Shared Ownership - What's my LTV?

Cardinal-Red

Afternoon all!

My partner and I took out a 5.29% fix with Cheltenham and Gloucester in July 2005 (completed on 01.07.05) and so we're coming to the end of it in a few months.

I'm looking around and am well aware of the current LTV restrictions that are in place etc.

My partner is a teacher and so qualifed for some keyworker assistance - this took the form of a 24% equity loan and the remainder made up by the mortgage. Figure wise we purchased our house for £157,000, with a mortgage of around £119,000 which at the end of the 3 years will be down to around £110,000.

Value of the house I think is hard to ascertain right now as there's not been many moves around here in similar properties lately, but the house next door (exactly the same but in a slightly less advantageous position) sold for £165,000 in the summer of 2006. So I'm working on the assumption of it being around the same value.

My question is - as far as LTV goes, will banks consider it to be around 70% (i.e. mortgage of £110,000 on a property worth £160,000); or will the equity loan mean that the LTV will be much higher?

Some figures that may be relevant.... our combined salaries are £60k+ so I don't foresee any problems with income multiples.
The terms of the equity loan are simply that we were granted 24% of the purchase price; we must repay 24% of the sale price when we sell on. There is no rent, interest or any other payment on this loan and if we sold for less than we bought, there is no "minimum repayment" of the original loan amount.

Sorry this post is much longer than I first anticipated!!

Cardinal-Red

Sorry thought I'd bump this in case any helpful brokers were taking a well deserved Sunday off...

AndrewSmith

It all hinges on whether the equity loan is secured against the property or not.

If it is then it will be £110,000 plus whatever the loan works out to be, as the amount needed to be covered by the new mortgage.

What are the T&C's for the loan in relation to it's security? ie is it secured or unsecured?

Cardinal-Red

Hi Andrew - thanks for getting back to me.

It's a charge on the property properly registered with the land registry. I guess that means it is secured on the property?

AndrewSmith

Yes it is secured in that case.

This means any new lender will normally want to cover both the mortgage and any other secured charges on the property.

Have you spoken to C&G to see what their take on this is and what they can offer you?

Cardinal-Red

Eeek!

Sorry have I misunderstood what you're saying - when you say "cover" do you mean they would expect me to borrow the money to pay off the secured charge?

Obviously that's not something I'd want to do which could leave me in a tricky position!

I'm setting up a meeting with C&G soon but I wanted to have some info on other offers around, but from what you're saying that doesn't sound likely! :-(

AndrewSmith

Cardinal-Red wrote: »

Eeek!

Sorry have I misunderstood what you're saying - when you say "cover" do you mean they would expect me to borrow the money to pay off the secured charge?

Obviously that's not something I'd want to do which could leave me in a tricky position!

I'm setting up a meeting with C&G soon but I wanted to have some info on other offers around, but from what you're saying that doesn't sound likely! :-(

In general yes, a new lender will want any existing second or subsequent charges cleared or consolidated giving them sole first charge.

I say in general because, as I am sure you can appreciate, the scope of a forum limits the ability to be specific to your own case and circumstances.

Cardinal-Red

Thanks Andrew - I'll get in touch with the C&G and see what they say...