Confused about Shared Ownership mortgages

aldredd

Hi, need some help please!

We've started looking for a new home. We hadn't planned on shared ownership, but were shown a nice home that comes in under budget for 80% share. I can see both advantages & disadvantages, but is worthy of a closer look as it's in a nicer location than we could otherwise afford.
I asked the estate agent a bit more about how it works, and he was insistent that it only requires a 5% deposit and most banks will provide a mortgage for it, without using HTB2 (which is what we were planning on using). So is he right, or talking rubbish? Can you get 'high street' mortgages for SO with a 5% deposit without using HTB?

chanz4

HTB is the better option

Bella56

You may be able to. We got a SA mortgage with Abbey with 5% deposit some years back, no problem. But it is worth looking around to see if you can find a mortgage for your circumstances. Nationwide do SA mortgages too.

mytravelrep06

Leeds Building Society can do 5% deposit and also on new builds as well.

kingstreet

Are you buying on shared ownership, or are you buying on Help To Buy - Equity Loan?

Your post is confused and you need to clarify.

Is the property a newbuild?

Shared ownership you buy 25% to 75% of the property and rent the rest from a Housing Association. You cannot combine this with any of the other HTB facilities.

Shared equity is another name for Help To Buy - Equity Loan. You purchase and own 100% of the property from day one, with the Government lending you 20% of the purchase price, secured on your home as a second charge. This is free for five years, with "fee" payments of 1.75% per annum payable from year six, increasing each year.

The loan is repaid as 20% of the value of the property at the time, which is where the "equity share" comes from.

Help To Buy - Mortgage Guarantee increases the supply of 95% mortgages on second hand property. There is no shared ownership, or equity loan. You simply buy a property with a 95% mortgage.

aldredd

Hi Kingstreet

It's a Shared Ownership property, for a 80% share.

kingstreet

Yes. Is it a newbuild, or is it a resale of an existing property?

Newbuild purchases are normally under 75%, which is why I asked.

aldredd

kingstreet wrote: »

Yes. Is it a newbuild, or is it a resale of an existing property?

Newbuild purchases are normally under 75%, which is why I asked.

No, it's an existing property.
The estate agent gave the indication that there is much greater availability for SO mortgage with 5% deposit than there are regular mortgages with a 5% deposit. From the other replies, this does look to be the case, though of course greater availability doesn't necessarily mean better chance of acceptance.
And we're still weighing up whether we want to go down the SO route!

kingstreet

At the last count, there were 13 lenders offering 95% products, up and down the country, as well as the HTB - MG lenders. Many have geographical restrictions.

There are only two or three who offer 95% on shared ownership. On a SO resale, the remaining lease term can be an issue, so it would be a good idea to establish that now. Any S106 conditions and ability to staircase to 100% should also be established before making an application.

A broker would be a good idea for this, as well as your own research.

aldredd

Thanks Kingstreet - sounding like the EA may be trying it on a little, as I asked whether the leasehold would be an issue at sale time, but he was adamant it was freehold and wasn't an issue - first taste of EA's haha!

kingstreet

Yup.

You can't have a freehold SO property. There has to be a lease to determine the ownership and other responsibilities.

As with all leasehold property, the residual term is an issue for most lenders, with anything over 80 years normally being acceptable to all.