mortgage advice

[Swampyseifer]

Ok, this is complicated...or at least it sounds complicated to me!

nearly 2 years ago, me and the wife bought our first home. Its an apartment that we bought under a 50% shared ownership programme, it was like £84,000 or something. Also the owners do a 3year buy-back policy where if you sell the property back to them within 3 years, they pay what you originally bought it off them for.

Now we were informed by the people that we should start to look at beginning the buyback process after 2 years. the advice was to get the apartment valued, if its worth more then sell it on the market and if its worth less sell it back under the buy-back scheme.

Which is all kind of understood in my noggin....

What I dont know, seeing as it was our first purchase and we were all kinda pumped about buying our first home so we probably didnt listen as much as we should have, is what actually happens when we sell it back...

Do we basically get a cheque/bank deposit for the amount of mortgage payments we have made up to the point of sale? or, seeing as the plan would be to buy another property (probably moving up to a house this time) would we just not really see any money as the same mortgage provider would take over the dealings of our mortgage on the new place?

I hope we at least have the option to use the money we'd make on the previous mortgage payments to use as a deposit on the new place!

 

[Pestilence]

Not sure I'm understanding you entirely, but essentially you must have a set amount of mortgage that you've been paying off?

If so, the owners give you the cash to purchase your half of the property. That cash should then be used to settle the remainder of your personal mortgage with the lender. Whatever's left over after the settlement and any fees etc. is then yours to use as you see fit, for example towards a deposit for your next place.

 

[singularity]

But most of your payments were interest which i doubt you'll get back

 

[Windle]

Yeah it's a bad deal, assuming you were on a 25yr mortgage essentially the first 5 years of the mortgage are paying off the interest (taking as an average over the mortgage term), after 5 years you start eating into the main bulk of the moolah. Selling 2 years in, unless your property has massively increased in price (unlikely for an apartment which are seeing a huge slump in sales) is going to net you a loss.

 

[booyaka]

Quiet amazing.

You go ahead purchasing a property, probably the biggest purchase of your life - and you don't understand the process you signed up to???

I've heard of shared equity but never 50%, normally 80% etc.

I would SERIOUSLY consider checking out all the paperwork you have and re-evaluate your situation after fully understanding what options you have.

If you can "sell" it back to the owners/builders for the same price you paid ( i can't imagine in the current climate it will have risen in value) - you are likely to see nothing of any note back to you. In effect you have "rented" the apartment for 2 years as the mortgage you have is unlikely to have dropped in value.

If you owe 84k to the bank as your part of the mortgage, you are still likely to owe about that amount back to them as the initial years of any mortgage is only going to pay off very very small amount of capital.

Was the mortgage Capital and interest? Was it interest only?

SERIOUSLY - read the paperwork you signed to purchase the house - and find out the options from there.

Words honestly fail me at times like this - I don't understand how people can spend/purchase such a huge item as a house - and don't really know what they have got themselves into!!!

 

[Swampyseifer]

Hi

Thanks...I had a feeling that the interest would at least cut in to what we might have got as a return, sad to hear we may get nothing back - That wasn't pointed out to us by the owners/solicitors or the mortgage lenders.

I understood what I was buying into in so far as I knew how many years it was over, the total cost, the amount in mortgage repayments/rent per month and that it was a fixed interest rate at 4% for 4 years and then it would revert to a tracker which is 0.5% above the BOE rate. I believe also that it was a 40 year mortgage...

I admit that we got carried along but I think the company who we got this off of probably play into this somewhat! I mean they provide details of a solicitor to use, a mortgage lender, health insurance...everything you need so that the process is done as quickly and as painfully (and it seems as autonomously, without the buyers input) as possible!

I have looked for the paperwork, but...just to gall you more, I cant actually find it!!
Oh well, the news will probably please the wife...she doesnt really want to move out!

 

[[FnG]magnolia]

Health insurance? 40 year mortgage? My word.

 

[Em3bbs]

I think he means life insurance.

 

[Pajeh]

4% interest on an £84000 mortgage over 40 years, after 3 years you will have paid off £2713.

 

[Dr House]

It sounds quite simple to me, you bought 50% of a house worth 168k costing you 84k.

You now have the option of selling your half back to the developer for 84k or market it with an agent if you think the total house is worth over 168k. But to be honest after you have paid agents fees and stuff its probably not going to get you more money back.

So then you have to consider your mortgage. Do you know how much you still owe your bank?

You will probably have 2 options:
1 - pay off what is owed to the bank with your 84k. You are probably ending your mortgage early so the bank will charge your some early exit fees (2 to 5% depending on your contract with the bank).

2 - Ask your bank if they are willing to transfer the mortgage to your next property. This will avoid the exit fees.

 

[edscdk]

fixed interest rate at 4% for 4 years
!

well you cannot sell then unless its a portable morgage (in which case you cannot sell you transfer o another property)

if you sell inside a fixed term you will likely have to pay a 5 - 15k to the lender on top of what is owed...

also dont forget the solicitor fees when you sell...

 

[Dr House]

well you cannot sell then unless its a portable morgage (in which case you cannot sell you transfer o another property)

if you sell inside a fixed term you will likely have to pay a 5 - 15k to the lender on top of what is owed...

also dont forget the solicitor fees when you sell...

Thats not really true, the exit fees are not that bad. For example the last time I asked I was told on a 5 year fixed rate it was 5% in the first year, 4% in second, 3% in 3rd, 2% in forth 1 % in the final year.

But its really down to what ever he agreed when he took out the mortgage.

 

[edscdk]

Health insurance? 40 year mortgage? My word.

nothing wrong with a 40 year mortgage as long as you overpay it (enough so its paif off a lot earlier) you also have the advantage of a smaller required monthly payment if you run into money problems

 

[edscdk]

Thats not really true, the exit fees are not that bad. For example the last time I asked I was told on a 5 year fixed rate it was 5% in the first year, 4% in second, 3% in 3rd, 2% in forth 1 % in the final year.

But its really down to what ever he agreed when he took out the mortgage.

sill I bet its a few K he never reconed on having to pay....

 

[Swampyseifer]

Thanks all for commenting on this, certainly given me a shock!

yes, life insurance.

Yes, 40 year mortgage. Turned out a wise choice for the moment as less than a year after buying the property, my wife suddenly went on long-term sickness from work and about 9 months later was actually let go from her workplace...so I'm paying the lot from my own wages. She's just starting to get back to the point of finding a job, which I realise we would have needed to probably be able to afford the next mortgage anyway!


god...I'm starting to feel like a kipper! As it was I was not looking forward to the cost of having to buy all the white goods/furniture when it came to buying a new property!

it was bad enough to think that we might just make it out, by selling it back to the developer, with neither a loss or a plus on our money. but now it might cost us a good few thousand just to sell up? If thats the case then we probably cant even afford to do that!

I remember reading all the documentation through when we agreed signed up to this mortgage, also my wife and her father read it and I dont remember any of this being mentioned in the T&Cs. I know its not a good excuse but I deffo think we had the "truth" hidden somewhat from us when buying the property and it was all made to sound like it was good for us!

Methinks I will be making some calls at lunch to see if I can get a copy of all the documentation emailed to me!

 

[edscdk]

Methinks I will be making some calls at lunch to see if I can get a copy of all the documentation emailed to me!

the buyout fee on the mortgage will be totally seperate to the buyback contract

why not jsut stay there and keep paying?

even if the house is worth what you paid for it or less long term (baring total economic meltdown) it will be worth more...

overpaying the martgage will save you a lot, even in a fixed term you can usually overpay 10% a year.... and that 10% can be paid off on day 1 of the new period (dont overpay what you are alloud or they will fine you 1000's)..

 

[edscdk]

yes, life insurance.

if it came packaged with the morgage read the contract see how much oyu pay and what you get... also check your insurance if it was all packaged they are likely ripping you off...

Life insurance does it include critical illness? if not I would change the policy (not sure if life insurance usually covers critical illness...) if you are diagnosed with the worst you may live for 10 years unable to work...

 

[Swampyseifer]

why not jsut stay there and keep paying?

Well TBH it was nice when we moved in, it felt like our own place and all that...but after nearly two years the annoying things about it are really.....annoying!

Having to go out my front door, through another door, down stairs and through another door...just to get outside.

Not having my own postbox and hoping that delivery men can find my door, out of all the doors into various sections of the blocks and different buildings.

Often a lot of the security doors into the various blocks arent working

The "secure" parking door is often not working

All the neighbours are miserable, untalkative so n so's

A recent one thats annoying is that the land owners dug up a big patch of ground not far from our living room window...then left a huge gaping hole in the ground for 7 months...just to then come along, fill that one in and dig a great hole 4 feet away. No letters informing us of the work or what its for...

There's other things like a lack of a garden...and also we're sorta expecting that children are going to be along at "some point" and a two-bed apartment isnt going to have the space required.

if it came packaged with the morgage read the contract see how much oyu pay and what you get... also check your insurance if it was all packaged they are likely ripping you off...

Life insurance does it include critical illness? if not I would change the policy (not sure if life insurance usually covers critical illness...) if you are diagnosed with the worst you may live for 10 years unable to work...

it didnt come packaged...it was something that we were told to sort out and were given the details of an agent/company/thing that took all our details and went out to find us life insurance deals. Kinda amusingly the guy couldnt find a company that would insure either me or my wife as we were simply too unhealthy and not a viable option for a life insurance company to touch with a barge-pole.

*on a side note we have been making great roads over the last year to alther this tho, I've lost around 5.5 stone and my wife is nearly at 4 stone lost.*

 

[booyaka]

Out of interest - what happens after the 3 years if you decide to stay put?

Who is covering the other 50% of the property? The developers surely won't just hold 50% equity for ever so what happens??

You also MUST be paying some kind of "rent" for the other 50% that the developers own? They will want paying and won't just hold the equity as their part of the deal. What's happening with that part?

You SERIOUSLY need to re-read/get the paperwork and find out your options - Don't be so naive this time - You need to sort out your financial future or you could seriously end up in trouble.

 

[Swampyseifer]

Out of interest - what happens after the 3 years if you decide to stay put?

Who is covering the other 50% of the property? The developers surely won't just hold 50% equity for ever so what happens??

You also MUST be paying some kind of "rent" for the other 50% that the developers own? They will want paying and won't just hold the equity as their part of the deal. What's happening with that part?

You SERIOUSLY need to re-read/get the paperwork and find out your options - Don't be so naive this time - You need to sort out your financial future or you could seriously end up in trouble.

What happens....nothing I assume. The only difference is that from that point on, we would have to sell privately.

The other 50% is rented. We got a mortgage for half the property, and pay rent for the other half.

I do indeed need to read it more clearly. I'm going to make some calls this lunchtime to see if I can get anywhere with it