Affordable Housing

warrenaldo

Well thats where stephenp comment makes sense. Why would there be no clawback if it was sold for 150k. But if sold for 160k you would have to pay back 50%.

Ive confused myself now.

irlrobins

From reading discussions on other forums (askaboutmoney.com has a good AH section), if the purchaser stands to lose money on selling the house, the council is unlikely to ask for clawback.

For example in the case of someone selling the house for 160K they would owe the council 80K. This would only leave them with 80K to cover a mortgage of ~ 130K+. I doubt any council would do this, as the scheme is to help people, not screw them over. The clawback is a mechanism to prevent people getting into AH purely to make a profit.

Stephen P

I think I may (probably) have jumped the gun in my earlier postings. What irlrobins and warrenaldo are saying the clawback is 55% of the current market value that sounds more realistic. Its just when I rang the council yesterday they seemed to be very sure of themselves when I asked is the clawback 55% of the difference between the current market value and the price I purchased it at. I'm still waiting on clarification in writing though.
My apologies!!
I've also requested a redemption figure and a valuation on the property by the council, once thats done they'll give me a figure to clear the mortgage and clawback. It might be a possibility to rent it out once I've bought the council out??

warrenaldo

Once you have bought the council out - you can do what you want with it - including rent.

irlrobins

Once you've bought the council out you can do whatever you like with it.

Tony255

irlrobins wrote: »

From reading discussions on other forums (askaboutmoney.com has a good AH section), if the purchaser stands to lose money on selling the house, the council is unlikely to ask for clawback.

For example in the case of someone selling the house for 160K they would owe the council 80K. This would only leave them with 80K to cover a mortgage of ~ 130K+. I doubt any council would do this, as the scheme is to help people, not screw them over. The clawback is a mechanism to prevent people getting into AH purely to make a profit.

Ok here is the actual scenario with negative equity.

House was purchased for 150k and the MV was 300k so 50% clawback. If you go to sell the house and the MV is 160k you only need to pay the council back 10k not 50% of 160k. This is the law and is not up to the council to decide if they want to chase for the 80k. I think it is in one of the housing acts. If the value of the house drops below the MV at the time of purchase the council will take the hit, i have also confirmed this with the council.

Tony255

stephen p wrote: »

I owe roughly 140K, the apartment is worth in the region of 300K, we purchased it at 149K, 300K - 149K = 151K,
clawback = 55% of 151K = 83,050K,
total amount to buy council out = 140K + 83050K = 223,050K
I sell it on for 300K, clear mortgage of 223,050K (300K - 223,050K = 76,950K profit)

This is all depending on selling it. Its in a great location. Even if I get slightly less than asking price I still make some sort of profit.

Surely the clawback here is 55% of 300k and not 55% of the discount that you received from the council, otherwise they have just gifted you 75k which it what the AF scheme is against.

What was the MV according to the council when you purchased??

Stephen P

Tony255 wrote: »

Surely the clawback here is 55% of 300k and not 55% of the discount that you received from the council, otherwise they have just gifted you 75k which it what the AF scheme is against.

What was the MV according to the council when you purchased??

When I purchased it the market value was 333K, I reckon with the recent fall in house prices its worth between 300K & 310K. So if the market value now is lower than the market value when I bought it how much clawback do I pay?

irlrobins

149/333 = clawback rate of 44.7%

Assuming you sell for 300K you owe 134.23K.

starky

Tony255 wrote: »

Ok here is the actual scenario with negative equity.

House was purchased for 150k and the MV was 300k so 50% clawback. If you go to sell the house and the MV is 160k you only need to pay the council back 10k not 50% of 160k. This is the law and is not up to the council to decide if they want to chase for the 80k. I think it is in one of the housing acts. If the value of the house drops below the MV at the time of purchase the council will take the hit, i have also confirmed this with the council.

Is this mentioned in the contracts that I will eventually have to sign during the process for buying my Affordable housing unit? Or is it only mentioned in the legislation?

As a matter of interest can I ask what Council that you confirmed this with?

What would happen in this scenario:

Discount Purchase price 150K (FMV 300K)

Three years on you want to buy out the claw back and due to the mark conditions the property is now valued at 200K. does that mean it would only cost 50K to buy out the property from the council?

Afuera

irlrobins wrote: »

149/333 = clawback rate of 44.7%

This is the stake that the owner has in the property. The clawback is based on the stake that the council has in it and would therefore be 55% in this case.

irlrobins wrote: »

Assuming you sell for 300K you owe 134.23K.

55% of 300K would make it 165K.

The problem is that they still owe 140K on their mortgage so they would be 5K short of clearing their debts after they sell.

I know that the council can partially waive the clawback, so I'm guessing they would reduce the clawback to 160K here to stop the seller from making a loss. Maybe they might only request a clawback of 300K-149K=151K, based on the original purchase price? I'm not too sure if there are any practical examples out there of where this has happened before.

There might be more to it than just this as well. The selling price of 300K might have to be agreed upon with the council beforehand, or it may need to be auctioned off to prevent people selling way below the market value etc.

irlrobins

Where is the 55% coming from???

Afuera

irlrobins wrote: »

Where is the 55% coming from???

Clawback = Councils discount / Market price when purchased.
The council gave a discount of 333-149=184.

irlrobins

Ugh, I'm confusing myself. I should stop posting...

Afuera

irlrobins wrote: »

Ugh, I'm confusing myself. I should stop posting...

The whole thing about the clawback is quite confusing though. It will be interesting to hear what happens in practise. stephenp should get it in writing from the council before he proceeds with anything to avoid any nasty shocks.

Stephen P

Without having everyone confused I'll get the redemption figure and then the valuation and then ask them for a total amount (loan + clawback amount), as soon as I have more info I'll let you all know.

BTW thanks for all the advice & calculations

Tony255

read the last section on negative equity i hope this clarify's everything i got this directly from someone in the affordable housing section in dublin

irlrobins

That clears things up a bit Tony. Cheers

Afuera

Tony255 wrote: »

read the last section on negative equity i hope this clarify's everything i got this directly from someone in the affordable housing section in dublin

Thanks for posting that up Tony255.

This means that if there is negative equity the council calculates the clawback like so:
Clawback = Current Market Price - Affordable Purchase Price

If the market price goes below the affordable price then there is no clawback due.

That seems pretty clearcut at least.

In stephenp's case, it means that if he sold for 300k, he would have to pay a clawback of 300-149=151k.

Strangely though it also means that stephenp would get the same return if he sold at 149k as he would if he sold for 300k. If he wanted a quick sale all he has to do is put it up for auction, making sure that bids started at 149k. If a property is put up for public auction there is no way for the council to argue that it was sold below market value as far as I know.

Tony255

i forgot to mention that you should also keep in mind that if there are any structural additions to the house that have added value (extension, attic conversion) these are exempt from the clawback percentage. So if an extension added 20k to the MV of your home then this 20k is yours. House decoration is not exempt and is not considered to add value.

Stephen P

Thanks Tony! I was speaking to the council again today and they pretty much said what the PDF Tony posted said.

They said if the current MV is lower than the MV at the time of purchase the clawback % is reduced, they didn't say it would be current MV - purchase price, but when they do the calculations they will probably use that formula.

Afuera - you're probably right the amount of clawback will probably be 151K if the MV is 300K

joePC

Just got offered a 2 Bed Appartment - €250,000. If I go for the Shared ownership scheme will I get it for €125,000?

smooth operater

Hi joe,
Congrats on getting an offer, do you mind me asking where you were offered it?
I don't know much about the shared ownership tbh.

starky

joePC wrote: »

Just got offered a 2 Bed Appartment - €250,000. If I go for the Shared ownership scheme will I get it for €125,000?

You have two options to finance your affordable home.

1) Normal mortgage from the bank.
2) Shared ownership loan from the council

You already know what a normal mortgage is; it’s basically a massive loan. You borrow 225,000 or what ever it is and pay back 225,000 + interest over the course of the 30 years.

With the shared ownership loan it’s very different; firstly it’s a loan from the council and not the bank. You borrow 125,000 from the council just as you would from a bank, and pay it back with interest over 30 years. That is 50% of the cost of the property. The remaining 50% the other 125,000 is paid by the council. They then charge you interest of that money, this is also know as “rent”
At the end of the 30 years you will have paid off your (50%) 125,000, but you will still owe the council for the other half hence this loan is also gained the knick name 50/50 loan.
The best way to explain a 50/50 or shared ownership loan is that its half annuity loan half interest only loan.

You have the option to reduce the councils share by buying them out during a specified period of the year.

If you can at all manage it you are better to finance with a bank.

Daith

joePC wrote: »

Just got offered a 2 Bed Appartment - €250,000. If I go for the Shared ownership scheme will I get it for €125,000?

Yes but you'll be paying rent on the balance? My advice would be to mortgage as much as you can afford.

jdivision

Some councils such as Fingal offer mortgages

starky

jdivision wrote: »

Some councils such as Fingal offer mortgages

I don’t think that the council’s mortgages are realistic; even for their own AH schemes. For example the max mortgage you can get from DCC is 185,000 as far as I can recall. They only have a hand full of AH properties on the last news letter that you could buy for that amount.

Mufflets

Hi All,

I Just wanted to share my dilemma and see if anyone is in the same boat or can help.
The Ringfort development is administered by fingall Co Co and its big, consisting of over 150 houses.

I have been offered and accepted one of theses houses under the affordable ownership initiative (similar scheme to the affordable ownership except it moves a lot quicker but you get less of a discount/Clawback at around 27%)

Anyway the problem arose when my bank valued the house at 30K less than the councill did, (you get your own mortgage under this scheme)this was understandable since the councill valued the houses
over six months ago. but was a big problem for me as the bank would not mortgage the house as the contract stood with this inaccuracy.

I explained the story to Fingall and they are at present re-valuing the houses at Ringfort. i am one of the first to be offered a house there but they did say "We are getting revaluations done so i presume they are re-valuing others as well"

Anyway they are now proposing to revalue the houses but leave the cost price to the likes of me or anyone else out there who has been offered one of these houses the same. this would leave me/us a discount of no more than 17% which would be very unfair with every other development getting a discount of at least over 25%.

And possibly uneconomical ,with builders accepting offers of up to 15% less than market value on private developments with no mention of Clawback, or being tied to one mortgage provider etc.

I have written to the Councill to explain the above as politely as i could and pointed out that i ,or anyone else would be much better off waiting for the next development, in the hope that they will leave the clawbacks/discounts as they are make and it again a great deal to move to Ringfort.

I would ask anyone who is in the same boat to write a similar letter and/or to contact me (ill give you a copy of mine if you want).

All constructive suggestions welcome.

Cantab.

Mufflets wrote: »

this would leave me/us a discount of no more than 17% which would be very unfair with every other development getting a discount of at least over 25%.

Is a 17% discount really worth it? I mean, you'll be stuck in the same location for the next 20 years, there's a high risk of having social housing in your vicinity and you'll have to pay this "council fee" which is around the 2k mark according to reports.

Cantab.

Tony255 wrote: »

read the last section on negative equity i hope this clarify's everything i got this directly from someone in the affordable housing section in dublin

That doesn't clear up anything. It's someone else's interpretation of things.

Until it's in black and white in a contract and run through by a solicitor, I wouldn't trust those gombeens in the county council.