What type of mortgage to buy rest of discount market share flat equity?

echosea

Hi all,

I currently hold 70% equity of my discount market share (DMS) flat with the council owning the other 30%. I would now like buy over the 30% equity in order to rent the flat out but am unsure about the mortgage application as it's not a common situation. I haven't been able to find a thread with anyone in a similar situation to me. I was wondering which mortgage would be most appropriate. I currently do not have a mortgage on my share of the property. I would appreciate any advice! Thank you very much!

Best wishes,
echosea

kingstreet

Capital raising remortgage.

Some lenders will treat it as debt consolidation, some won't.

Are you sure you only own 70%? That's shared ownership, not shared equity. It would be more usual for you to own 100% and the council to have a second charge over the property for their 30% so they get back 30% of the value on sale/remortgage.

echosea

Thank you for your response. Pardon my naivety but can you remortgage on a place you've never had a mortgage for in the first place? I don't currently have a mortgage and didn't need one when acquiring the 70% equity.

I say equity because I do outright own 70% of the property and do not have to pay any rent to the council, which is what shared ownership would require. This is also stated on the title deeds. It was a DMS property - so in order for me to own 100%, I have to pay the council 30% of the current valuation. Essentially, they will be selling their equity to me.

echosea

Apologies, DMS should be discount market sale (not share!).

kingstreet

Yes. It's a remortgage of an unencumbered property.

Is the property freehold or leasehold? If the LA owns 30%, it must be leasehold to enable you to occupy what you don't own?

There have been shared ownership schemes where there was no rent paid to the RSL, so payment of rent should not be viewed as the determinant.

echosea

Great - thank you for letting me know. I will be going to speak with a couple of lenders so it's really helpful to know what products I should be looking for!

The property is leasehold. I've just had a look on my council's website and DMS is also known as council shared equity. Shared ownership for them is where rent is required on the remaining share so I guess it depends on which council it is!

kingstreet

echosea wrote: »

DMS is also known as council shared equity. Shared ownership for them is where rent is required on the remaining share so I guess it depends on which council it is!

I love it when organisations decide to make up their own rules.

Shared equity is a second charge placed over a property which is 100% owned by the individual.

TBH it's moot anyway. You want to get out of it and you need a remortgage of an unencumbered property. If it's owned as stated, you are purchasing additional equity, not capital raising or debt consolidation.

echosea

Yes I know! Anyway, thank you very much for your advice. It's all very helpful!