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  • FIRST POST
    • jjamestyu
    • By jjamestyu 28th Dec 18, 2:23 PM
    • 9Posts
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    jjamestyu
    Questions on shared ownership mortgages and selling a shared ownership property
    • #1
    • 28th Dec 18, 2:23 PM
    Questions on shared ownership mortgages and selling a shared ownership property 28th Dec 18 at 2:23 PM
    Im looking at a shared ownership property and had a couple of queries related to the mortgage and the resale of the property at a later date.

    A) Im struggling to get my head around why one would go for a shared ownership property over a traditional mortgage.

    As i understand you still need to be able to show the affordability of both the mortgage and the rent.

    So if it was a 250k property, with 50% ownership, 50% rent, with a 10% deposit. You would need to show somewhere in the region of 50k pa earnings. (50k pa being 50k*4.5 = 225k + 10% deposit = 250k).

    If the affordability calculation also takes into account the rent, why would you go for a shared ownership property. Wouldn't you be better off with a standard mortgage 90%, with a 10% deposit as this would give you more flexibility ? Is there something im not getting here ?

    b) What are the resale prospects like on a shared ownership property ?
    Are they harder to sell ? Will it be an issue if for my next place im looking for a standard mortgage, and entering into a chain ? Can i sell the owned part back to the landlord, and are they under any obligation to buy it back ?
    Last edited by jjamestyu; 28-12-2018 at 2:25 PM.
Page 1
    • haras_nosirrah
    • By haras_nosirrah 28th Dec 18, 2:39 PM
    • 1,729 Posts
    • 3,014 Thanks
    haras_nosirrah
    • #2
    • 28th Dec 18, 2:39 PM
    • #2
    • 28th Dec 18, 2:39 PM
    I am a shared ownership specialist on the panel for two housing associations.

    Your calculations are flawed. The main difference is that on the 50% of the 250k property the mortgage would be based on 125k not 250k

    There is a lender who does 100% shared ownership mortgage and no stamp duty up to 500k so the property could be purchased for just 2k in approx purchase fees.

    On the mortgage side on a mortgage of 225k the lender calculates at around a 6-7% interest to determine affordability.

    On the shared ownership the mortgage part is based on the same calculations but the rent part is on face value so the affordability is much more generous even if the monthly payment is similar

    Someone may not be able to afford the mortgage on the 250k property according to the lender but could afford the mortgage on the 125k share plus 200 a month rent
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • jjamestyu
    • By jjamestyu 28th Dec 18, 5:59 PM
    • 9 Posts
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    jjamestyu
    • #3
    • 28th Dec 18, 5:59 PM
    • #3
    • 28th Dec 18, 5:59 PM
    Thanks Haras

    Is there affordability criteria for the rent portion ?

    Would the rent payments need to be deducted from the total available house hold income used for mortgage purposes ?
    • jjamestyu
    • By jjamestyu 13th Jan 19, 7:09 PM
    • 9 Posts
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    jjamestyu
    • #4
    • 13th Jan 19, 7:09 PM
    • #4
    • 13th Jan 19, 7:09 PM
    Wondered if you had a chance to review my follow up question ?
    • haras_nosirrah
    • By haras_nosirrah 13th Jan 19, 7:15 PM
    • 1,729 Posts
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    haras_nosirrah
    • #5
    • 13th Jan 19, 7:15 PM
    • #5
    • 13th Jan 19, 7:15 PM
    Apologies I didn't see it.

    On the assessments I do the mortgage (based at 5%) rent and service charge and any debt commitments, childcare, maintenance etc cannot he more than 45% of take home pay with the mortgage maxed out at 4.5x salary
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • cjv
    • By cjv 13th Jan 19, 7:32 PM
    • 449 Posts
    • 235 Thanks
    cjv
    • #6
    • 13th Jan 19, 7:32 PM
    • #6
    • 13th Jan 19, 7:32 PM
    I found this calculator useful when I started looking at shared ownership:

    https://assets.publishing.service.gov.uk/media/58d55b72e5274a06b300000e/Shared_Ownership_Sustainability_Calculator_-_June_2017__FINAL_.xls
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