Buying More Equity from Shared Ownership Scheme

newjay

Hi Everyone,

I'm new to the forum but had what I hope is a fairly simple question. Trying to help a friend to buy more equity in her shared ownership house and wondered if anyone knew the following:

Friend bought 25% of house last year and wants to buy the remaining 75%. Will mortgage companies view her 25% equity as her deposit for the mortgage she wants to get or does she need to raise an entirely new deposit?
Also - is she able to access the full mortgage market as an existing part-ownership customer or will she be limited by the products available to her?
.

I appreciate there that the property is going to have changed in value so percentages are going to vary (we suspect risen in value since purchase price). It is difficult to shop around for mortgages without knowing this up front and no lenders are keen to say whether or not they would accept the equity as a deposit.

Any help or advice welcome!
Thanks

ricky_v

yes they do, for example;

75% owned by HA,
entire value of house - £100,000
occupier owns 25% so £25,000
£10,000 mortgage remains
£15,000 equity therefore a 85% LTV mortgage needed.

"Also - is she able to access the full mortgage market as an existing part-ownership customer or will she be limited by the products available to her?"

If she's buying out the HA outright then I guess so. I can only speak from experience as I recently bought the HA's half and the bank's (First Direct) solicitors writing to me stating that their client doesn't lend on shared ownership. When I corrected them that it will no longer be shared ownership things carried on as normal.

newjay

OK thanks so much for prompt reply. This is the exact situation but with different figures. Are you saying she can only get an 85% LTV? Do lenders effectively ignore 10% of her equity?

ricky_v

The 85% LTV is only for the that example. I guess re-reading your post your friend has no mortgage currently on the 25% share so it's a 25% deposit therefore a 75% LTV mortgage. She's free to add an aditional cash deposit to bring the LTV down.

newjay

thanks for clarifying. Much appreciated.

newjay

just one more question on this topic. Does she class as a 'first time buyer' or a 'remortgage'?

ricky_v

It would be neither, as she's not a first time buyer (certainly not within the definitions of getting a HTB ISA (trust me, I checked! )), nor is she remortgaging as she's paid her mortgage off.

The nearest example would be selling a mortgage free property to move into a higher value property, and having to borrow to pay for the shortfall between what the original property is worth and the purchase price of the higher value property, but in your friends case not actually moving.

newjay

ok thanks! Had a feeling this might be the case. I have seen reference to 'staircasing' mortgages and what you have described sounds like it could be this.