75% shared ownership flat--should I go all out with mortgage to staircase to 100%?

lama_pdx

Hi everyone,

Would be really grateful for advice around a mortgage vs saving issue.

I'm 51 and I have about £50,000 in pension funds.  I only have £1000 in savings at the moment because I have poured everything into the purchase of a shared ownership flat.  I own 75% of my flat, and within that I owe £60,000 as a mortgage.  No other debts. 

Once I build up my savings to 6 months' living costs, does it make sense to extend my mortgage as much as possible to staircase up to 100% ownership?  I have done some calculations and it would mean that I would need to take out another £35,000 and pay mortgage until I'm 72.  The flat is in a suburban area with good transport links and a lot of development programmes happening so I'm hoping the value will increase.

I earn £32,000 per annum by the way.

No other resources such as upcoming inheritances or anything like that.

My dilemma whether it would be wise to put everything into just one asset?  Or whether it would be better to remain at 75% ownership and build up savings/pension?

Would be grateful to get any perspectives.

Slithery

Are you allowed to staircase to 100%?
It's not an option for all shared-ownership properties.

theoretica

How much is the rent on the 25% compared to a mortgage?  What are the arrangements for rent increasing?

lama_pdx

Yes I'm definitely allowed to staircase to 100%.  

I am not allowed to rent the property out even at 100%, with the current lease. But I know a sol who thinks she can get a variation of this once I staircase to 100%.  If I can change the lease so that someone else can live here, that would allow me to rent this property out or to leave it in my will as an asset (currently, when I die my inheritors would have to apply to live here in order to enjoy the property, otherwise they'd have to do a quick sale).  

lama_pdx

Ideally, I'd like to staircase to 100%, pay off the mortgage as soon as possible, move back to the countryside when I retire, and then rent this place out.

HampshireH

lama_pdx said:

Yes I'm definitely allowed to staircase to 100%.  

I am not allowed to rent the property out even at 100%, with the current lease. But I know a sol who thinks she can get a variation of this once I staircase to 100%.  If I can change the lease so that someone else can live here, that would allow me to rent this property out or to leave it in my will as an asset (currently, when I die my inheritors would have to apply to live here in order to enjoy the property, otherwise they'd have to do a quick sale).  

I wouldn't rely on being able to vary the lease. I'd say it's quite unlikely depending on the size of the block your in 

Personally I wouldn't bother. Would your inheritors want to live there after? Is it going to be suitable for you till your 90s if you age that well?

I would keep your money/savings and ensure you can afford retirement rather than pumping it into a flat which you don't need to pay at more for.

Especially as presumably you have no opportunity to buy the freehold so you would be a leaseholder with a lease to still adhere to

lama_pdx

Oh very good questions Theoretica. 

The rent on 25% is about half of my mortgage payment.

If I were to staircase to 100% then my extra mortgage payment be as much as the rent is now.  So I would break even.

The rent and service charge have increased by about 3% each year.  It is a historic building owned by a large Housing Association.

lama_pdx

Thanks, I was thinking of that.

No, none of my inheritors would want to live here and I'm mindful that currently, when I die, they'd be stuck with the rent payments coming out of my estate until they can sell it.

I could definitely stay in this flat in my old age.  Just would be nice to think that I could someday jet off to Dubai for a year (lol) and rent it out.  

lama_pdx

Also thinking it would be a good idea to staircase before the value goes up?  

Tiglet2

I think it is highly unlikely that you will be able to rent out your flat if your lease prohibits it.  The freeholder would need to change all the leases in the building rather than yours only, as all the leases need to have similar terms.  How many flats are in the block?  The smaller the block, the more chance the freeholder will agree to a variation, but don't count on it.

HampshireH

lama_pdx said:

Also thinking it would be a good idea to staircase before the value goes up?  

What if it goes down? 

You would also still have a service charge to pay regardless and you have alread said they currently won't let you sub let 

I would suggest getting confirmation in writin tha they would vary the lease (at your expense legally) before doing anything else.

As that is the stickler for you. If you can't sublet it then your plans are irrelevant as you will be paying for an empty flat from Dubai.