I know nothing, nothing about all this so feel free to treat me like a five year old.
Son, partner and 7 month old want to get a place. They are currently living with his partners parents but it's becoming untenable due to her parents marriage being over effectively and the parents "being at war".😟
Details that might be relevant or not and in no particular order:
He is a line manager working in a call centre (wfh mostly) dealing with some expensive fashion brands I've never heard of. Job safe for the moment at least but he's just applied to the Police Service, he has 2 family members already serving so knows the up/ downsides, pay prospects etc etc.
He and partner are both 23 years young. Lucky buggers.
I'm going to have to help him get together around £5 to 6k deposit. That means me spanking a credit card/s for 3 to 4k which I'm a bit concerned about.... BUT my son's (and his partner and babys) life is being made hell by living somewhere with a civil war going on around them so basically so I'll do anything I can to help. That said, will the mortgage company even accept a mishmash of payments, part from him, part from me?
My lads credit rating is average, his partners is very good. They both work, with his partner just about to return to work after maternity leave. Her partners father is willing to be guarantor if necessary. He is some sort of financial advisor. I know, I do see the irony of asking you guys rather than him but it's complex, very complex...
We live in the SE so house prices are bloody expensive.
Seems he can set amounts of the property he is buying, 30% or 40% etc etc. Pros and cons to that guys? Can the percentage be changed during the life of the mortgage/rental scheme by him? Guessing not?
Thanks for any insight into this guys I'll post more as I get more details from him.
I've recommended to him to try normal rental till (hopefully) getting into the Police Service but there are no doubt some pitfalls in that course of action too.
I believe you can increase the share you are paying a mortgage on three times, but there are "admin fees" each time.
I used to think shared ownership was our (better half and I) solution to get out of renting and getting on the housing ladder, but I'm not so sure any more. Same goes for leasehold properties and ground rents. But currently, sub £175k houses that don't need renovation are like hen's teeth around Southampton.
Couple of mates have done this in Bristol, as above i believe you can increase, but the limits are you are going into a limited market that is being set up to profit from help to buy, so new houses specifically built for this purpose in many cases, so cheaper in terms of location and build quality.
Be wary of the small print though, you're focusing on the deposit but you will need to pay a half decent solicitor, make sure it's not the one recommended by the site they are buying off!
Don’t think they really care where the deposit money comes from, they will want to see statements tho to check it’s been obtained legally!
Suspect they’ll ask you to confirm in writing that it’s a gift which you don’t want to be repaid (otherwise they’ll factor it in to his borrowing I.e. lend him less)
Sure I read recently that some lenders are now refusing loans where too high a percentage of deposit comes from parental contribution so may reduce your options slightly.
I am currently remortgaging - I can confirm that lenders DO care where the deposit comes from.
Say Bank A lends them 95% of a house. 5% came from Mum and Dad.
Mortgage defaults, Bank left with 95% of the house to cover by auctioning it off.
But actually, it turns out that Mum and Dad's mortgage was with a subsidiary of Bank A too, and now they have lost the money they gifted to their kids, and out their own mortgage payments in jeopardy - suddenly the risk to Bank A is much higher.
It's not that you can't give money to your kids - but don't be surprised if lender's want to see where it's coming from, and how.
I think the big thing to be wary of is more to do with he leasehold/freehold status of the property.
Others will be able to give real advise, but a lot of these schemes seem to leave the lease with a parent company with a contract that states you can buy the lease in the future for a reasonable amount.
Sadly it seems that, in many cases, a few years down the line the lease is then sold to another company who decide to significantly increase the lease purchase price. In many cases this seems to price the householder out of the option to purchase the Lease meaning they cant move.
I am sure they are not all like that, but is something to be aware of.
PS I found this site which looks to cover a lot of the pitfalls. Its a .org webpage so should not be trying to flog you anything and therefore the advice might be good
As mentioned above lenders are very particular about where deposit money is coming from at the minute, some are only allowing 25% of the total deposit to be "gifted" which your money to them would be classed as. I'd also be wary about only owning a small percentage of a property and paying leasehold on the rest. Who controls the value of the part they dont own? In 5 years, 10 years time when they want to try and buy a bigger share in the property it could have been hiked up to an unaffordable price.
Why the desire to own and if things are that bad at home can they not rent somewhere for a while?
Everytime I've seen part buy part rent places for sale they seem to be over priced if you calculate the 100% purchase price ☹️
In the current climate I'd be sitting out the current boom in prices & renting to see what happens to the housing market, plus as police they may be able to get better deal in the future?
I'm just moving out of a shared ownership place, having lift here for 7 years, it's been great. DM me if you want more information, here are some of my thoughts:
1) Pay attention to the full price, as others have said, they can be overpriced (don't get fooled by a low number for your share).
2) Ask about service charge, rent is regulated and so some companies make up for it in the service charge.
3) Research the housing association thoroughly, some are great, some are basically criminals and some are incompetent (asking people in the building will tell you this). You'll be reliant on them for everything (they will probably hold up the purchase).
4) You can buy up to 100% for most of them (and it's not that hard).
5) There are limitations (you can't sublet), selling is likely to be a slower process.
6) Check they have a cladding certificate.
7) Normally the rent is fairly reasonable too (it's the only rent in the country which is regulated)
8) The biggest challenge is definitely qualifying for the flat. You normally have to live/ work in the area. The affordability window is fairly narrow (you can't be too poor, you can't be too rich). This is definitely worth checking if they are applying as a couple (if they're both working, there is a risk of them earning too much, if only one of them is working, there is a risk of not meeting the affordability).
9) Once you qualify, it's a real lottery whether you'll get it.
I've found it to be a great option for me, don't do it expecting to make a profit like homeowners often do (there are better investments). If you qualify, and are looking for a reasonable place to live, it may work well.
big gamble though, worst case is prices continue to rise & he ends up not being able to afford even part ownership. Personally I can’t see any scenario short of nuclear war that will see prices in the SE fall long term.In the current climate I’d be sitting out the current boom in prices & renting to see what happens to the housing market
I got stuck in a house with neighbours from hell that I couldn't sell for six years because I bought it "quick before prices go up even more!"...at the end of the 80s. Small deposit. Took us that long to find the money to bridge the negative equity gap.
If everyone is going "buy now before prices go up more and *no-one* can afford a house..." That kind of suggests prices might fall (at least in real affordability terms).
I would suggest the main takeaway is don't get into a position where you can't move - if your own home is a nightmare rather than a refuge it make your whole life really grim.
Normally the rent is fairly reasonable too
Not always, friends managed to get out of their shared ownership place after the rent portion went up massively over 6-7 years they were there, think it doubled in that time.
There have been some real issues highlighted with shared ownership properties when it comes to selling.
https://www.theguardian.com/housing-network/2013/sep/03/hidden-dangers-shared-ownership
But on the other hand I know a couple of people its worked well for
My Mum and Dad gifted us some money to help with our deposit on our house. The mortgage company wanted to see the evidence of the original accounts it came from (my parents savings account) and then the money in our account so they will be interested in where the money came from in my experience and as mentioned above mortgage lenders are being more fussy now.
Also as an aside I always know a poopscoop started thread as you always manage to integrate an emoji picture into the title 🙂
It's been a while since I last looked into it but the last time I checked my status for getting a mortgage with the Nationwide (part of my annual accounts review) they were adamant that if I had any help for the deposit it had to be 'gifted' and that the person gifting it could not use a loan/credit card/their mortgage to raise the funds. My portion of the deposit also had to be clear savings and traceable to prove so. It was the same back when I worked for Barclays back around '07-08, any deposit could not be funded by further debt*. With the current state of play they will be hot on making sure of this.
I won't comment on the whole part buy/part rent schemes as I see them as a way of artificially boosting house prices while still making it look like housing is 'affordable'.
* yes, they did 100% mortgages back then but that was their rules for places that would obviously go up in value...