Buying out council clawback

B

bradfield

Registered User
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Hey All,

I bought a two bed terrace house in D15 5 years ago under the affordable housing scheme with Fingal County Council. The house at the time was worth 190000, I have recently got a valuation and redemption figure from the council which leaves me with 95500 equity in the house. I am proposing to remortgage releasing some equity ( leaving approx 50,000) to purchase a house down the country. The idea is to get an interest only mortgage on the property in Dublin and rent out the house for a few years, this would cover mortgage payments plus a couple of hundred a month at current rental rates.

I would be grateful for anyones opinions on the wisdom (or lack therof) of doing this?

B
 
Hi Bradfield,
I went down the route of trying to remortgage with the council but i would have to pay back the clawback which in my case amounted to over 100,000 which seemed crazy. I'm still toying with the idea of selling but not sure if you can rent out your property under the affordable housing scheme. You do realise to remortgage you have to pay the clawback?
 
Hello Rex,

Yes I know about the clawback and the council redemption figure factors that in so when I say there will be 95500 equity that is taking the clawback into consideration! Technically you are not supposed to rent out an affordable house, that doesnt stop some people and you can talk to the council about it if your circumstances change, they consider such requests on a case by case basis. If I remortgage then I will be severing my connections with the council altogether which is very attractive!

B
 
If you pay the clawback then the house isnt an affordable home anymore and you can do as you please with the house.
 
i bought council out clawback and all, the apt is now mine to do with it what i wish, i am now a private owner of my property. No ties with DCC whatsoever.
 
can i ask you why you decided to buy out the clawback, i have been thinking of doing it for a while but wondering what real advantages are there as i don't think i would be in a position to sell and buy another house after paying back the clawback
 
Hello Bradfield

Would you mind explaining for me what 'redemption figure' is? I am currently considering buying an affordable property and am very interested to learn what buying out the council will involve down the road. I'm guessing that the future situation for people now will be different to yours because properties now are likely to fall not rise in value.

Could you elaborate if you can as to how you approached the council about buying them out what the procedure involves?

As for taking out an interest only mortgage and renting the place out - you might get better advice if you post that query under mortgages, buying and selling...

Good luck with the decision making!
 
Chees!

The redemption figure is the amount you will have to pay the council in order to buyout the house in full. This figure consists of the amount of mortgage that you still owe to the council plus the clawback figure which is calculated on the basis of a current market value as evidenced by an official valuation from an IAVI valuer.

This also answers the question as to what you have to do in order to re mortgage, I am still in the middle of the process but initially (after speaking to people in the council housing loans section) what I had to do was provide the council with a current market valuation which cost me 121 euro. They in turn issued me with a redemption figure! I am now with a broker to see what alternative mortgage I can get! I will people know what other dealings I will have to have with the council!

B
 
Thanks for replying. I was afraid the council would set the market value again... stranger things have happened!!
 
hi bradfield,
please keep me posted on how you get on i too purchased a house in d15 nearly 6 years and very interested in whether it's worth my while to buy out the clawback. i would like to get equity on the house and buy something else and keep my present house and i think that's the only way to do, let me know how you get on.... thanks
 

Hey,

The redemption figure is basically the final figure that the council give you that will cost you to buy them out. So basically it would be what you borrowed from them, plus interest, plus claw back price, those three added together will be the redemption figure = what you need to give them to buy them out.

I think the situation will be the same even if price figures change, if your valuation is still higher than the original price they sold to you at you will still pay your full claw back to that figure, but if the price of the value is lower than what you paid, i think the situation is that you still pay the figure, but at the lower valuation. But i don't 100% know if that is the situation.

if you wish to buy the council out there is a number of things you will need first. First you MUST be in the property a year. Secondly, you will need to have the apt valued by your own valuer, plus the council will send out someone to value also (to match yours) then you must get the redemption figures from the council to be able to go to your local bank/building society to buy them out.

It is easier to sell your property with affordable housing and pay them out that way, that to buy them out. But the longer you leave it if the price of property goes up, you will pay more back - mind that doesnt seem to be happening at the moment.

Any other questions, fire ahead.....
 

Rex, unfortunately you can't rent out your property with the affordable housing. If you did so, you would be going against your contract with the council, and i'd double check what the consequences of that are, but i doubt its nice.

If you sell or buy them out you are still paying back the 100k clawback figure, only difference with this is, you own the property if you buy council out and u pay the 100k then too, (however its then yours privately,and u can rent it out)
You sell the property and pay the 100k clawback, and be done with the apt altogether. Maybe you might make a small profit depending.

Reason i bought the council out so soon was cos my circumstances changed re: Partner wanting to buy with me, and it meant that in the future that i could sell or rent if i really wanted depending how the market went, that i was no longer stuck in a situation where i didnt have a choice, It was only a personal reason to buy them out and that was for my own peace of mind in knowing i now privately owned my apt to do with what i wish.
 
thanks clongriffin yes i know i can't rent it out that's the reason i would be thinking of paying the clawback and keeping the house to rent out and buy somewhere else but not sure if a good idea in the current climate. having said that there are a few houses in my estate that have never been been lived in by the owner and have been rented out for years but i don't agree with that and i think the council are clamping done on this.
i'm still in 2 minds whether to sell my house but waiting to see if the market will pick up.
 

Ye i hear you, it depends, personally i'm in my property just under 2 years, but i'm going to hold out in selling for another year, maybe year and half, reason being because how the market is at the moment. I'm in no rush to sell, and i dont want to sell the apt and not make a bit of a profit on it. Chances are you're not going to loose out on much as you got it at a low price in the first place even wtih the claw back your still talking about making some sort of profit rather than loss, however its more a decision you'll prob have to make on that one. U could buy them out, then rent the place out (rent market is fantastic) that way u can sell it when u like also, plus make the money from rent.

My personal advise would be, if you are in no rush to sell the property then hold out until you need to, reason being is, at the moment, you'll need to sell low to sell, and its not worth it, however wait till end of thisyear and i guarantee the house prices will rise to a normal level, i dont think they'll ever go to what it was like before, no way, but it will get better.
 

Clongriffin, is this when you have got your mortgage from the council you must pay them back the mortgage too? What if you have borrowed from a bank or building society, can you keep this mortgage and then pay the council just the clawback amount?

My own situation is that my original offer letter in Dec 2007 valued the property at €240,000 with a purchase price of €182,000, giving a clawback of just over 24%. However the sale hasn't gone through yet, and the council have revalued the property at €200,000. Purchase price is still the same. However the clawback is now only 9%. This is only €18,000.

If you have have to wait a year before you can proceed to buy the clawback, could you then keep your current mortgage and (if you are lucky or rich enough!) just give the council a cheque for €18,000 (+ legal fees) and you would have full ownership of the property? This scenario assumes the market value stays at €200,000.
 
hi all,
very intersting post....I have a Afd home financed through shared ownership. The market value of home was 275,000 when i bought it in mar 2007. I bought it for 206,000 , thus giving me a 25.09% discount. I got a 60/40 shared ownership deal through the council meaning i have a mortgage for 124,352 and the council's rental equity at the time of purchase was 83,248.

I really want to change this situation as I dont feel in control of my own home! I was on to the council and they said it was possible to do a 99% purchase/ 1% rental equity under shared ownership. Has anyone done this? whats the pros and cons? Would I be better just trying to buy their whole rental equity out so I just have a simple affordable home?

I am still a bit confused about my options so any help/advice would be greatle helped.

Thanks
 
Hey Bradfield,

What you propose to do is very common these days. You can refinance the house with a lender, buyout the council incl clawback, release equity and use that as a deposit on your new home.

The lenders will look at the potential rental income of your property, and will want approx 1.3 times cover for the interest only repayment. If there is a shortfall they will take your income into account.. if there is a big shortfall it might affect your borrowing ability to purchase your new home.

Drop me a line if you would like more info

Brendan
 
A quickie in relation to renting if you have an AH, I believe the government brought in some tax relief that allowed a person rent out a room in their house up to a certain amount within a year....now if that was a given for all houses, surely no one could stop you doing it with an AH house?! So I figure renting, if a room in the AH then it would be above board...have I ever asked the council for fear they would say that's not the case....em no I haven't asked...and yes that's why! Hate, hate, hate clawback...20 years is too long for a person's life not to change somewhat...what if you have a one bed, surely in time things will have to change! Should leave rant for other section...yes I know.
 
I am interested to know which county council lowered the value of your property because the sale was delayed for a long time. Have you signed something already related to the clawback figure?
 
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