Paying off shared equity

john2k

When i purchased my new-build home, i was given a 25% shared equity option from the house-builders. That meant I only needed to raise 75%. WIth my deposit and a mortgage I was able to raise this and have managed to clear of the mortgage and have been mortgage-free for over 6 months.

Now my shared equity loan term is coming to an end in just under 1 year and the house-builder needs this to be settled before the expiry date. As it stands the 25% will probably be around 90-100k. I have some savings but not enough to cover this. So, what are my options? Can I take out a mortgage for 100k, this will be on a house that's worth 400k so the loan to value is very low. I'm not very familiar with the world of finance and loans so would appreciate some advice.

How does taking out a mortgage for this purpose work? Do I get the mortgage funds in my account and then use that to pay the equity loan etc? Do I need to get solicitors?

kingstreet

Yes, it's a remortgage.

Yes, you will need a solicitor. The mortgage funds will be paid to them to settle the equity loan.

Many remortgage products offer free legals or a cashback so you may not have to meet these costs.

john2k

As I will not no the exact value of the equity until I am ready to pay it off and the house-builder will have a valuation done. After this valuation is done they say they will send a redemption quote which will be valid for 28 days. This means that I have to get the mortgage sorted by then? What will the job of the solicitors be in this occasion? When you pay off your final mortgage I take it you don;t need a solicitor right?

john2k

So re-mortgaging is like going to another provider and telling them my outstanding mortgage is whatever the 25% is and they will pay the existing lender in this case the house-builder that. is that correct?

kingstreet

You apply for a mortgage based on estimated figures.

Your solicitor gets the mortgage offer then obtains the redemption figure from the chargeholder.

You amend the mortgage amount with the lender, if needed.

Your solicitor obtains the mortgage funds and redeems the equity loan, ensuring the charge is removed and replaced with the new mortgage lender's first charge.

Captain_Kirk427

I'd also give the house builder a call to see if they will accept a lower offer before paying the full amount.

When I bought my new build, I had a shared equity loan, interest free for 10 years. After a couple of years I was in a position to pay it off thanks to inheritance, and they offered a reduction of £4000 on a £22000 loan, so quite a big discount