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  • FIRST POST
    • philandfern777
    • By philandfern777 2nd Aug 18, 5:53 PM
    • 3Posts
    • 1Thanks
    philandfern777
    How do you afford to staircase on shared ownership
    • #1
    • 2nd Aug 18, 5:53 PM
    How do you afford to staircase on shared ownership 2nd Aug 18 at 5:53 PM
    Hi,

    I am hoping someone will know the answer to my question.

    I am interested in buying a SO property-30% for 66k. On the open market it is worth 258K.
    My question is my current salary caps me at 150K for a mortgage. If my salary didn't increase at all in 20 yrs. How do I afford to buy more shares in the house as my current salary would not allow me anymore than 150K. My worry is that I will never afford 100%. i.e how can someone who is only able to buy at 150K have a mortgage on a house that is worth 258K?
    I am a FTB. Salary may increase but guaranteed. Single salary.

    I hope that makes sense!

    Thank you
Page 1
    • 00ec25
    • By 00ec25 2nd Aug 18, 6:33 PM
    • 7,334 Posts
    • 7,048 Thanks
    00ec25
    • #2
    • 2nd Aug 18, 6:33 PM
    • #2
    • 2nd Aug 18, 6:33 PM
    how can someone who is only able to buy at 150K have a mortgage on a house that is worth 258K?
    Originally posted by philandfern777
    they can't

    surely you can see that for yourself. Either you get married and have 2 incomes or you get a better paid job or you trade down and buy somewhere cheaper using the equity in your current property by selling it..
    That is how everyone moves "up" the property ladder. There is no magic wand that creates money
    • Klr005
    • By Klr005 2nd Aug 18, 6:37 PM
    • 22 Posts
    • 11 Thanks
    Klr005
    • #3
    • 2nd Aug 18, 6:37 PM
    • #3
    • 2nd Aug 18, 6:37 PM
    Hi

    I wondered this when we bought our house on shared ownership.

    We bought a 60% share in 2015 and thought that would be it for us. Fast forward 3 years to the end of the fixed term on our mortgage and we staircased to 100%

    Its definitely possible.

    Its hard to say about a payrise but it is unlikely that you'll stay on your current wage for the duration of your mortgage. Pay rise = borrowing more.

    Other ways include cash injection. Savings or inheritence.

    You could also remortgage with additional borrowing after a few years so you've paid some money off and can add more to it.

    Might be worth adding that lots of Housing Associations don't allow you to choose the amount you want to buy. You have to buy the maximum you can afford based on their affordability calculator. Therefore, if you can get a mortgage on 150k, it's unlikely they will let you only purchase 66k.

    Hope this helps.
    • philandfern777
    • By philandfern777 2nd Aug 18, 7:07 PM
    • 3 Posts
    • 1 Thanks
    philandfern777
    • #4
    • 2nd Aug 18, 7:07 PM
    • #4
    • 2nd Aug 18, 7:07 PM
    Thank you. That was the whole point in my question-it didn't make financial sense but others were staircasing & I just wondered how it all worked.
    I am a FTB so no current property. Don't want to get married-single salary only. I am a teacher so there is potential but depends on many external factors.

    Thankfully someone has a sensible, helpful teply below.....
    • philandfern777
    • By philandfern777 2nd Aug 18, 7:11 PM
    • 3 Posts
    • 1 Thanks
    philandfern777
    • #5
    • 2nd Aug 18, 7:11 PM
    • #5
    • 2nd Aug 18, 7:11 PM
    Thank you so much -all really helpful.

    I have asked if I can buy more share i.e 40% instead of the 30% but they said no. However after a year I can increase it so that's not too bad.

    Unfortunately my salary will never be that great as I am a teacher & we are capped a bit after a while on our salaries. But you never know.

    Can I ask did you just save in order to staircase so quickly or did your property increase in value so equity was released?

    Thanks again-really helpful
    • Klr005
    • By Klr005 2nd Aug 18, 7:21 PM
    • 22 Posts
    • 11 Thanks
    Klr005
    • #6
    • 2nd Aug 18, 7:21 PM
    • #6
    • 2nd Aug 18, 7:21 PM
    Interesting that they said no to more but at least you know that you will get to staircase at some point as you won't be borrowing the maximum now.

    We did save some money to add a bit more but not loads. There were a few other things.
    I got a payrise in that time but not a lot to make a huge difference. About 5k.

    The biggest factor was that as first time buyers on a new build with a shared ownership property, the mortgage rate wasn't great so we had high ish mortgage payments.
    Once we remortgaged, we were no longer first time buyers and the house was no longer considered new build so we were offered more preferable rates, reducing the mortgage payments. And then with the equity in the house, our loan to value decreased giving even better rates which meant that even though we've borrowed more, our mortgage payments have only gone up by 5 per month.
    • Hoploz
    • By Hoploz 2nd Aug 18, 8:38 PM
    • 3,842 Posts
    • 3,386 Thanks
    Hoploz
    • #7
    • 2nd Aug 18, 8:38 PM
    • #7
    • 2nd Aug 18, 8:38 PM
    Many years ago i was a newly qualified teacher and bought 70% of my flat. 3 or 4 years later my salary had increased - I was able to borrow more due to the increased salary but also a history of making mortgage payments behind me. I bought the other 30% and owned it outright.
    • Sandyra
    • By Sandyra 5th Aug 18, 12:16 PM
    • 20 Posts
    • 1 Thanks
    Sandyra
    • #8
    • 5th Aug 18, 12:16 PM
    • #8
    • 5th Aug 18, 12:16 PM
    As everyone is saying, salary or overpaying your mortgage. Also don't be afraid to take a hit and leave your mortgage lender and pay the ERC. I'm a teacher and I bought 30%. I got a 6k payrise and my lender in the first year would only lend me enough to staircase to 50%. So I paid 2,000 in ERC went with another lender and staircased to 75%. Also like above has said after a few years of accuring equity and overpaying you get better rates. By overpaying I've reduced my mortgage term by 35yrs to 30yrs. I'm planning to staircase to 100% this October as I change schools and capitalise on inner london weighting.
    • cjv
    • By cjv 5th Aug 18, 7:59 PM
    • 356 Posts
    • 183 Thanks
    cjv
    • #9
    • 5th Aug 18, 7:59 PM
    • #9
    • 5th Aug 18, 7:59 PM
    Did you account for all your other financial commitments when calculating that you could borrow 150,000? remember to include the future rent you will be paying, service charges etc.

    This is what the person who is assessing you will take into account and may be the reason that they will only allow you a 30% share.

    I am looking at shared ownership and have been messing around with an excel spreadsheet for different scenarios, levels of debt etc. to see what I can afford.

    https://assets.publishing.service.gov.uk/media/58d55b72e5274a06b300000e/Shared_Ownership_Sustainability_Calculator_-_June_2017__FINAL_.xls
    • brit1234
    • By brit1234 5th Aug 18, 8:24 PM
    • 5,187 Posts
    • 11,961 Thanks
    brit1234
    You could alway get a 30% share and overpay on the mortgage. That way you build up equity, don't have to pay the staircae admin fees and are more protected more from any falling prices. You can always staircase later when the price is lower.
    Scams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.

    Save our Savers
    • getmore4less
    • By getmore4less 6th Aug 18, 8:15 AM
    • 33,649 Posts
    • 20,359 Thanks
    getmore4less
    If you can't afford a 100% of a property then something has to change to make that happen(prices rising does not work)

    The two main ways are
    You find some cash (luck, inheritance, series of bonus, find a special friend that has cash...)
    Your income grows so you can borrow more(or that special friend has income).

    Those two are the easiest to quantify.

    There are other variations but the limiting factor is based on the interest only model(it takes forever to buy)

    Using your example(with some guesses).
    I am interested in buying a SO property-30% for 66k. On the open market it is worth 258K
    30% of 258 is 77.4k ?

    Anyway starting point for 260k, if you could borrow all interest only of it at say 2.5% that would be 542pm, if you can afford more than that then you are on the path to owning.

    It then depends on the surplus income and how long you have.

    Some payments based on long terms to get to

    years, 50%(130k), 75%(195), 100%(260).

    50y 651 705 760
    45y 672 737 803
    40y 700 779 858
    35y 736 835 930
    30y 785 906 1027
    25y 854 1010 1,167

    now as you can see with a surplus(760-542) of only 218pm you can buy 1/2 the place in y30-y35, 3/4 by y40-435 and the full 100% by y50

    now with shared ownership is the rent is not the equivalent of interest only because the share value changes and by the time you come to buy it it may have gone up or down so those number don't work but you get the idea.

    What is key at the start is what the rent is for the share you don't own as a % against lending rates if it is below or close to lending rates then ok if more then it is not such a good deal.
    • Cakeguts
    • By Cakeguts 6th Aug 18, 11:55 AM
    • 5,338 Posts
    • 8,136 Thanks
    Cakeguts
    Do what I did. Move jobs to a cheaper area.
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