Shared Ownership - Want to purchase remaining 75% but need mortgage advice

mattcafc

This is the situation,


]We bought 25% of a place not long ago, costing £43,750 as the property was valued at 175k.
There is 29k left of that to pay.
We want to purchase the remaining 75%, we have had the place valued and its gone up 40k, meaning we need to pay 161k for the remaining 75% which is fine.

However, the mortgage company have told us we need to basically get a new mortgage to get this 75% and requires us to put down an 18k deposit. Is this right?

I thought we would just be able to increase our mortgage to buy the place, between myself and my partner we can easily afford repayments and are currently saving 1.5k a month between us. Yet we have 3 months to purchase the place based on the valuation, but cannot come up with 18k in 3 months.

Anyone know what else we can do, if anything?

Would it be possible to get the whole mortgage needed - 161k, plus our raming 29k somewhere else, on the basis the property is worth 215k, so they see it as we have paid off 25k?

mattcafc

Bump for the evening experts

marksoton

I'd say get a broker for this one!

DandelionPatrol

mattcafc wrote: »

However, the mortgage company have told us we need to basically get a new mortgage to get this 75% and requires us to put down an 18k deposit. Is this right?

Probably is right. They can set their own terms.

Do you know why they will not lend the full amount you want? That is probably the first question you need an answer to.

A quick calc here shows that you have £24,667 of equity and you want to increase your borrowing to £190,000, which is a Loan to Value of under 90%

There are potentially 4 reasons for not getting the full amount

• Your income and commitments do not support the borrowing
• Your credit record is not good enough
• The property is valued at less than you think it is,making the Loan to Value too high
• The lender does not want exposure to your property or your type of property

We cannot answer here which of the reasons applies, you will have to find that out yourself. Once you have found out, the action would probably be obvious, but if it is not, come back and ask some more or go and see a broker.

Jacob's_Dad

Hi, we've been through a similar situation very recently, and my advice, as marksoton suggested, would be to seek advice from a broker. We used London & Country, I believe they're recommended on here, and they are fee-free. The only thing to be considered is they're not whole of market, they don't give you access to direct-only deals, but we didn't find any that matched the mortgage L&C arranged for us anyway. Companies like Which? and the independents are whole of market but they cost you. Really depends whether you have the spare money in the short term (possible with your level of savings?)

Our original mortgage lender was also unwilling to provide us with the additional capital but it was relatively straightforward to find another bank that would. If the valuation is by a RICS surveryor then that will be the price the HA will let you buy at, so the mortgage company will have to agree - little reason not to as the valuation is already RICS-certified.

In the case of staircasing and increasing the mortgage amount - because most mortgage companies have limits on the value of % of any increase on an existing mortgage you need an entirely new mortgage, and thus a new deposit. The deposit, as DandelionPatrol says, comes from your existing equity. Your equity if the property were still £175,000 and your mortgage £29,000 on 25%, would be £14,750).

If your property increases by £40,000 (and is now worth £215,000), then your share goes up by 25% of this, or £10,000, hence the £25,000 give or take in equity you now have. That in itself is plenty to use as a deposit against a new mortgage. If you are currently saving £1,500 every month also, this money can be used to boost the deposit if necessary, if it can get you to the next mortgage band - 85%, 80%, 75%, etc. to open up better interest rates.

Just to reiterate DandelionPatrol, If the sums are correct, you have a £25,000 deposit, which means you need to borrow £190,000, making the mortgage 88.4% - under the (generally) maximum 90% LTV.

Your current lender may be unwilling to offer you a 90% LTV mortgage - this may be why they want an extra £18,000 on top of your £25,000 - this would take your deposit to £43,000, thus giving you an 80% LTV mortgage. If the sums are correct, it's simply a case of finding a new mortgage provider (which may be preferable anyway, most lenders on shared ownership have very high interest rates and even higher standard variable rates. You'll essentially be looking for a standard mortgage so it'll open up a whole world of options!