Shared ownership and Mortgage

jw2082

My partner owns a 75% share in a house with her ex that they brought 4 years ago at the peak of the market.

Long story but we are applying for an order of sale on the property due to the "ex" missing payments ect and building up arrears, abuse

Now to cut a long story short is there ever any room with mortgage companies to negotiate the final settlement figure ?

To clear the mortgage and pay the builder would mean selling for almost exactly what they paid brand new and this would not leave anything for costs ect and obviously the chances of getting that kind of money in this climate are very slim.

Any advice and sorry if this is the wrong section.

kingstreet

Are you sure it's shared ownership?

It sounds more like shared equity, if there's money to be paid to the builder.

Please clarify.

Shared ownership - you own a portion, a housing association owns a portion, you normally pay rent on the portion you don't own. The property must be leasehold. When you sell, you sell the portion you own, the HA retains its share and the buyer rents it from them.

Shared equity - you own the whole property. You purchase it with a deposit, a mortgage and a second charge loan from a builder/Government. The second charge is interest-free, for normally five years. When you sell, you pay off the mortgage, then the second charge is repaid and that's a percentage of the sale value, equal to the original percentage of the purchase cost.

ie If you got 25% at the outset, you repay 25% of the sale value.

The property is usually freehold.

jw2082

Apologies. (I am at work and typing quickly)

Yes its shared equity with Persimmon and the property is free hold. The chances of selling it are good but not for the money it would need to sell for to cover everything.

kingstreet

In which case, the mortgage lender, as the first charge holder, gets first call on the sale proceeds. The builder, having only a second charge, gets anything left over.

The borrowers are then left needing to make an arrangement with the builder for any shortfall, to repay the balance over time.

I suggest they contact the builder in advance to establish what's possible, before they get too far down the road. The lender will not settle for less than the outstanding balance on the mortgage, unless the potential sale price is below what's owed on their mortgage. In that case, you would need permission from the lender to sell for that amount, otherwise it could refuse to release the charge over the property on completion day.

jw2082

How is best to approach the builder in this sort of situation ? as could the effectively stop the sale if they are not going to et paid directly from proceeds of sale ?

Thank you for the reply by the way

kingstreet

Contact both mortgage lender and builder to establish processes for sale if price does not meet value of credit secured on property.