Co-ownerhip, staircasing & negative equity

idiotsguide

Hi, I bought a house in Aug 2007 with 50% coownership share. House has now fallen to below 50% of the sale price, so I thought it might be an idea to start to staircase because I can buy the additional share at current value.
However, I went to see a financial advisor who said I'd be silly to do that as I'm just buying off co-ownership's share of the negative equity.
My view of it was that house prices will start going up at some point which means it'll cost me more to staircase - in the meantime I am just paying rent for nothing, and then when I retire, I'll have (just about) paid a mortgage but still owe for 50% of the house. _pale_

I'm confused - if anyone has any ideas I would appreciate it! Worse still, once you receive your valuation, you've only 2 weeks to make up your mind. :-(

Old_Git

if you sold NOW you would have nothing .I would start staircasing

idiotsguide

That's what I thought! It seems to be logical to me, but I'm very quick to doubt myself when someone questions me so I thought I must be missing something quite clever in a money management way!

Even if house prices did go back up they'd get 50% of any profit I'd make so frankly if I ever made anything out of a sale, it would be miniscule. Since I doubt they'll ever go that high again, it's basically been a bad investment. My thoughts, therefore, were to cut my losses and pay back debt when it is cheaper, therefore reducing my monthly rent and the percentage owed, rather than wait until the market value AND interest rates/mortgage payments go up.

tommie

idiotsguide wrote: »

Hi, I bought a house in Aug 2007 with 50% coownership share.(

Oh dear,...... not one but two massive mistakes there, .......... why??

Your choices now are the lesser of two evils,

"I can buy the additional share at current value."
The thing is who determines this `current value`? What say have you in all this?

don_ky01

Speak to a different financial advisor.

idiotsguide

Thanks Tommie for rubbing it in! I am painfully aware now that it was a bad investment, but trying to make the best of a bad situation :sad:.
A surveyor appointed by coownership did the valuation. If someone doesn't agree with the valuation, they can appeal, however, as far as I can see by looking at similar properties in the same area it's spot on.

Old_Git

assuming the survey if favorable I would start staircasing .
On a positive side if you had fully bought the property in 2007 you would have a hell off a lot more debt and more negative equity .

leskerr

Old_Git wrote: »

assuming the survey if favorable I would start staircasing .
On a positive side if you had fully bought the property in 2007 you would have a hell off a lot more debt and more negative equity .

Me too.

Les

saverbuyer

It's an awful scheme but if I was you I would actually pay down the mortgage on the share you own. Prices are continuing to fall; you might as well hold off and ensure the scheme (tax payers) take the biggest hit. Also remember that you'll have to buy with cash if you are stair casing now. You'll never be able to do it with a remortgage as you'll probably be in big negative equity on your share.


Say you bought for £200,000. Prices drop 50%.

You share's now worth £50,000 with a £100,000 mortgage.

Work to get rid of the negative equity, don't try and compound your loss staircasing when prices are falling.

qwert_yuiop

I am just paying rent for nothing,


No. You're paying rent to avoid suffering even more depreciation.
If you'd bought the whole house back then, it would have been a bit like buying a Jaguar as opposed to a Fiesta - a lot more depreciation cost.

Pay off as much of your loan as you can. Consider buying the other half after that's been dealt with. Prices are still dropping. No rush.

idiotsguide

Hi All,
If I staircase even at the smallest 5% amount, the rent is reviewed at current market value, which reduces the monthly rent by about 60%.
So, with mortgage overpayments also in mind, I then went to my mortgage provider to find out more about overpaying my mortgage They said that, in terms of affordability, I would be better to staircase to reduce my monthly rental payments. Back to the excel spreadsheet for me I think!

Thanks for all your responses, it has been really helpful to get different perspectives on this - I hope that anyone on co-ownership or thinking of it will also find this thread useful for reference!