Shared Ownership mortgages - why so different from normal ones?

malc_b

Can anyone tell me why the numbers for shared ownership mortgages work out so different to normal ones? My son and partner are in the process of buying a shared ownership. I'll used made up figures but the ratios are correct. Based on joint salary Nationwide calc says 100k mortgage limit (made up figure). They need 40k so the web page says no problem for 25yr mortgage. However, web page is for standard mortgage. Discuss with NW and are offered 38yr for 40k. Go to broker who gets 28yr for 40k. The 40k is under 75% LTV. The rent part is under 50% of the mortgage payment.


I assume the issue is in affordability calculations, if so why? Rent is limited to RPI+2% (AFAIR) but I don't think they were asked a rent figure.

minimike2

I'm really sorry but your post doesn't make much sense as it's just a lot of numbers and words without any real logic to be able to follow what you mean.

I am sure it made sense to you when you wrote it, but reading it back I can't fathom much other than it appears you have some kind of difference with either a lending amount, term, or required deposit, depending if you buy a SO property compared to a fully owned property. (It would stand to reason, since you need to factor rent in as a financial commitment on SO).

Could you clarify?

haras_nosirrah

the difference between shared ownership and standard and why you can borrow less on shared ownership is because the rent is counted as a commitment so the difference would be 100k with no commitment or 40k paying £250 a month to a housing association (made up numbers)

there is a shared ownership option on the calculator and you put the annualised rent payment down

malc_b

The shared ownership rent is under 50% of the mortgage repayment, so 40k mortgage for the share, plus rent would only be an equivalent of a 60k mortgage. For a standard mortgage they could borrow up to 100k on 25yr. Why is SO supposedly less affordable?


BTW minimike2 sorry if I was unclear, maybe it help if you view 100k as 100% of their standard mortgage limit, i.e. Standard mortgage limit (SML) is 100%. For shared SO they want to borrow 40% of SML but direct can only do that on a 38yr term not 25yr. Via a broker with same lender this comes down to 28yr term. Rent amounts to same as 20% SML mortgage. Hence it should work out as 60% of SML so easily affordable on 25yr term.

malc_b

haras_nosirrah wrote: »

there is a shared ownership option on the calculator and you put the annualised rent payment down

Which calculator do you mean? Can you give a link?