I bought a stake in a shared ownership mortage and would now like to release the equity to buy another property, is this possible?

Posted on 19 October 2007

Hello, I bought a 25% (£80000) stake in a shared ownership property 5 years ago which was valued then at £320000. I'm remortgaging shortly as the 5 year fixed rate mortgage period is ending. I have a faultless payment record and credit history. I am interested in releasing the equity in my share- similar flats in the same development have recently sold for £480000. If I can I would like to remortgage for £100000 and use the excess to explore a buy-to-let in Budapest . Is doing this possible in shared ownership properties. And if so should I try to pay off any outstanding debt first(approx £4000 credit cards) or can I use released equity to do this?

Greg

Hello Greg,

What you are looking at here is another shared ownership mortgage, except this time for 25% of a bigger value. You are proposing that the property is now worth about £480,000 and you own a quarter of that so theoretically you should be able to get a mortgage of £100,000 (or £104,000 loan if you want to pay off the cards too) on a share value of £120,000. However, lenders are notoriously cautious of this sort of thing. Your first port of call is to contact The housing association, as it has to give you permission. After that, I would speak to your existing lender to see if they can help you (worry about the interest rate later). After that, try Abbey, Halifax, Leeds, Woolwich and Kent Reliance; or even better: have a broker do it for you.

One final note on consolidating the £4,000 of debt: if you do extend your mortgage and part of it is to pay off card debt, the interest charged on the £4,000 could be considerably greater as you spread it out over 25 years, or whatever term you take.  I recommend that you always overpay your mortgage by whatever you can, so that this debt is paid of quicker, otherwise you won't be in any better position in the long run.

Best of luck, Katie.

Category: Shared ownership

 

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