Shared Ownership - Mortgage

Andybooth23

Hello,
Me and my partner are closing on a 75% share in a shared ownership house. We noticed in the mortgage no porting is allowed.

In the case we did want to sell in 5-10 years, (our stake is 125k mortgage) would the sale fee need to cover whatever is left of the 125? (And any remainder come to us) Or would it need to cover the full term of the mortgage with the interest? (Which would be around 222) 

Thanks!

AdrianC

Just the outstanding capital.

If you borrow money for 25yrs, and repay it after 10, you don't owe interest on it for the other 15yrs... and, of course, your monthly payments up to that point are paying interest as you go, as well as repaying some of the capital - that all goes towards the total repayment over the term.

£222k is the £125k you borrowed plus the interest over the full term. Divide that by the number of months in that term, and that's how much you're paying per month, right?

£222k seems high, though - over 25yrs, it'd be about 5% (£730/mo), or 4% over 30 (£600/mo)?
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

amandacat

Porting your mortgage is only an issue if you’re in a fixed rate. In which case if you sold and bought elsewhere you would get a new mortgage and just pay the ERC. If you time it right to coincide with your fixed rate deal ending then there will be no fee. 
If it’s still shared ownership when you sell then you only have to pay back the remaining mortgage for the part you own. So say you sell your share for 150k at that point and there was 120k left on your mortgage, it will pay off your mortgage and you will be left with the 30k. 

Andybooth23

AdrianC said:

Just the outstanding capital.

If you borrow money for 25yrs, and repay it after 10, you don't owe interest on it for the other 15yrs... and, of course, your monthly payments up to that point are paying interest as you go, as well as repaying some of the capital - that all goes towards the total repayment over the term.

£222k is the £125k you borrowed plus the interest over the full term. Divide that by the number of months in that term, and that's how much you're paying per month, right?

£222k seems high, though - over 25yrs, it'd be about 5% (£730/mo), or 4% over 30 (£600/mo)?

Brilliant, thankyou.

Yes unfortunately the best offer we got when searching (both individually and through a broker/consultancy) we would be on a 3.99% fixed for 2 years, then Leeds BS Standard current rate with a discount of 1.25% bringing it to 4.04% for 3 more years, and then just the standard Leeds BS rate which is 5.29%. We'd be hoping to shop around near this time for a better deal?

It's also a 35 year mortgage, but we just did this to stretch out the payments if needed. We're aiming to be able to make some payments early, as well as potentially staircase the full amount of the property in future if we do still really like it there. On the plus side it's a house so no communal charges, just rent (which is capped at 2% increase a year) which is currently £102 a month, and our mortgage on top and a £17.50 buildings insurance a month.

Our reasons for basically stretching out the payments is for the first 6 months in our new property my partner will be on maternity leave, so our income after all our essential bills and payments (but before weekly food etc) will be around the £700-850 mark but after 6 months back up to around £1800-2200 a month. (Our household income combined when both working is around the 55-62k mark).

Would love to hear thoughts on if this all sounds sensible or not! It seems to be viable and sensible in our heads at this moment in time, but advice and opinions greatly appreciated! Especially on the potential shopping around for a new mortgage in a few years etc

steveamaniac

Andybooth23 said:

AdrianC said:

Just the outstanding capital.

If you borrow money for 25yrs, and repay it after 10, you don't owe interest on it for the other 15yrs... and, of course, your monthly payments up to that point are paying interest as you go, as well as repaying some of the capital - that all goes towards the total repayment over the term.

£222k is the £125k you borrowed plus the interest over the full term. Divide that by the number of months in that term, and that's how much you're paying per month, right?

£222k seems high, though - over 25yrs, it'd be about 5% (£730/mo), or 4% over 30 (£600/mo)?

Brilliant, thankyou.

Yes unfortunately the best offer we got when searching (both individually and through a broker/consultancy) we would be on a 3.99% fixed for 2 years, then Leeds BS Standard current rate with a discount of 1.25% bringing it to 4.04% for 3 more years, and then just the standard Leeds BS rate which is 5.29%. We'd be hoping to shop around near this time for a better deal?

It's also a 35 year mortgage, but we just did this to stretch out the payments if needed. We're aiming to be able to make some payments early, as well as potentially staircase the full amount of the property in future if we do still really like it there. On the plus side it's a house so no communal charges, just rent (which is capped at 2% increase a year) which is currently £102 a month, and our mortgage on top and a £17.50 buildings insurance a month.

Our reasons for basically stretching out the payments is for the first 6 months in our new property my partner will be on maternity leave, so our income after all our essential bills and payments (but before weekly food etc) will be around the £700-850 mark but after 6 months back up to around £1800-2200 a month. (Our household income combined when both working is around the 55-62k mark).

Would love to hear thoughts on if this all sounds sensible or not! It seems to be viable and sensible in our heads at this moment in time, but advice and opinions greatly appreciated! Especially on the potential shopping around for a new mortgage in a few years etc

Definitely think you’re doing a sensible option. If you’ve gone for fixed rate for 2 years you can remortgage at that point and should be able to get a better interest rate as you won’t be a first time buyer although shared ownership rates seem to be higher to that of standard with less lenders available.

Im in the same situation and planning to staircase to 100% after the 2 year fixed rate is up.