Paying off shared ownership, is this a good method?

martyp

Hi all,
Hoping for any ideas or suggestions please in case I might be making any silly mistakes at all.
Basic details:
50% shared ownership house
Mortgage currently on 50% is £24k left at 1.49% until February 2027 (5 year fix)
Rent on other half is currently £227 a month (includes building insurance)
I can buy the freehold of the property staircasing to 100%
The other half estimated around £85-90k. Based on current mortgage rates that would be around £500 a month for 25 years.

At present I'm paying £136 minimum mortgage payment each month, £227 rent and putting £250 a month overpayment into savings accounts at 4.5-5.5%

I appreciate the other half and rent will always go up over time so did intend to get the other half as soon as I can.

So far around £3500 in overpayment in savings account since I stopped directly overpaying the mortgage balance.

I'm thinking at some point that money would either:
a) pay off some of the £24k mortgage balance
b) go towards buying the other half to reduce the interest (slightly).

Does that sound like a good system? I don't believe house prices are increasing much around here, generally around 1.5% or so.
The rent increases around £15 or so each year depending on inflation.

Mark_d

If you buy the second half, you're looking at paying £375 in mortgage interest vs £200 in rent (not including buildings insurance).  This is on top of your mortgage repayments for the first half.

Since the rent is so much less than what the mortgage interest would be, I wouldn't consider buying the other half.

martyp

Thanks Mark, much appreciated.
I did even consider the idea that once the mortgage is paid off then the rent is very low anyway. Rental value I think for similar properties is around £800 a month too although I have to pay all my own repairs etc.
I noted the Housing Association offer incentives too that seem to be when the economy is in a certain state. Around 2008 I think was the last one then again in August this year. Paying the legal fees etc. Or towards them but I figured that the saving on the legal fees and survey possibly could easily be wiped out by the amount of interest paid at the current rates.

stuartp2000

If you stair case to 100% then the rent will go but you will need buildings insurance so teh net impact of teh mortgage is (Mortgage-Rent Saved+Insurance).
After 25 years (and maybe ahead if you over pay the mortgage will be gone but if you did not stair case at that stage you will have rent of around 372 a year (I think they increase inflation +3% and I have just taken a basic 2.5% inflation)

You do not say your age but then the rent will continue for any number of years after this and that could be a lot of rent.

The other consideration is if you stair case to 100% is if you intend to move in the future, I am sure it is easier to sell a property and port the mortgage than it is to sell a Share Ownership property.

So only you can know the right choice but there is the here and now versus the where I want to be in x years to consider

martyp

stuartp2000 said:

If you stair case to 100% then the rent will go but you will need buildings insurance so teh net impact of teh mortgage is (Mortgage-Rent Saved+Insurance).
After 25 years (and maybe ahead if you over pay the mortgage will be gone but if you did not stair case at that stage you will have rent of around 372 a year (I think they increase inflation +3% and I have just taken a basic 2.5% inflation)

You do not say your age but then the rent will continue for any number of years after this and that could be a lot of rent.

The other consideration is if you stair case to 100% is if you intend to move in the future, I am sure it is easier to sell a property and port the mortgage than it is to sell a Share Ownership property.

So only you can know the right choice but there is the here and now versus the where I want to be in x years to consider

Thanks, good thinking.
I'm 46, my plan originally with the overpayments was to pay the mortgage off in around 5 years as opposed to the 23 years left on the term.
The lease does concern me as it was I believe 99 years in 1991 so believe they are costly to extend but not sure about that aspect.