80/20 mortgage deals

chugianne

we took out a deal 3 years ago thinking we could get a further advance for the 20% that we didn't own. We are now told that we cannot get a mortgage loan for this 20%. We have to pay it in one cash lump sum if we want to buy this remaining 20%. Is there any other way possible around this problem.

kingstreet

First thing you need to do is establish what you have. It is not clear from how you describe the situation.

If we assume you purchased a property on shared equity, you own 100% of your home, with a 20% equity loan from a builder, local authority or the Government.

If your property has sufficient value, you should be able to remortgage to repay the equity loan. Please remember that you repay 20% of the current value, not the amount you borrowed originally.

Your current lender may consider a further advance, subject to value/equity again.

Any new borrowing is of course subject to status, income, credit etc.

chugianne

We are told that in effect this was a interest free loan from the government and the idea of the deal was to sell the house after ten years in order to have gained enough for a deposit for another house, but i believe this was not explained to us.

kingstreet

This sounds like the FirstBuy scheme, or one of it forerunners. What exit strategy did you plan? Who told you you cannot get this "further advance?"

There's no chance of a mis-selling case here, so we might as well concentrate on "cure" rather than "cause."

What was the original purchase price?

What is the approximate value now?

Can you borrow enough to remortgage your current mortgage and the amount you need to repay the equity loan? Why are you considering this now if the loan is interest-free for ten years?

Have you looked at this site, which sets out the post-sales issues for the Government's shared equity schemes;-

http://www.myfirsthome.org.uk/

chugianne

We wanted to buy the other 20% now. Original price was 189000, now valued at 170000. Our current lender told us we cannot remortgage to own 100% of the house. We would have to find the 20% in cash.No I haven't looked at that site, I will look at it.

kingstreet

Ok. So the problem is the value of the property.

In which case, you're going to have to wait for the property value to recover before you can repay the secured loan. If you did have the cash to do it, it would be cheaper as you would only repay 20% of the current value, rather than what you originally borrowed.

However, if you don't that can't be helped and you are going to have to wait. Saving, or reducing the outstanding mortgage you currently have by making overpayments, will help you reach the time to be able to do this, a little sooner.

chugianne

Thanks for your replies and help Kingstreet