3177256