I have searched through various threads and while I found this mentioned in one I did not see a definitive answer.
Does anyone know if you can get in to negative equity with affordable housing? If a property increases in value or stays the same you are liable to pay clawback to the council.
However, if the property falls well below the market value is it true that you would be liable for the remainder of your mortgage only and not the clawback? For example:
- you buy a property at a third of its market value (200k instead of 300k)
- if you go to sell after 5 years you would normally be liable for 33.3% clawback here.
- there is a price crash after 5 years - the market value falls to 200k
- you can sell the property, repay your mortgage and not have to repay the clawback?
Is this safety net really in place with affordable housing? Seems too good to be true?
Any info or referrals to official docs would be very welcome.
The council wiil still get their % clawback regardless of how much the property is sold for... (assuming it is sold within 20 years, % clawback reducing by 10 % for each year after year 10)...
Property bought for 200,000 Euro
Market value is 400,000 Euro
% clawback is 50%
9 years later...mortgage completely paid off
Property sold for 200,000 Euro
Clawback to council is 50% OF 200,000 = 100,000 Euro
Loss = 100,000 Euro
(c) Where the amount payable under paragraph (a) would reduce the proceeds of the sale (disregarding solicitor and estate agent's fees and costs) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.
Are we any closer to understanding as to whether there is a chance of negative equity on an affordable home?
My take on things is this:
Buy apartment for 200k with affordable housing
Market value day 1 = 300k
Clawback = 33%
Market value some time in the future = 190k
Clawback 0%
Total losses incurred by purchaser = 10k.
Basically, as the market value of the apartment falls, so does the clawback until it hits 0%.
I talked to my solicitor about this today and he laughed at me. he said house prices/apartments won't come down to the price that were paid for them under the affordable housing scheme. If the price is just slightly over what was paid for it then a certain formula/algorithm will probably be worked out by the council. And they will probably get all profit as they are still making a loss.
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