Unsustainable Shared Ownership Mortgage

B

bd1

Registered User
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Hi Everyone,

I have a Shared Ownership mortgage with Dublin City Council since 2006. I am currently employed but facing possible redundancy and it’s likely I will need to move abroad in order to find work.

This leaves me in a bit of a bind as I have been told by the council I am officially not allowed to rent out my apartment. Even if I was allowed to, the rent I would get would not even cover the monthly repayment (mortgage and rent).

My liability in terms of the mortgage part I understand and accept but I’m confused over my liability for the rental portion. It appears I effectively signed a 30-year rental agreement.

As such, I need some advice as I can’t see any way of dealing with this other than handing back the keys which I really don’t want to do as I know it wouldn’t end there anyway.

I need to find out exactly all my options so I can make an informed decision about what to do. I would be very grateful for some non-judgemental advice from people in the same situation as me.

Purchase Price: EUR220,000 in 2006. 50% Mortgage and 50% Rent
 
Your options are very limited since DCC (unlike Fingal and SDCC) is sticking to its official policy that people are not allowed rent out their properties if they are the mortgagee. Sadly DCC is taking the approach that they would rather make arrangements for unemployed borrowers to reduce their mortgage payments for a period of time than change their official policy.

You could do it on the QT and as long as your mortgage keeps getting paid and your tenants don't engage in anti-social behaviour, DCC probably won't do anything about it. Personally I wouldn't consider this an option but a lot of people are doing it and DCC is fully aware of it and mostly turning a blind eye.

At the moment I think the only way to do it on the up-and-up would be to transfer from Shared Ownership to a full mortgage, and take out that full mortgage with a private lender rather than the Council. But if you're facing redundancy that might not be an option for you, either.

Alternatively some smart lawyer might be able to make a case that this policy is effectively keeping you unemployed, breaching your freedom of movement etc... probably a long shot but desperate times and desperate measures!
 
Thanks for the response Brooklyn, good point about the freedom of movement.You're right, I will need to seek legal advice due to the nature and inflexibility of the ‘loan / rental agreement’ it seems anyone who wants to or needs to move cannot.



I would have thought that due to property crash the council would be more flexible but it seems not. Have any of you in the same situation sought legal advice already or received a definitive answer from the council on the best way to exit the scheme?

If not, I’m wondering if anyone with the similar issues would be interested in getting together as a group in order to seek legal advice and to organise before contacting the council.

I did look into obtaining a full mortgage but was told in order to buy out the council’s 50% I have to pay them the full value as it was in 2006 meaning they take no hit on the price fall! I would need to take out a mortgage of approx 200K for a property currently valued at 100K which is impossible as a bank cannot lend more than a property is worth.

If I move and rent out the place it would only cover the mortgage portion and the monthly service fee and I would have to subsidise the rent. I could do this for a short period but over the long term it would be impossible as I will have to rent somewhere to live.

At present my monthly repayments are 500 mortgage and 500 rent. 500 per month rent over the remaining twenty four years would be approx 140K with no return. If I had a full mortgage (albeit with a higher monthly repayment) I would be able to justify that but the thought of paying rent for the next twenty five years for a place I wouldn’t even be living in seems crazy.
 
hi,

I am in a similar situation as you, have shared ownership house, I pay around 500 rent and 500 mortgage per month. I do not need to move out from this house but paying such a high rent is annoying me. I have contacted council on possible soultions; at the moment there is one option only: taking the loan from the bank and repay council, this as you mentioned above is not realistic due to the market value of the house (there is a big gap betweek current value and the money that needs to be repayed to council).

at the momemnt, there is not other option really (unless you have savings to cover the difference ...). But council / govermenet is working on the solution that would allow transfering to full mortgage with council (to avoid paying the rent constantly). They trying to change the law, as far as I know from them. I am in contact with them on the regular basis over the last 2 years regarding this but the only answer I am getting is that they still work on this. I do not know if they will allow renting the house.

hope this helps.
Skier
 
Hi Skier,


Regarding the rent, your post has made me realise that the rent issue affects everyone regardless if they want to move or not.



If the monthly rent figure was calculated and set at the time of purchase based on the then property value, it follows that when reviewed yearly it should have been adjusted downwards significantly in line with property values but it hasn’t. In the mean time everyone is paying much more rent than they should be as DCC is still charging rent based on peak property values and that is unfair.

I wonder, for those on agreed reduced payment schedules, has the rent been reduced or is it just interest only on the mortgage portion? If so, in effect they are in actual fact also paying the full high rent and not being assisted at all.


The more I think about this whole issue the more confused I get and the less sense it makes to me so anyone reading please comment so I can understand this better.

It’s Shared Ownership and that should also mean Shared Responsibility and Shared Risk for both parties. As a borrower I accept liability for half the loss in value but the council should be doing the same for their half and reducing the rent if it is connected to property value.

I know the reasoning behind Shared Ownership and it made great sense with stable or increasing property values. It wasn't designed to be long term but unfortunately there was a massive property crash meaning people are now trapped with no manageable way out.

I could deal with the concept of being a ‘Mortgage Slave’ for the time being as half the country is in the same boat but what I can’t accept is being a ‘Rent Slave’.
 
we could spend months and years sending posts on this... but without coordinated action to councils (or rather government) nobody will move any further. I have been trying over 2 years, contacted cork county council and ombudsman, and finally I got confirmation that somebody is doing something around that, i.e. they try to change the law to allow transfering to full mortgage, which in my opinion is the only option to not waste money on rent. I could also imagine that once you own a full ownership of the house, renting such a house should not be a problem anymore.
I can see that there are many "philosophical" posts around the shared ownership issue but no real actions taken.
Skier
 
Hi Skier,
I didn’t find many posts on this topic so I started this thread in the hope that others would share their knowledge.
I realised a while ago that Shared Ownership isn’t working but I just sat back in the belief that the council would take charge and do something to sort the problem. Now because of uncertainty with my job and the fact I may have to move means I’ll have to deal with this. I wanted to get as much information as possible before having to go and spend money on legal advice.
Excuse the philosophical posts but as I said I have only started to face up to the reality of the situation and for me it seems overwhelming as I honestly cannot see a solution.

You mention you got confirmation they are trying to change the law to allow transferring to full mortgage – have they said how exactly that might work?
 
Hi,

I contacted the cork county council and they informed that the Council is looking at the option of allowing people to buy out the rented portion of the shared ownership lease using an increased mortgage from the Council. I do not know what progress they made so far... no decision has yet been made on this.

similar solution is currently proposed by dublin city council (try google: Transfer to a 100% Mortgage dublin)

regards
skier
 
Thanks Skier and Brooklyn for the info


I’ll contact the council and find out how exactly transferring to a full mortgage will work. Last time I checked with them they told me in order to buy out their half I would have to pay the 2006 price. It would be great if that policy has changed.


I don’t want to be too pessimistic but they would have to significantly reduce the asking price for their portion given the value of the apartment is now around the 100K mark. When I took out the loan the value was 220K!



I’ll check and post on here what I find out. In the mean time, if anyone has any more information or feed back to share, please do.
 
The Shared Ownership Scheme was and is a terrible deal, but obviously for all of us commenting here it was effectively "the only deal in town" at the time. Dublin City Council do allow you to transfer to full mortgage (subject to approval), although it's still a pretty bad deal - apart from having to get a mortgage for the original full price, you have to pay their and your own legal fees, and still have to pay their mortgage protection insurance, which is much higher than you would be able to get privately. On the plus side you get your loan from DCC, you would never get a loan from a bank as the property is undoubtedly worth vastly less now than you paid for it, and the interest rate is the ECB rate.

If you're in a scheme other than the DCC scheme I suggest you get on to your local TD (not councillor, although probably best to also contact them) and point out that if Dublin City Council can do it they can do it. I imagine it's a huge benefit to a Council's accounts to have a property fully mortgaged rather than half-mortgaged, as it means they own a loan that is worth the full value of the purchase price, rather than half an asset that is worth a fraction of that purchase price.
 
dubgem said:
the interest rate is the ECB rate
Click to expand...

The interest rate is a variable rate. It's higher than the ECB rate (all mortgage rates are) but tends to track its movement - although not necessarily instantaneously, as has been discussed extensively on another thread here :).
 
I checked with DCC and in order to switch to full mortgage the policy has not changed. To take out a full mortgage the borrower must take it out at the initial purchase price.



I could never allow myself to take out a loan for more than a property is worth. I think it’s illegal for banks to lend more than a property is worth so how can this be allowed?



Hopefully anyone who was duped (through lack of choice) into transferring to a full mortgage and committing to even more debt than they already had will be able to appeal when all this is sorted out.
 
bd1 said:
I checked with DCC and in order to switch to full mortgage the policy has not changed. To take out a full mortgage the borrower must take it out at the initial purchase price.

Is this correct??? What would be the point of the council revaluing in order to give a redemption firgure?? Am I missing something??
Click to expand...
 
Yes Star, none of it seems logical, trying to rationalise is pointless and will only end up frustrating you (I speak from experience).



A start would be if they would assume responsibility for their half of the purchase price, instead of applying their loss onto the already burdened borrower and address the rental aspect.



This might allow many to work with them and renegotiate, in turn minimising future losses to the council. I won’t hold my breath though.
 
Lads,
I have just received another letter from CCC that my rent increases again, this is terrible.

Has anyone of you also received this letter? Did you hear anything about any changes in the legislation re shared ownership?

Skier
 
Skier said:
Lads,
I have just received another letter from CCC that my rent increases again, this is terrible.

Has anyone of you also received this letter? Did you hear anything about any changes in the legislation re shared ownership?

Skier
Click to expand...
Hi Skier, just got a letter as well, last month they lowered the payments and now this... called them today and talked to a guy,asked him are there any changes to deal with this problem? he said everything stays like it was, no chance to get full mortgage with them, cant rent out the house legally(if payments are made, he has no problem with this!?) cant change the parcentage, my is 60-40, being in negative equity; he said thats not their problem(after asking him maybe they can take some part of NE on their hands...) so we are stuck in this for a long time...me thinks...
 
Hi,


yes last month they decreased the interest rate on the mortgage part but now they in increase the interest rate on the rented equity.

I rang them today also, ... got the same information as you.

1. no transfer to full mortgage with council possible (to increase own percentage)
2. can't rent out the house
3. the rent we pay every month is calculated based on the initial rented equity that does not change therefore our rent will never decrease unless you pay some money to decrease the rented equity and increase own equity),

What exactly they said you about renting out the house?

thanks
Skier
 
I too got a letter from Dublin City Council today, dramatically titled:

URGENT RENTAL INCREASE

“Please note that the rental equity held by Dublin City Council on the above property has been adjusted in line with the rules of the Shared Ownership Scheme.”

It’s poor that they don’t advise the percentage increase or the increased rental amount; they just give the new figure.

Increasing the rent is madness, given how much people are already struggling. It’s as if they want the scheme to implode.
 
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