Keep overpaying or buy other half? -shared ownership

martyp

Hi all,
I just wanted to throw this out there to ask what seems the best arrangement (won't hold anyone to their suggestions of course).
I bought my house as 50% shared ownership in 2005 with a £55k mortgage. I have £34k left to pay for that and my 3 year 2.09% fix ends June 2022. My repayments are £165 a month but overpaying by £200 a month taking the 25 year term down to 10 years hopefully.
My rent for the other half is £187 to the housing association.
As house prices are a major unknown I don't know whether to:
1) carry on overpaying my share to get best LTV
2)look at buying the other half now and borrowing more
3)look at buying the other half when my current deal ends in June 2022 (gamble on interest rates).
Someone with a similar house I believe is paying £70k for their other 50%
My house value I believe has increased from £110k to £140k so with £34k + £70k my LTV would be 74% roughly I think.

Wantabeautifulhouse

It depends on a few things. Do you want to live there for more than 5 or even 10 years?  If you want to live there for 10 years, I would personally buy the other half and aim to pay off the mortgage in 10 years time. Imagine a life without a mortgage!

Are shared ownership properties in demand in your area? In London there are many singletons that cannot afford a flat so it is easier to sell a SO flat than a standard 1 bed. If that is the case in your area and you want to sell in the next 5 years, I would overpay on the mortgage and not staircase.

dimbo61

Have you used one of the mortgage calculators like " whatsthecost " to work out what £100K at 75% LTV would cost from a couple of lenders ?
Can you afford to overpay even more for the next 11 months until your fix is up.
Maybe an appointment with your current lender might give you an idea if they will lend you the funds you want.

getmore4less

The key number is £187pm on £70k that's 3.2%  ( on £55k when you bought that would have been 4%)

Mortgage rates at 75% LTV are <1.5% 1/2 the rent.

£34k at £165pm is roughly 22y4m

£70k at 1.5% same term £320pm   you have £200pm can you find another £120pm

Current lender?
Not all have rates that good for extra borrowing.
A ditch the fix option might be worth a look if your current lender is way off and the ERC is 1%

martyp

Many thanks for the advice everyone, much appreciated.
I think the demand for SO houses here might be considerable as more in my street are now fully owned and no plans to move at the moment.
It is a situation whereby the other £70k will mean a higher over all mortgage and more than the amount I pay now for mortgage and rent so looking at a lower overpayment or possibly even no overpayment which was why I was putting off the other half on the idea of paying off the half that's mortgaged as quick as I can with the overpayments then buying the other half. Of course the gamble is how much the other half would be in 10 years time depending on how quick I pay off the current mortgage. Buying the other half secures the house price and helps build up the equity but worried about the interest although the £187 in rent each month is technically wasted money anyway.
Thanks for the calculations, if in theory the other half is £70k and I carry on with the overpayments I would be significantly under 75% LTV by next June if I bought the other half I was thinking.
I might discuss with my mortgage provider as well. My Dad will help he said as my salary is only £17550 so whether I can borrow an extra £70k is possibly difficult.

getmore4less

My Dad will help he said as my salary is only £17550 so whether I can borrow an extra £70k is possibly difficult.

That's going to limit borrowing to ~£80k

typo on the term its 21y 4m with current £165 payment.

that £34k  with £365pm  will be  ~£30k next June 

Still need £100k if prices stay about the same which is a stretch for your salary.

The other thing I missed is you are currently paying £165+£200+£187 so you have enough to cover the extra borrowing on ~21year term 

so even though you probably can afford the issue will be that's a 5.7 multiple for £100k



One thing to check does the £187pm include any service charges that will remain after buying the share? 

martyp

Thanks getmore4less, my rent just includes buildings insurance. I'm fortunate in that if I buy the other 50% I get the freehold and no ground rent etc. In the situation. So really I think just looking at the extra cost of the building insurance.

getmore4less

That looking good the limiting factor is going to be affordability.

The rent is relatively high against renting the money(interest) but bridging the gap for a repayment is probably the blocking factor.

The other factor is the value increase as that effectively makes the over all cost higher.

eg the £55k is now £70k  that's another £15k over 15 years. 


How much is your dad able to help, might need to be a sizeable gift or maybe a broker can come up with a way to squeeze more out a lender.