Shared ownership with housing association

Romanzach

Hello all,

We have enquired about a shared ownership property with a housing association recently and received positive feedback. We await an appointment with their mortgage advisor.

The house is £130,000, and we are looking at a 25% share, which is £32500. We have £7500 to put down as a deposit, so the mortgage is £25,000. We earn £50k between us and have 1 credit card each to re-build our credit from a bankrupty 4 years ago. We have 'cleaned' our credit files so to speak so all previous accounts are now settled.

My wife qualifies as a key worker, we rent privately and we have 2 kids so meet the criteria. We are in long term employment and have rented at £650 for 4 years without missing a payment.

Would anyone say we have a chance of obtaining the mortgage? Thanks for any feedback.

kingstreet

Your bankruptcy (both of you?) will be a problem for many lenders and you may not get through the HA's vetting process. Have you been through a formal application?

Assuming you do, why only 25%?

Your position seems to suggest a share of 50% would be viable. This would reduce the rent you pay on the unowned share.

Is this not an option?

25% share = £25k mortgage @5%* over 25 years = £146.25

Rent on 75% = £223.44

Total = £369.69 + service charge and ground rent.

or

50% share = £57.5k mortgage @5%* over 25 years = £336.14

Rent on 50% = £148.96

Total = £485.10 + service charge and ground rent.

* Illustrative rate only.

£115 per month more to own twice as much property and still less than your current rent?

kingstreet

Homebuy criteria;-

Criteria:

To be eligible for all government funded homes available through HomeBuy:

Your household income must be under £60,000 per year (in London £64,300 for 1 to 2 bed and £77,200 for a 3+ bed property).

You must also be able to demonstrate that you do not have adverse credit history and can afford to sustain the costs involved in buying or renting a home.

You must show that you are not in mortgage or rent arrears, or in breach of your current tenancy agreement at the time of application.

You cannot afford to buy a property that meets your current housing needs without assistance through HomeBuy.

http://www.homebuy.co.uk/eligibility.aspx

Romanzach

Thanks for the reply KS,

50% is fine with us, but we fear any deposit request from the mortgage lender would be prohibative. We have formally applied with the HA and they say we have passed their criteria, but they too, like yourself suggest we should buy more of the property. We are indeed both bankrupt.

kingstreet

Was there a question on the application about the bankruptcy and if so, how did you answer it?

Many people believe that once such an issue falls off their credit file, it is safe to answer a question in the negative.

However, solicitors undertake a bankruptcy search normally close to exchange of contracts and if uncovering something not disclosed to the lender or the HA at the outset, would be duty bound to report it.

With many lenders unwilling to lend to former bankrupts, the usual response would be to decline, on both the fact of the bankruptcy and the lack of the disclosure.

Declaring the bankruptices to both HA and lender is the only way to avoid the risk of a mortgage offer being withdrawn after hundreds have been spent on the purchase/mortgage fees.

Romanzach

Hi KS,

We declared all information regarding the BR situation to the HA on our application. They stated to us that as we are discharged and under no restrictions or IVA's etc, we are eligable. They appear to be more concerned with the social aspect of selling the house to us i.e we would make good tenants and be able to actually afford the property. I have spoken with Nationwide who offer such mortgages and they consider former bankrupts who are disharged after 12 months.

Don't get me wrong, I fully expect any deal to collapse.

kingstreet

That's probably a sensible stance.

Don't spend money on fees until you are sure they won't be wasted.

Right about deposit with Nationwide too. 90% maximum loan to value on shared ownership. That would mean a deposit of £6,500 on a 50% purchase at £65,000.

I'd still look at the 50% in the first place. If that doesn't work out, you could always return to 25%, using the deposit to reduce the loan to value and the chances of being accepted.

25% = £32,500 less £7,500 deposit = £25,000 and 77% LTV.

Romanzach

Thanks for your time & input KS.

lindens

what are your choices of percentage ie. are you limited to 25%, 50% and 75%. Maybe consider 40%??

Romanzach

Hi Lindens,

It appears to be pretty much anything between 25-75%. The HA say we are OK to proceed, but they are still deciding how much they would like us to purchase. I personally would buy as much as possible, it just depends on their mortgage advisor being able to get us the mortgage.

shonzyd

you may want to check with your housing association what share you have to buy. Mine was advised as from 25% but i had to buy up to what my affordability allowed which was 51%. I enquired about buying a lower share but they said you have to go up to your affordability - which was fair enough.

Just to give you an idea, my house was £125k full price, i earn 20k and bought a 51% share. If you earn £50k and its a £130k house, you may find you ahve to go to your max affordability.