Reece Lipman is 33-year-old filmmaker who bought a one-bedroom new-build flat in Romford with shared ownership.
In January 2021, he and his partner decided they wanted to buy a place together. “We asked the housing association [which owns the remaining 75 per cent] how we could sell. That’s when we found out about the cladding issue.”
The developer has agreed to pay for the cladding to be replaced but Lipman and his partner are still unable to get a new mortgage. He was able to get a new two-year fixed deal back in July.
Lipman wants to know, as a shared owner, whether he could port his current mortgage to the new property, which won’t have shared ownership, or should he use some of the deposit he has saved up, pay off the shared ownership mortgage and hope he can find a cash buyer to buy his share?
The details
- Price paid in 2014: £150,000 (25% shared ownership of £37,000)
- Mortgage rate on a five-year fixed: 2.8%
- Monthly interest-only payments: £14
- Mortgage balance: £22,000
The advice
Colin Payne, associate director, Chapelgate Private Finance
Some lenders, such as Nationwide and Santander, appear to be softening their approach to cladding. For now, the first port of call should be your existing lender; you should then speak to a mortgage broker to compare options.
Most lenders will still not lend on cladding-hit properties; others are starting to relax their stance and may consider it if the building owner has agreed to cover the cost of the works and they have begun or, as in Reece’s case, will start within a reasonable time.
As regards Lipman specifically, there are some challenges for someone buying from him.
The property is shared ownership, which reduces the lenders available, and, with a 25 per cent share, the loan size may be below some lenders’ minimum levels. As the developer is paying for the work, this will open up options.
I don’t see the benefit in repaying the mortgage as early redemption charges are likely. If Lipman finds a buyer, some lenders may allow the rate to be ported.
David Hollingworth, associate director, L&C Mortgages
The recent assurance that leaseholders will be protected from remediation costs has given hope that lending on unsafe properties will be possible.
One lender stipulates they’d want to know that the building owner would foot the bill, seek assurances around safety, confirm work will be completed in a reasonable time and that costs won’t be passed on to the leaseholders.
As for porting the current mortgage to a new property, some lenders offer their core products to shared-ownership borrowers, whereas others have exclusive shared-ownership mortgages.
Nationwide would allow a deal to be carried across to a non-shared ownership property, whereas Leeds BS wouldn’t. However, the latter would waive any early repayment charge on the current deal and allow its current rates to be taken on the new property.
