Mortgage Advice

Desert Orchid

Desert Orchid

Senior Jockey
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Aug 2, 2005
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I'm looking to buy or rent a small place closer to work to avoid lengthy commuting.

I take it no-one is offering 100% mortgages these days but I have seen a shared equity scheme with a local builder.

It seems simple enough. 75/25. Pay back the 25% after 10 years or selling the house, whichever is sooner, the 25% to be based on the average of two independent valuations.

It would mean I wouldn't require a deposit and the mortgage would be for 75% of the price of the house, which itself strikes me as pretty competitive compared with existing properties in the area.

Is there anything I should be wary of with such a scheme?
 
Sound ok but you could be suprised how quickly the ten years comes around. There is a glut of city centre flats in some areas at the moment and the question has to be whether there will still be oversupply in tens years time. If you are talking london, edinburgh or York perhaps, then fine. but ist cities like Ipswich and leicester where they cant give them away> will that change in ten years?
 
This is a brand new 2-bedroom flat for sale at £90k in a nice, quiet little town where the average price of established 2-bedroom properties is about £90k.
 
But are there a lot of newish developments in the town? Is there much else thats unsold?

If so, then might be worth holding on. Property prices still ahve some way to fall yet i believe
 
The rep admitted sales in the development were slow and they were trying to encourage first time buyers. They've obviously had to be careful at how they set their prices. Normally I'd expect new development prices to be 15-20% higher than existing similar properties.

Our current house is a self-build. We got the plot in 1994 because the developer stopped building as sales were so slow. The house was started late 1995 and completed in the spring of 1996. Within two years it was worth double the project cost.
 
The problem is with your builder thing is the same thing my little sis was looking at. Your correct in saying you pay back the 25% to the builder when the house is sold or at the end of ten years, however if the house devalues, you still have to pay the 25% price from the initial purchase, however if it goes up in value, you have to pay 25% of the new value. Therefore its a win / win for the builder and not exactly the same for you.

If for instance the 90k property is worth 120k in ten years, you have to pay the builder 30k, however if its worth 75k you still have to pay 22.5k, its designed to benefit the builder and help first timers get on the ladder. However its not exactly a great idea unless you are clued up. I talked my sister out of it, but didn't realise she would end up moving in with me !!!!!
 
Flame said:
however if its worth 75k you still have to pay 22.5k,
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£18750 by my calculations, which means we both lose. It's a risk on both sides but if I buy a prperty outright at £90k which ends up worth £70k, my losses aren't shared.

As for waiting a year, suny, it would mean commuting for another year, which is already costing £280 per month in diesel plus the monthly portion of maintenance costs for the car. I've always maintained the car in tip-top condition because it was so important to me but he servicing and maintenance costs for the last 12 months were almost £3000. I can see the sense in waiting as far as the market is concerned but I'm in a position where I need to minimise my nett outgoings.
 
DO.
You don't say whether or not you would be keeping your existing property.
Without knowing that here's some thoughts in the interim.

Builder wants to recover his costs, probably needs cash. You are in strong negotiating position. Maybe forced seller,find out. If necessary I will tell you how.
If you are in position of borrowing 70% LTV or less for mortgage should be some very good fixed deals around in the near future. Get as long as possible.
Expect high level of fees from bank. At least double what you paid in 1995 probably more.

Happy to discuss via PM if you wish.
 
Desert Orchid said:
£18750 by my calculations, which means we both lose. It's a risk on both sides but if I buy a prperty outright at £90k which ends up worth £70k, my losses aren't shared.

As for waiting a year, suny, it would mean commuting for another year, which is already costing £280 per month in diesel plus the monthly portion of maintenance costs for the car. I've always maintained the car in tip-top condition because it was so important to me but he servicing and maintenance costs for the last 12 months were almost £3000. I can see the sense in waiting as far as the market is concerned but I'm in a position where I need to minimise my nett outgoings.
Click to expand...


Check that out because thats what my sister thought, but the fact was the builder gets 25% of the house value, at TIME of purchase or time of Sale, whichever is greater.
 
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