first time buyer, shared ownership on 1970's house. advice would be great

carnut1234

Hello all,

Im hoping you would be able to give me some advice.

Myself and my wife have recently put an offer in on a 1970’s house which is a shared equity property. Unlike other shared ownership properties that I have see this is a freehold which we are dealing directly with the estate agency and not a housing association.

The house is £151,000 and the share is £25% which is £37,750. This house is very cheap due to it needing a bit of work(new kitchen, bathroom and possible boiler) House up the street the same size and style finished is £168,000 so not bad. Anyway due to the massive amount of interest and offers we have actually offered £38,250 hoping that the extra £500 will put us ahead of the game. Also we have a mortgage in principle and we are not tied into a chain and ready to go.

Ive just called rbs to just double check everything with the mortgage and they say they will not accept shared ownership mortgages which is a bummer. ive not mentioned this to the estate agency as I don’t want it to affect our chances.

Who offers shared ownership mortgages. Im struggling to find them on old houses. I can only see newbuy scheme mortgages. I was also hoping to have a 95% mortgage as well. The plan was to have a 3 year fixed mortgage and then buy the entire property and re mortgage.

Anyway im obviously going to have to start looking at other mortgages and have just run a credit report with checkmyfile and its looking pretty good. Credit score is 803. There are 2 late payments from beginning of 2011 and mid 2010.

Basically my question is first will those 2 old late payments ruin my chances of a mortgage?

Also who does shared ownership mortgages for old houses.

Im hoping you can help. We are very new to this and are learning very quickly.

Hope you can advice.

Kindest regards

daniel

kingstreet

Can you please confirm, this is shared ownership, not shared equity.

You are purchasing only a portion of the property and some of it will be owned by a third party, probably a housing association?

Is there rent to pay on the share you are not buying? How long is left on the lease?

Shared equity, you buy the whole property, using your deposit, a mortgage and an equity loan from a builder or a government agency. The equity loan is interest-free and you pay it back from the sale proceeds.

carnut1234

Ok sorry its shared ownership. There is rent to pay on the other share which is £237 a month to jephson housing association.

This is a freehold so not lease.

kingstreet

Unless I'm going completely mad, you can't SO a freehold property.

At least, I've never come across it in 28 years doing this job.

I'll have to make some enquiries about this tomorrow. I don't know of a lender which would accept such terms. I work for a firm which is a panel member for the HCA/Homebuy-appointed agent for the Midlands, Orbit and we do shared ownership and shared equity stuff all the time.

http://www.jephson.org.uk/images/jephson/shared/documents/guide_buying_shared_ownership_property_from_existing_owner.pdf

Page 15;-

You will be assigned a long lease in the property which will normally contain the right to purchase further shares with a view to owning the property outright.

Please confirm this guide does not cover the property you are purchasing.

carnut1234

I'm obviously showing how much of a novice I am. Maybe this will help. Here's the property in question.

Sorry due to being a new member I can't post links. If you go to rightmove and put in postcode cv31 2rs. It's. 2 bed house on erica drive. The house is on for the 25% or the full purchase price.

Is there questions that I should be asking. Basically so far I have seen the property and put an offer to the estate agents.

I had looked at a shared ownership property with orbit before. I had to send an application which was accepted. Once viewed if I wanted it I then had to go back to orbit to let them know. With this one the housing association hasn't been mentioned at all apart from the fact it says jephson housing.
I had looked on the website and couldn't really find much to help me.

carnut1234

You link was great seems to be correct its just the estate agents haven't gone into any details with this.

kingstreet

Ok. I suspect the vendor has agreement from the HA to staircase upto 100% ownership if he finds a buyer who would prefer that. In those circumstances, you would then get the freehold, as Jephson's guide says.

As a result, the agent has mentioned freehold as it applies to the 100% ownership option. It has then copied and pasted the details over to the shared ownership version, forgetting to alter the tenure to leasehold.

You need to establish this is the case, then you need to find out how long is left on the lease. If it's less than 70 years, which it may be on a property built in the 1970s, you will have a problem getting a mortgage.

As far as shared ownership is concerned, you'll need to be vetted by Jephson as you were by Orbit to ensure you fit the profile. See pages 6 & 7 of the guide I linked to. Chances are, if you passed with Orbit, you'll pass with Jephson.

You do have some research to do before you can take this further. I wouldn't worry about mortgages just yet. You need to establish the property is right for you first. Have a word with Jephson. They should be able to tell you about the property and the lease and the answers should be more reliable than what the agent can tell you.

carnut1234

Ok fantastic. I shall call them tomorrow. So the property would need more than 70 years left on the lease to be able help with securing a mortgage.

kingstreet

Lenders stipulate the length of lease needed to secure a mortgage. As each year passes, another lender or two disappears from your list of mortgage possibles. Your list isn't that big to begin with, TBH.

You are also storing up potential re-sale problems for yourself if you buy a short-leased property. I'd be interested to see what the HA says about this when you speak to them. They may be able to extend the lease quite easily being in their position.

Southend1

Why would you want to buy a quarter of a house then spend a load of your own money on new boiler etc? You'd be better off renting

carnut1234

As said above. The reason for the house being about £16k cheaper is due to the fact that its not been touched since the 70's. the amount to get this place up to high standards is no way near half of that so its a cheap buy with potential as well.

Owning 25% of something is better than owning nothing and wasting money on rent.

Also the amount I pay in rent for a small flat would be £200-£250 than owning this house.