Shared ownership loophole

Legacy_user

Hi all,

We've seen a new build property (off-plan) which we are interested in. The whole block will only be available as shared ownership. We can get up 75% of it and then within 3 months can staircase to 100%. Banks will lend us the full amount for the 100% of the property so is there anything stopping us from remortgaging fairly soon and buying up the remainder quickly so we own 100% and save on rent?

If this makes sense...

Thanks

sammyjammy

Only the fact that you would in all likelihood be locked into a mortgage for the 75% you are buying first. I am sure there are other things but this seems the most obvious.

clarefs360

I think this would be worth discussing with the housing association. If you are able to borrow the full amount for the property then you may not fulfil the criteria for a shared ownership property.

System

@sammyjammy Thanks

@clarefs360 We meet the full eligibility criteria for applicants in London.

Marina2016

I think it depends what it says in the lease about staircasing. Our shared ownership lease says you have to wait 12 months before staircasing after the initial purchase.

If you move to a new lender to buy additional share there would likely be an early repayment charge.

clarefs360

@danyalaziz I was thinking more of the housing association's own criteria rather than the general eligibility for shared ownership in London. They will all have further affordability criteria, and from experience the property being 'too' affordable can also be a stumbling point. As mentioned there would also most likely be a time period before you could staircase to the full 100%.

My other point was though that if you could afford to buy 100% of the property this early, which is great, then perhaps shared ownership isn't necessarily the best way for you to do it as it will add complication and expense potentially.

Pixie5740

Don't you need to get a joint mortgage with your mother just to meet the affordability for a mortgage on the 75% share or is this a different development you are looking at?

System

@pixie5740 Without my mother, the max share I could get is 40%, with her they will let me have 75%. This is the HA eligibility criteria however based on incomes, the lenders will lend enough for the full amount. I will pay the mortgage, this is just so I can pass affordability in essence.

RedRuby_2

Don't discount the fact that after to staircase to 100% the property will have to be re-valued by a surveyor and that valuation will be higher than what it is currently valued at now. You may not be able to afford to buy the other 25% at the higher price.

Toucan_toucan

I'd agree with the points above:


-Have you checked any restrictions on when you can staircase, both from the HA point of view and that of the mortgage lender?


-While you'll stop paying rent you'll still pay a service charge...are you happy that 75% mortgage + rent + service charge is more than 100% mortgage + service charge? E.g. I am a shared owner and with a 30% mortgage + rent + service charge I pay much less every month than I would if I staircased to even 50%. I think the maths is better at bigger shares, but definitely something to check


-If you can get a mortgage for 100% of the value, why are you looking at shared ownership at all? Wouldn't you be better off looking elsewhere for something you can just buy outright without having to get involved with housing associations?