Buying a home - 80% equity - good decision or not?

[firefly11]

We are looking at first time buying. We have 2 daughters and our family is complete so we don't want any more children. I don't drive due to having ADHD, and public transport is not good so our choice of location is limited to a very city centre/central spot, which means prices are high. MY husband can barely afford a 100% mortgage for a city centre location with his salary, although his job is secure and he's been at the same job for over 5 years and happy there.
We found a large 2 bed duplex apartment listed as 80% equity, priced at £88k, in the spot we want.
It is not new build and is quite an expensive area. These flats have been around for a while. The property owner is Jones Lang LaSalle. I'm not sure if they are just managing the place... don't think they built it judging by the age of the building. It looks like a listed building and beautiful inside in the communal areas. Lots of business, offices rentals in the same block and buildings around it. It is in the heart of the business district.

This is cheap considering most properties in this location will tend to cost upwards of £100k.
Also we have limited (but still very much appreciated) help from his parents to loan us money for a deposit but they will only help with up to £8k in value for this.
So this flat seems to fit the bill.
We have been renting for the last 5 years and pay about£540 per month but this location is a 20 minute bus ride into the city centre and buses are not cheap. I have to pay £2 per bus journey, plus we have to keep a car for driving to buy shopping and go to places as few buses serve this area.
So if we take a city centre flat we won't need a car. He works there too so can easily cycle to work. And I can take public transport easily if I need to sometimes go out of the city although there will be little need to do so as most services are already within walking distance if we lived there. The only places I can think of tht would require travelling would be to green spaces like nature reserves, national trust properties, because the city centre is devoid of those. Although it is right by the scenic docks and river so offers that scenery.

I just wonder if shared equity is suitable for us. Have booked an appointment with the agent for viewing today. I wonder if anyone has suggestiins for questions I should sk the agent about the flat. I love the flat. It seems perfect for us. But I am not too familir with shared equity property buying... I just know that it involves paying rent for the unpurchased value of the property to the developers and you have the opportunity to buy it at 100% in a few years... We have no plans to move away and will probably be here for the long term.

Anyone can give any advice? Would be much appreciated :-)

OH yes forgot to add that service charge for this apartment is £135 per month.

Sorry for typos... typing on a touchscreen

Have you worked out how much you would be paying each month with the Mortgage, rent, service cahrge and ground rent?

My DH and I looked into this years ago and it worked out that we would be paying more each month than we woudl if we actually got a mortgage for the entire value of the property. Mind you we were looking in Central London.

Yeah I used the BBC Mortgage calculator... so deducting the 8k deposit his parents lend us, we need an 80k mortgage, 25 yrs, 6%, and that works out at £521.51 a month.
Add service charge £135 and council tax £127 a month would be £ 783.51.
I have no idea how much the rent payable for the unpurchased 20% of the property would be... could someone explain how that works. Or give me an idea how much it might be.
Hmm...
Right now
We are paying £540 per month rent and £84.78 per month in council tax, which equals £624.78.

I don't think we will be spending more on utility bills if we move into the city centre flat as we are currently also living in a rather large 2 bed just outside the city centre.

Worth asking both how much is the rent, and is it possible to buy more of the flat over time. And service charge terms - how much can they go up, can there be extra one off charges, etc.

Now DH is not convinced shared ownership is the way to go because of hearsay from colleagues.
He thinks it must be a desperate situation for us to take it up.

Does anyone know if its possible to try and purchase 100% of the property outright from the start even though its advertised as 80% shared equity?

I think if it is advertised as shared equity, then that is the way it must be sold.
However, normally you should be able to purchase the rest at a later date. Ask would the remianing 20% be valued at today's purchase price or the market value at the later date. What happens if the market value of the flat decreases? Will the price of the 20% reflect that or is there a minimum amount (maybe today's value)

I am in a shared ownership flat, it's the only way we could get on the property ladder. However we have been in it for two years and are saving towards a deposit to be able to buy the rest so that we will own it 100% (with mortgage)

If it's the ideal area for you it might be the right thing to do if it's all you can afford in your ideal area If you can stretch to getting a "normal"
The agent selling it will be able to tell you what the rent on the remaining 20% is so you can see if it works out financially for you.

As for your DH's colleagues, shared ownership isn't always ideal especially at the top of the market or if the developer could run into financial difficulty, but with Jones Lang LaSalle beign one fo the biggest property developers in the world I'd feel a little more secure about dealing with them.

Definitely find out how much the rent is, it could be a lot more than you anticipate.

You may be able to get a lower interest rate than 6% on an 80% mortgage though which would help offset the rent.

I wish I could find a shared equity mortgage calculator online that is for private developers and not Housing Associations. The only calculator I found is here http://www.newlonhomeownership.co.uk/mortgagecalculator/default.aspx

But that is not exactly a Housing Association nor a private developer.

Its interesting what you said. Autumn, regarding lower rates for 80%. I used the calculator here http://www.newlonhomeownership.co.uk/mortgagecalculator/default.aspx for the property we are looking at. Although there is no option for 80% equity, there is 75% equity option, so I did the calculation based on that just to give a ballpark figure.

The monthly repayments worked out really low for us, nearly a hundred quid less than our current rent.

It seems that they calculated less mortgage repayments per month than the BBC Mortgage Calculator or any other standard online mortgage calculators, which I presume are for 100% equity mortgages. So I'm wondering... Which figures should we rely on? Because standard calculators would have us paying just over 500 quid a month on mortgage alone, yet that shared equity mortgage calculator run by a charity that provides homes for North Londoners gives us a mortgage repayment calculation of just over 400 a month.

It makes a big difference and will probably swing our decision.

Thanks to takingthestairs for your input. Its nice to hear positive accounts of shared equity schemes. I really think the flat is the right one. DH however will be more influenced by his home owning colleagues' hearsay ... Read : middle aged men who bought their homes 20 to 30 yrs ago when it was cheap and reaping the benefits of inflated house prices years later...

I probably wouldn't rely on any calcultors online to be honest!
The company who are selling the property will be able to tell you how much the rent is. They may also be able to give you information regarding the mortgage as they may deal with a specific lender.

For an 80% mortgage I would expect that you could get a 3% repayment mortgage.

Thanks autumn for the mortgage advice. We went to view the flat. Husband wasn't impressed by the ceiling height of the bedrooms, which are really low our existing wardrobes won't fit. But the agent said they are not charging any rent for it. If we bought it we will always own the 80% of the flat. And we can pay the 20% anytime in future if we wish to purchase it outright. Anyway no chance of buying it now with the ceiling problem. Husband has been looking for other city centre flats. He also applied for a mortgage quote from his bank today just so we can be prepared in case we need to make an offer quickly if there is a flat we like.