Helping your child!

lotto

My son wants to buy a shared ownership flat which is perfect for him. The minimum share is 30%, on a £350000 flat. He has a £20000 deposit and earns £25000 per annum. His only monthly outlay at the moment is a student loan and mobile phone bill. He has been told that he hasn't got enough money, is there a way that I can help. I can't afford to buy it for him!!!

Pixie5740

30% of £350k is £105k and your son only has £20k so no, at the moment he doesn't have enough money. Do you mean that he has applied for a mortgage for the remaining £85k and has been told that he doesn't meet the affordability criteria?

lotto

This is the first stage of the shared ownership where he informed their advisor of his finance. They have said he fits the shared ownership criteria, but not on his financial commitment , but I can help, but I don't know how or if it is possible.

Bluebirdman_of_Alcathays

It's a numbers game, he can either:

Wait until he has a larger deposit
Look for a cheaper house
Get a better paying job.

Dan-Dan

or pay off his student loan thus increasing his affordability

Pixie5740

A £350,000 property on a salary of £25,000 is ambitious, even with shared ownership.

Are you able to gift him a large chunk of money so that he could buy a bigger share of the property? Would him buying 40% or more make a difference to his affordability?

Edit: At the moment your son must be taking home under £1,700 a month. The mortgage on an £85,000 mortgage (although his £20,000 isn't the whole deposit unless he has other money set aside for solicitor's fees etc) is going to be around £450, then there's the rent on the remaining 70%, plus service charges, council tax, gas, electricity, food and all the other costs of living, so that's a tight, if not completely impossible, budget. Your son would also need to take into account annual rent rises and possible interest rate rises.

If I were him I'd look at chaper, non-shared ownership properties.

Twiglet12

On a £350k property I suspect the mortgage repayments plus rent on unowned share and service charges will come to around £1200-1400 a month which isn't affordable on a £25k salary. I'm afraid a £360k property is well out of his price range.

kingstreet

The rent on the unowned share is £561 per month and to that you have to add service charges, which could be another £50 to £100.

You can't use guarantors on shared ownership, so this looks like a non-starter.

Has the local HTB agent vetted him, as it sounds like the case would have no chance of passing the HCA shared ownership calculator.

Twiglet12

Here are some example figures from a shared ownership development we were looking at, for 40% shares;

Full value £275,000. Rent £378, service charge £110, est. mortgage £593, total £1081pcm. Minimum income guideline £41,500.

Full value £355,000. Rent £488, sc £146, mortgage £765. Est. total £1399pcm. Minimum income guideline £57,500.

They won't be the same of course, but to give you some idea of 'ballpark'.

lotto

Thank you for all your advice. It's a shame I can't share the mortgage. I can take on his student loan and see how that affects things.

Hoploz

Wow 350k for his first property! Even here in Surrey that buys a pretty reasonable semi, either he is aiming too high or you are in central London??

Personally I think it is a mistake to buy shared ownership with low percentage ownership. I did it when I was a FTB in 1999 but with 70% to start off, which meant I was able to purchase the remainder after a few years and be free. Your son should really consider a cheaper area, I mean that - I'm not just saying it because I'm in some cheapo northern area, 350k on 30% sounds madness to me!