Shared Equity Mortgage

spenni331

Hi Guys,

Some advice needed.

We have been accepted on a shared equity scheme by our local council they pay 30% of the property.

Now they say we should only have to fund 5% deposit due to the councils interest in the property.

I have a few questions, are shared equity schemes seen as less of a risk by the lenders because the council/government is putting in 30%?

Will some lenders require more than 5% to borrow on this scheme?

Im quite concerned that I wont get approved, my income is about 22k. I have about 4k in defaults two of which are to drop off in the next few months.

I am 27 and in Full time employment for 7 months, my partner is 21 and is a student with an income of about 5k in various benefits and government grants.

We have about 5k saved up for a deposit.

I have been renting for the last 3 years.

My credit score is 670, my partners is around 800.

I have car finance at £280 per month. Rest of income is split between rent/bills etc.

Can anybody offer any advice, or things that may get us approved.

Thanks for your help, most appreciated.

spenni331

Oh sorry forget to say full property value is £127,950 -30% Shared Equity Loan will be about £89,000.

Thanks

kingstreet

There are a handful of lenders who accept shared equity business, but only one which will accept as little as 5% deposit. Most of them want a 10% personal deposit on top of the equity loan.

Lenders don't view shared equity as less risky. It's the amount of equity you'll have in the property which matters.

With visible defaults I would not rate your chances highly. Wait until they are no longer visible before making an application.

You also have affordability issues. I'd be surprised if your partner's income could be included and that car finance is making a massive hole in your borrowing power. If I use the Halifax affordability calculator, an A-pass (top score!) gives a maximum joint mortgage of £34,290 over 25 years. If you apply alone, this increases to £71,340 as your partner stops being dependent on you.

spenni331

Hi Kingstreet,

Thanks for your advice most appreciate it. My self working as an insurance broker tend to know a little bit about how brokering works.

Do certain brokers have schemes or more sway over lenders as is in the insurance industry, or is it just a case of 100% computer managed application and if you dont meet certain criteria you will be auto rejected.

Kind Regards

kingstreet

Mortgage lending with the top credit-scorers is completely automated. You are accepted and proceed, are referred and an underwriter looks at it and makes a decision, or declined.

Credit history could cause a decline. Affordability issues will cause the amount you are offered to be reduced to a level the lender thinks you can afford.

Brokers can package the case so it looks as good as possible to the lender, but there are basic issues which can't be glossed over, such as affordability and credit history.

Lenders won't offer someone a mortgage because they go through me, or another broker. If the case is acceptable, it's acceptable regardless of the source.

The mortgage broker's role is more about finding the right lender at the right rate and ensuring the case is acceptable before an application is submitted, then looking after the application once it's in, through to completion.

spenni331

Hi Kingstreet,

Thanks for your informative response again. At least now I know how the market works and the chance of me obtaining the mortgage I am looking for is practially zero at this time.

Guess ill be renting for while to come yet, until my finances improve. I suppose when rent starts appearing on your credit file lenders may look at this.

I suppose pre credit crunch mortgages was easier to obtain.

Kind Regards