shared ownership-further advance

angjaw

I am a co-owner. I entered into a shared ownership scheme with the local council in the 1990's. We each own 50%. I pay rent to the council on the 50% they own. I am responsible for all internal/external repairs/costs.

I have approached my mortgage provider for a further advance of £14000 to re-roof and doubleglaze my house. My total mortgage will be £35000.

My house is valued at £130,000. My share of the equity is 50%.

Even though there is plenty of equity, my mortgage provider has requested the permission of the co-owner, the council, to allow the mortgage provider to increase their share of MY equity. Is this usual practice? They also charged me to get the house valued!

In addition the council have asked for all the details of my borrowing and are charging me £50 for the council to ask the land registry for the lease as the council don't have it, although they thought they did! I think its unnecessarily intrusive into my finances...

Any thoughts..?

bigadaj

As you don't own the whole house then you are subject to the requirements of your lender and co owner. You could try and go. To another lender but lending money on half a house isn't going to be attractive to most lenders.

angjaw

I am not 'subject to their requirements'. There is a lot of legislation concerning co-ownership leases and repairs etc. I state this only because if someone is looking for similar information on this forum, your comments are misleading.

The leasehold advisory service are a government funded free service and are now helping me with my situation. There is a wealth of information on their website and free help is available via telephone or meetings.

opinions4u

The council has an interest in your property, so your lender is not prepared to advance further funds without their consent. If it ever came to repossession the council would have priority over the lender on any sale proceeds against this additional money if such consent hadn't been forthcoming - that would be unacceptable to any mortgage lender.

Equally, charging you for a valuation when taking out a further advance is perfectly normal for non-shared ownership properties.

If you want to borrow you have to go with the criteria of the lender you choose.

A question I'd be asking is what would it take to get the council to pay half the cost? I'd be very reluctant to spend £14,000 on a property when the council is going to benefit from improved value with no input and I'd only get half of that financial benefit.

angjaw

Thanks for your reply. I agree with what you say about the lenders criteria.

The council have already gained substantially without any input as the house has increased nearly threefold from when it was purchased. They sit back and collect the rent on the 50% they own...which incidentally is double my mortgage payments!!Also if I wish to purchase further shares in the house I pay current market value...I'd pay twice as much to own the rest of the house than what I originally paid for my half that I did buy!! I seriously wouldn't recommend co-ownership to anyone.

The council are under no obligation to pay for repairs. The thing that irks is that they have consulted solicitors who want written details of the loan including confirmation of what the loan is actually for...it implies they could veto my borrowing against my sizeable equity, if they don't agree with the purpose of the loan! All unnecessarily intrusive into my finances...

I seem to remember something about rights to equity...there's a clause/act that can be used, someting about about the mortgage lender getting 100% of the equity in certain circumstances...memory's a bit vague on that one

I will update for the benefit of forum users.

bigadaj

Your comments on shared ownership are correct but does this mean you didn't consider these issues before buying? Would you be paying the council back for any loss in value if house prices fall?

Shared ownership can work for some but only really does either when people can upscale and purchase the remainder within a sensible timescale, or historically take advantage of rising prices, sell their share to then act as a depsoit for another place. In most other circumstances people are better renting and saving.

angjaw

At the time it got me out of a council flat and a foothold on the property market. Circumstances prevented me buying further shares when it was affordable.

On the flip side various life-changing events (health-wise), have left me grateful for the financial help I was able to access, for 12 months, to get my rent paid and the mortgage interest paid - had I a full mortgage I wouldn't have managed as the help was specifically for the interest and not the capital. Swings and roundabouts...such is life.

I will be able to downsize and live mortgage free at a later date.

bigadaj

Fair enough, good and bad in everything in life.

In terms of spending on your house then it would be worthwhile splitting what you are doing into what is essential and what is optional. Work on the roof sounds essential, double glazing less so though part of this could be if the windows have outlived their useful life. Logically all essential works should be split, and those optional and cosmetic would be purely down to you to fund. However with councils being strapped for cash as they are, then you may well struggle to get anything out of them.