Sharerd Onwership Mortgages

[jem_bob]

Hi all,
My partner and I are in the process of buying 40% of an apartment with a shared ownership scheme. Everything has been finalised and it is now down to us to sort out the mortgage. I'm having terrible trouble finding a lender that will supprt this method of buying. They all want to be able to claim back 100% of the property if we don't keep up our repayments, therefore they're not interested in helping us. We have a perfect credit history and have been approved by a financial advisor. We have been given 3 quotes from high street companies, all of which have an interest rate in the high 6 or 7%. One has even offered 7.89% (this was the one offered by the financial advisor!). We only have a 10% deposit, and the fact that we're doing a shared ownership means we have been lumped together with people with bad credit history and it has been classed as a 'problem mortgage' by one company. I wondered if anyone has had any experience with this and managed to find a good rate with anyone? I feel we're being punished, as we're classed as 'high risk'. We are only buying this way as we are both only 21 and therefore haven't enough of a deposit to buy 100%.

[Velvetee]

Presumably this property would have been purchased through a Housing Association. Do they not have a list of preferred lenders or schemes for purchasing this way?

It will be harder to get a mortgage for most people now, even those wishing to just buy on the open market. Banks are being very selective who they lend to and will only do so, if a large deposit is supplied.

I supposed shared ownership helps people get on the property ladder, but does it not work out more expensive in the end? Not only will you have a mortgage, but have to pay rent on the part you don't own.

[jem_bob]

Yes, it is owned by a Housing Association who referred us to a Financial Advisor who had to interview us and approve our financial status. They then did a search for suitable mortgage lenders and the best they came up with was a fixed rate at 7.89% for 5 years. This is incredibly high and we don't want to be stuck with it for that period of time. The rent is only 2% of the value of the property that you don't own. so 2% of 60%, so when you add this to the mortgage repayments, it actually works out cheaper than renting in our area. The only reason we are doing it this way is beacuse we don't have the sort of money you would need for a deposit on a full ownership property, e.g �15000. We will then be able to gradually buy back more of the property as our salaries increase.

[bednobs]

sorry but this is just life at the moment, people are finding it hard to get mortgages. Mortgage companies are giving everyone bad rates and expecting big deposits, not just people with bad credit histories.
Most people look for a mortgage forst, find out how much they can borrow, get an agreement in principle then look for a place - you are much less likely to be disappointed.
You mentiom a good credit history - at 21 you might not have enough of a history for them to consider.

[jem_bob]

We had already worked out how much we could afford and found providers willing to lend us the money before we found the place. We were just looking for a better deal, as is everyone else out there at the moment.

[bednobs]

i really feel for you Jem, it must be a nightmare to be starting out at the moment

[jem_bob]

It is somewhat! In terms of the rates, but if we buy now while prices are cheaper we may also do quite well from it in the long run *fingers crossed*. It's all a big gamble and a bit scary at our age, but I'm sure we'll work it out.

[Velvetee]

That interest rate is astronomically high and to be tied into that for 5 years may be difficult. You cannot guarantee your salaries will increase.

Personally, I would consider waiting a while until things pick up, which I'm sure they will. In the meantime start putting money away and building up a deposit, so you can perhaps to buy on the open market.

There will always be properties out there for sale and you are both still young, what's a couple of years to wait.

[bushbaby_de]

Shared ownership mortgages are usually higher than normal mortgages for the simple reason that in these cases the bank isn't the only party with a charge on the property because the housing association also owns a share, so if you were to default on the agreement the bank is not guaranteed to be able to repossess the property to cover your debt as the housing association would also have a claim. So unfortunately you are never going to get as good a deal on a shared ownership mortgage as you would on the open market.