Shortfall on a great Right to Buy Opportunity

espud

Hi There,

I am actually posting this on behalf of my Aunt. She has been given the opportunity to purchase her council flat under the Right to Buy scheme that she has been living in however she is struggling to get a mortgage for the full amount. Her age is a big issue.

The main financial details are

£182,000 - Full Price
£75,000 - Discount
£107,000 - Amount Required to Finance
£28,000 - Deposit
£15,000 - Annual Salary
She is 55 years old and plans to retire when you she 70
Current Rent per Month is £516.000

So she needs financing of £79,000. I estimate a shortfall of around £20,000....

Does anyone have any ideas about how she could make it happen? I reckon we just need to think OUTSIDE THE BOX... Could a family member go in on as a joint mortgage although the housing group might not allow this? Could you release the equity that she will gain from the purchase AFTER it has been completed if some family members lent her the money? It is a two bedroom apartment so she also will be able to keep a lodger there which will help with outgoings and payments....

Help and ideas would be much appreciated!

geordient

No assets she can sell? Car? Antiques?

mrginge

Purchasing a council FLAT may not be the fantastic deal it sounds.

kingstreet

Only a family member who has lived in the property for twelve months or longer can be party to the purchase/mortgage.

I tried one lender calculator and £15,000 with a 14 year term gave an affordability output of £47,255, so this may be tougher than you think, especially if she has any credit commitments.

espud

No assets or other debts... She has some funds that are maturing in a few years... But not sure if they can assist with getting a bigger mortgage?

What about if someone like me gave her the funds? When could you release equity from the flat to pay me back?

kingstreet

Council pre-emption period lasts five years and during that, your chances of being allowed to borrow into the discount are nil.

Saying which, how could she borrow more then anyway? Same income and five years less to pay it back...

p00hsticks

mrginge wrote: »

Purchasing a council FLAT may not be the fantastic deal it sounds.

Agreed. Going slightly off topic, has your aunt fully thought through all the consequences of becoming an owner/occupier ? no more ringing up the council to carry out repairs, or relying on them to maintain the property - that will all become her responsibility. What service charges will she face ? She's not on a high salary - what sort of pension provision does she have ? The rules may change between now and when she retires, but at present, if her income is low enough she could be eligible for housing tax benefit to subsidise her rent, but there is nothing similar for working or retired owner occupiers.

Yes, it's a big discount and I can see why it's tempting, but there is a downside which she needs to consider if she hasn't already done so.

My partners mother lives on a council estate, and whilst some who have exercised their right to buy have spruced up their properties considerably, the majority have declined and are now in a far worse state of repair than those still under control of the council.