First time buyer - Questions re: Shared Ownership

Andos_2

Hi there.

I have asked on previous threads about my girlfriend having a Debt Management Plan but myself currently looking into a position to save pretty swiftly.

My salary is £27.5k basic and I have other earnings of approx £4k per year. I have 2 dependents; my daughter and step son and live with my girlfriend.

If/when I go to discuss a mortgage, I'll likely try go it alone initially and I think that's the best approach given my girlfriends DMP, which brings me on to my main question:

How does the mortgage offer work with Shared Ownership?

i.e - Halifax with my 2 dependents and one loan outgoing could offer me £120k to £140k ish... This is obviously not enough to buy a 3-bedroom house that we require. However, will they still lend close to that for a shared ownership?

For example, a 3 bed shared ownership of £220,000 is being offered for 40% mortgage at £97,000 and approx £120 rent on the remainder. Based on a 4.1% mortgage rate, that's £385 mortage payments + £120 rent = £500. Affordable.

But, do they reduce the amount they would offer me by 40% as that's the share... i.e they'd only lend £48-56k or would they still be happy to lend the amount they said whether it's for a share or full value? Or do they reduce the £120-140k only by assuming the rent is another outgoing. So may lend £100-120k?

I hope someone with experience on shared ownership properties could help clear it up. I'm gearing up and would love to know fully what lies ahead.

Thanks and sorry for rambling.

libf

They will lend say 90% of the share price to your 10% deposit depending on the lender and affordability (and not all lenders will approve shared ownership mortgages); so for a £97,000 share they would lend £83,700.

The rent is definitely considered for affordability.

Is it a new build? Even so you may need a higher deposit.

Andos_2

Thanks for the reply.

Sorry for not being clear; I am aware they wouldn't lend over the 90% of the share value. I was just wondering would they lend that?

So if I went to Halifax looking for a mortgage; would they say you could borrow £120k for example. But if you're buying a 40% share of something we'd only lend say £48k. Is it proportional?

Or do they just reduce that £120k to say £105k taking into consideration that rent is another outgoing.

Sorry if I'm not being clear. If someone with experience could provide a summary of their experience and ease at getting a mortgage it would be awesome.

libf

It's based on affordability. If they say you can afford to borrow £120k, but then you need £83k for a shared ownership then it's likely they will lend. But you will have to add the rent to outgoings so that will affect affordability. Also, Halifax may not do shared ownership mortgages so check that first before you try affordability calculators.

LTV is based on share, not on full market price.

Ease of mortgage will depend on affordability. I had no problems getting a shared ownership mortgage with Woolwich and then re-mortgage with Nationwide.

libf

Also, if the girlfriend is going to be living with you but not on the mortgage then that will narrow your pool of available lenders still further.

kingstreet

Loan to value and affordability are two different issues.

If it's a newbuild, Halifax will lend only upto 80% loan to value unless the builder is one of their top twenty panel.

It doesn't matter if you can afford more, that's the limit on the LTV.

On affordability, you need to enter shared ownership rent and any ground rent and service charges and these will reduce the amount you can borrow. Hopefully, still enough to purchase the required share.

You also have to satisfy the Government's shared ownership affordability calculator.

tiger_eyes

I'm finalising a mortgage through Halifax right now for a shared ownership flat and they were very reluctant to lend anywhere near the amount I could have borrowed to buy 100% of a property. They only offered to lend around 2.5x my income for a shared ownership place. Just FYI.