Mortgage on £200,000 Shared Ownership property

[uk66fastback]

Hi all

My stepson is trying to get a mortgage on one of these - 50% share. So mortgage of £90k plus a £10k deposit which he has gives him half of the property. His gross pay is about £20k, with an annual bonus of £3500 roughly ... so just under four times salary. This is quite a high mortgage he's looking for relative to earnings - so where would be the best places he could try.

Or does he need to scale it back a bit and be a bit more realistic about what is affordable ... ie go for a single bedroom place - he is a first-time buyer, aged 28.

My dad has the old maxim a third of your gross on your repayments, but I'm not sure that is doable for the yoof any more - they have to forego other things in life - can't have it all etc ... yes, he has the top phone, before anyone asks ...

Thanks

Edited by uk66fastback on Monday 3rd June 11:51

[geeks]

SWMBO's son did this a couple of years ago on albeit on a larger salary (£35k total income from memory) for the same amount and had no issues procuring a mortgage. however his sums are much better in that regard.

I would suggest a chat with Sarnie on here, mortgage man extraordinaire who has sorted our mortgages for the last 5 years or so

[NickCQ]

uk66fastback said:

My dad has the old maxim a third of your gross on your repayments

£90k 90% LTV mortgage should cost him <£400 pre month so well inside that threshold at £20k pa

[uk66fastback]

NickCQ said:

uk66fastback said:

My dad has the old maxim a third of your gross on your repayments

£90k 90% LTV mortgage should cost him <£400 pre month so well inside that threshold at £20k pa

Not really though, when you consider with shared ownership, you have to 'rent' the 50% you DON'T own, so another £300-odd a month inc the service/management fees etc.

[Mobile Chicane]

Shared ownership is a ruse for property developers to shift their crap that won't sell on the open market.

'Your' share will be nigh on impossible to sell on, and you will be reamed for rent increases on the unowned portion.

[cat with a hat]

As mentioned above.. You need to be very careful of the service/management fees if its a flat... They can easily turn what appears to be an attractive offer into a rip off.

Shared ownership will also likely be a lease... So after 10-20 or however many years someone will need to extend it.

[uk66fastback]

It's not a ruse as such, and they're not sold by the developers. They're sold to housing associations and then these are sold on a varying degrees of percentage-ness (new word). I am aware that they've got you over a barrel as far as location etc. On the next phase of the estate he is looking at there are TWO SO three-bed properties for sale out of nearly 150 houses.

Yes, it's not ideal - if he was buying the house outright he'd have the pick of where to live and I think he should cut his cloth accordingly to some degree but he can't get a mortgage to buy a terrace as you put it as they are too expensive to buy outright. He thinks this is the only option available ... (it isn't of course, there are others - but they know best, don't they ... )

There's no getting round that in effect, you're paying top dollar to not choose where you live, or really the style/kind of house, getting a leasehold property and then you're beholden to the HA until you own 100%.

And all this because government of both colours have allowed the housing market to seemingly grow yoy, instead of using various methods to peg it back, cos it 'makes us feel better off' ...

[uk66fastback]

Mobile Chicane said:

'Your' share will be nigh on impossible to sell on, and you will be reamed for rent increases on the unowned portion.

Can you explain why this would be so, I really don't know ... and am still learning about the new-fangled way of house ownership these days ...

If he could FIND a two-bed to buy the current owner's 50% share of, he'd be all over it.

It's a house btw, not a flat he is looking at. Still leasehold though.

[LosingGrip]

Funny enough I looked at one last week. Well two next door to each other. For sale (50%) for £97k and £100k. Mortgage was £325 a month (95% LTV). Monthly rent was £310 with other bits included.

We've now got a mortgage in principle for £145k for £560(ish) a month. I'd strongly suggest having a look at a full ownership.

[Sarnie]

LosingGrip said:

I'd strongly suggest having a look at a full ownership.

This.

I've done lots of these for clients.............it's not a straight forward purchase/mortgage process........and disposing of the property isn't straight forward either as the HA usually contractually insist on being able to list the property for sale themselves before allowing you to put it on the open market weeks and weeks later....

I would always buy the best house you could get with full ownership.

[clockworks]

I guess things have changed in the shared ownership market?

I bought my first house 35 years ago on a shared ownership basis. It was a new build in Milton Keynes (my employer relocated there from Croydon), a scheme run by the then MK Development Corporation, who were also doing all the rental properties.

The rental portion was set at the same rate as equivalent council rents (i.e. cheap compared to private rental), and the properties were built to council standards (i.e. properly, but with cheap fittings). I bought 30% to start with, then another 30%, and the final 40% a couple of years later as my salary increased.

The purchase price of each share was fixed at the time of the initial purchase, and I got a discount because I was moving out of a MKDC rental flat.

There were only 2 potential drawbacks:

Right from the start I would be responsible for all maintenance, the same as if I had bought the house outright.
If I sold with (I think) 9 years, I would have to repay the discount pro rata.

I looked at buying from a private developer, but that would have cost a fair bit more.

It was a small "council" development in a good area. My immediate neighbours were all ex-council, trying to better themselves. Very quiet, no problems at all. I stayed there for 14 years, sold on the open market and moved to Cornwall.

[uk66fastback]

Thanks for the replies. The problem is, he cannot afford to buy 100% of ANY house ... as he cannot get a big enough mortgage, certainly not at decent 'high-street-lender' rates. He cannot afford it then, you might say, and that is the problem for FTBs on their own. If he was looking to buy with someone else, there wouldn't be a problem with the two incomes.

He rented for a few years and considers it money down the drain, and long-term, he's right. This is a least ONE foot on the ladder (almost) ...

[red_slr]

Flat?

[GregK2]

uk66fastback said:

He rented for a few years and considers it money down the drain, and long-term, he's right. This is a least ONE foot on the ladder (almost) ...

He will still be half renting though, except with none of the advantages of renting and all of the drawbacks of ownership. The mortgage process is difficult, both buying and selling are a pain. I have owned shared ownership in the past, I couldn't recommend it to anyone.

[Benbay001]

I bought my flat last year whilst earning just over £22k.
My credit history is blemish free.

The most HSBC would lend me is £100k.

By the time your son has paid council tax, rent, insurance and heating for a £200k house (as opposed to a £110k smaller flat), I cannot see them deeming it affordable.