Our road to freedom

gazfocusgazfocus Forumite
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This is a bit of an odd one but bear with me...

I currently own a 50% share in my shared ownership house. My wife isn't currently on the mortgage so it's solely in my name.

My 2 year fixed deal ends in August 2014 and then we're hoping to get a new mortgage in both our names, for the full 100% of the house.

At this point, we will be overpaying like mad (one of the requirements we'll pass to the mortgage adviser) to get the mortgage paid off as quickly as possible.

I bought my 50% share for £62,500 and my current mortgage is at 90% LTV.

I paid a deposit of £6,250.

Current outstanding balance on the mortgage is £54,627.

There's a house on our street at the moment that's for sale at £55,000 for 50% share so I'm hoping when we come to buy the other share, we'll get it for a similar figure and we're hoping to have a minimum of a 20% deposit when the time comes.

What's the best lender to go with if we want to overpay?

Replies

  • edited 30 October 2013 at 3:17PM
    BeckyyBeckyy Forumite
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    edited 30 October 2013 at 3:17PM
    Many lenders allow overpayments, although there's quite often a limit to what you are able to overpay each year. 10% is a common figure.

    I would concentrate on making sure you have a high enough income and deposit to satisfy a lender for the whole property. The more you can save now the better rate you will get. You will also need to allow for solicitor fees, and make sure you read up on the conditions of your shared ownership, any valuation fees etc.

    If a similar (?) house is currently selling their 50% for £55,000 then it would seem that the value has dropped (as you paid £62,500) so be aware of that for your deposit on the whole of the house, as a lender will want the deposit % for the entire house value not just a % of the other half.
  • gazfocusgazfocus Forumite
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    Beckyy wrote: »
    Many lenders allow overpayments, although there's quite often a limit to what you are able to overpay each year. 10% is a common figure.

    I would concentrate on making sure you have a high enough income and deposit to satisfy a lender for the whole property. The more you can save now the better rate you will get. You will also need to allow for solicitor fees, and make sure you read up on the conditions of your shared ownership, any valuation fees etc.

    If a similar (?) house is currently selling their 50% for £55,000 then it would seem that the value has dropped (as you paid £62,500) so be aware of that for your deposit on the whole of the house, as a lender will want the deposit % for the entire house value not just a % of the other half.

    Thanks Beckyy, those are all very good points and are points that I have indeed thought of.

    I was very careful when looking into buying a shared ownership house and I feel that the terms of my lease are the best of the bunch (i.e. any improvements will only add value to my share, can staircase at any time in multiples of 10% all the way up to 100%, drop in value affects whole property, not just our share, etc).

    I know the drop in value is a disappointment, but if we buy the rest of the house fairly soon, it will work to our advantage.

    We have spent a lot of money recently in improving our house. We've had new carpets/flooring throughout, internal wall built to create a hallway and understair cupboard, new kitchen, large conservatory, new fencing, garden levelled (was originally at a 30 degree(ish) angle, so all of these things will add to the value of our share.

    There are currently two properties in our street for sale, both of which are shared ownership. One is identical to how our house was at the time I bought it and is on at £55k, whereas the other one is newly renovated (due to a house fire), and is on at £67.5k.

    I guess putting it simply, we would need a new mortgage to pay off our existing mortgage (£54,627), plus whatever we buy the other 50% share for (£55k hopefully), so we would technically be buying the house for £109,627, so we would be looking to have at least £22,000 to use as a deposit, plus valuation/solicitor costs, etc.

    The complicated bit would be if the mortgage lender value the house higher because of the modifications we've made such as conservatory, and then that would potentially put us in a good position regarding LTV (i.e. if the house is valued at say £130k, and we need a mortgage for £109,627, does that mean we already have £20k of equity?)
  • BeckyyBeckyy Forumite
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    I think pretty much everything depends on how much you can purchase the other 50% share for. If you purchased your initial 50% for £62,000 and your house hasn't lost value through the improvements you've made then I would assume you'd still have to pay £62,000 for the other half.

    If the mortgage valuation values the house any higher than £110,000 then you have some equity in your 50% share already (as you paid £55,000).
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