Hi, I am 27 and it looks like I'm about to buy my first property - a two-bedroom apartment in Cambridge - under shared ownership. I'd like to double-check how sensible a proposition it looks with you guys.
I am an Account Manager for a publishing company and currently earn £26,300 basic. My annual bonus this year (it's my first six months at the company) was around £2,100, but they can be up to £15-18k - although naturally I cannot expect these to be factored into my earnings by a mortgage company yet; nor should I depend on them (as you cannot guarantee you will always receive them).
So, I have close to £1,700 after tax going into my account each month.
I was investigating renting in Cambridge. Initially I was looking at a studio flat, but a decent studio, with clean, modern interior design and a Cambridge-central location is £700/month minimum before bills; and they disappear quickly. Very quickly.
I then decided to look at taking a room in a two bedroom place, as you can get a decent flat with modern design, good location and a balcony for around £1,200/month (£600 each) before bills; but that raises the issue of finding a decent flatmate.
I knew little about mortgages until recently, but I have a £10k lump I can access, so I looked at a 5% deposit scheme, which would open me up to a £200k property. However, the 3.5-5 times your salary rule would limit me to a maximum £125k mortgage - which is basically a shed in Cambridge.
Under suggestion from a family friend whose son has a shared ownership flat and has had a generally positive experience, I then investigated this option.
I identified that the local authority had a block of apartments about to become available under shared ownership, in a simply fantastic development in Cambridge centre, next to the station and several hundred metres from Microsofts new research centre. I really could not choose a more exciting location.
Unfortunately, I came in just under the eligibility criteria for a studio flat.
I could have saved to increase my deposit, but decided to speak to my sister, who is 24, has access to around £5k in savings and currently earns £18k (having received a £700 bonus this year). We get on very well; and Id happily live with her for several years.
Together, with our combined income of £44k before bonus and a £15,000 deposit, we have been approved for a 45% stake in a £325k two-bedroom apartment, which is therefore worth £146,250.
Rental on the 55% we do not own will be £409.64 PCM, with an £86.78 monthly service charge.
With a 10% deposit (£14,625) well then be looking at a mortgage of £131,250.
We used the broker recommended by the housing association, who has offered us the mortgage with Leeds Building Society. Its a Shared Ownership Fixed, which is fixed at 5.29% until 31st May 2016. From 1st June 2016, Leeds Building Societys standard variable rate, currently 5.69%, for the remaining term of the mortgage.
The form says the total amount you must pay back, including the amount borrowed is £248,131, which means you pay back £1.89 for every £1 borrowed; and the overall cost for comparison is 5.9% APR. (Although, the mortgage broker explained that typically wed look at re-mortgaging to bring this down?)
So, the 36 payments made whilst fixed will be at £799.46; rising to £828.36 under the current variable rate. Combined with the rent, thats just over £1200/month and £1280 with the service charge.
So, thats around £640 each before bills.
I understand there will be several K for the legal fees and 1% stamp duty, but £640 is cheaper than renting an equivalent property; and we can enjoy it more, decorate it and know were paying into a mortgage.
What are your thoughts?
Is this a reasonable mortgage?
Would you take this opportunity if you were me; and if not, why?
When we go our separate ways in a few years, can we easily get each of our halves out of the mortgage? Whether we sell and buy a new place each, or I buy her half out remains to be seen.
I can see this being a flat I'd happily live at for many years, so it may well be me buying her out eventually.
I am an Account Manager for a publishing company and currently earn £26,300 basic. My annual bonus this year (it's my first six months at the company) was around £2,100, but they can be up to £15-18k - although naturally I cannot expect these to be factored into my earnings by a mortgage company yet; nor should I depend on them (as you cannot guarantee you will always receive them).
So, I have close to £1,700 after tax going into my account each month.
I was investigating renting in Cambridge. Initially I was looking at a studio flat, but a decent studio, with clean, modern interior design and a Cambridge-central location is £700/month minimum before bills; and they disappear quickly. Very quickly.
I then decided to look at taking a room in a two bedroom place, as you can get a decent flat with modern design, good location and a balcony for around £1,200/month (£600 each) before bills; but that raises the issue of finding a decent flatmate.
I knew little about mortgages until recently, but I have a £10k lump I can access, so I looked at a 5% deposit scheme, which would open me up to a £200k property. However, the 3.5-5 times your salary rule would limit me to a maximum £125k mortgage - which is basically a shed in Cambridge.
Under suggestion from a family friend whose son has a shared ownership flat and has had a generally positive experience, I then investigated this option.
I identified that the local authority had a block of apartments about to become available under shared ownership, in a simply fantastic development in Cambridge centre, next to the station and several hundred metres from Microsofts new research centre. I really could not choose a more exciting location.
Unfortunately, I came in just under the eligibility criteria for a studio flat.
I could have saved to increase my deposit, but decided to speak to my sister, who is 24, has access to around £5k in savings and currently earns £18k (having received a £700 bonus this year). We get on very well; and Id happily live with her for several years.
Together, with our combined income of £44k before bonus and a £15,000 deposit, we have been approved for a 45% stake in a £325k two-bedroom apartment, which is therefore worth £146,250.
Rental on the 55% we do not own will be £409.64 PCM, with an £86.78 monthly service charge.
With a 10% deposit (£14,625) well then be looking at a mortgage of £131,250.
We used the broker recommended by the housing association, who has offered us the mortgage with Leeds Building Society. Its a Shared Ownership Fixed, which is fixed at 5.29% until 31st May 2016. From 1st June 2016, Leeds Building Societys standard variable rate, currently 5.69%, for the remaining term of the mortgage.
The form says the total amount you must pay back, including the amount borrowed is £248,131, which means you pay back £1.89 for every £1 borrowed; and the overall cost for comparison is 5.9% APR. (Although, the mortgage broker explained that typically wed look at re-mortgaging to bring this down?)
So, the 36 payments made whilst fixed will be at £799.46; rising to £828.36 under the current variable rate. Combined with the rent, thats just over £1200/month and £1280 with the service charge.
So, thats around £640 each before bills.
I understand there will be several K for the legal fees and 1% stamp duty, but £640 is cheaper than renting an equivalent property; and we can enjoy it more, decorate it and know were paying into a mortgage.
What are your thoughts?
Is this a reasonable mortgage?
Would you take this opportunity if you were me; and if not, why?
When we go our separate ways in a few years, can we easily get each of our halves out of the mortgage? Whether we sell and buy a new place each, or I buy her half out remains to be seen.
I can see this being a flat I'd happily live at for many years, so it may well be me buying her out eventually.