Shared Equity Mortgage

Hag83

Good afternoon.

Three years ago, me and my partner took out a shared equity mortgage. After three years of saving up to get married we are finally in a position to start thinking properly about the best way to get some of our equity back.

At the time, we placed a 5 % deposit down and the builder 15 %. The 15 % loan is interest free for ten years. When we sell the house or after ten years, we owe the builder 15 % of the value at that time.

While house prices are still low, I was thinking of borrowing 5 % on top of the mortgage and paying back a 5 % stake to the builder.

Thoughts and feedback will be much appreciated.

kingstreet

Is there enough equity to enable you to do this? What's the current property value?

Will the builder accept a one-off payment?

Are you asking your current lender for a further advance, or planning to remortgage elsewhere? If the latter, will the builder provide a deed of postponement to enable the new lender to have a first charge?

Hag83

Yes, the builder will accept one off payments of at least 5 %. I haven't had the property valued but house prices in my area have pretty much remained the same.

We paid 89'500 for the property 3 years ago.

I am planning on borrowing on top of my current mortgage.

kingstreet

With no increase in the value of the property, I suspect you will have insufficient equity to do this now. Ask your lender if it will lend upto 90%.

begganmanu

I'm sorry not totally related to this discussion but similar.. I currently own 75% of the house and builder had 25% .. Builder has subsequently went bust and an administrator was appointed 2 years ago .. The 25 % was a 10 yr scheme of which I haven't begun to pay back(4 yrs expired). Only correspondence I had from the administrators was soon after they were appointed stating that I would now owe them the money but also they would not stand over any snags / defects anyone in the estate had with their houses ( quite unfair and there is maybe 10/15 houses ) .. So essentially I want to know where I stand - do I need to pay them after builder bust ?

kingstreet

You would still be covered by the balance of the ten year NHBC guarantee, so this and the equity loan are totally unrelated.

The equity loan is a second charge over your home, so you will not be able to change your mortgage, nor sell your home, without settling the second charge.

begganmanu

Hey kingstreet ,
Thanks for your reply much appreciated .. I thought as much that was outcome.. And therefore the legally binding documents drawn up in beginning don't become void as he went bust ?? As I understand then so I need to pay this inside the 6 yrs I have left and if that time expires maybe its renegotiable to extend with them ? Should this 10 year lapse does the remaining balance increase in respect to house prices at that time or stay same ?? Thanks

kingstreet

I don't know what your particular loan agreement states.

I'd expect you have to pay back 25% of the value of the property at the time of repaying voluntarily, or selling.

No idea what happens at the end of the ten years if you can't/won't pay. Back to your agreement again.

begganmanu

Thanks very much for the info kingstreet .. Gotta get back on to the solicitor and perhaps a second one so I know exactly the terms and conditions but I think your outcome is the inevitable.. Cheers