Shared ownership/equity is a scam.

brit1234 wrote: »

This thread is shared ownership/equity is a scam. It includes both schemes and refers them as both scams.

I believe they are both scams as their effect is to artifically prop up house prices much like the US sub prime, option arm and alt A mortgages. Its all the same scam to make money for the builders and the bankers at the buyers expense.

Yes I realise there is a clear difference between shared ownership and shared equity, however the media in most of the articles I have posted have also bounded both terms in the wrong incidents.

However both are still scams to get people to over pay for housing. Without them property I am sure would be cheaper.

I don't disagree with your general sentiment, re: a way to prop up high house prices.

What I do disagree with, is calling it a scam.

If it's a scam to prop up prices, then so was lax lending, so was BTL, so was 100%+ lending, so is SMI etc etc etc.

A scam, suggests that the person buying gets nothing in return, or gets a product that is not as described. That's not the case. In most cases, people get a home which they would otherwise be unable to afford, often for a cheaper price per month than renting, with a secure tenancy and a stake in the house / opportunity to at least start on the path towards buying a home. With the opportunity of staircasing, although costing more over the time period than it would to buy a house at 100% ownership, it gives another opportunity to make a further step towards total ownership.

I do take issue with shared equity, but again, my issue isn't so much with the (now removed, I believe) government homebuy scheme, but rather with the builder schemes.

With the builder shared equity schemes, I will agree with you. Can't agree they are a scam, as you get whats described. But can agree that the sole reason for the new shared equity schemes is for the benefit of the builders, with a costly price paid by the homeowners. With these schemes, the buyer is pretty much guaranteed to be in negative equity from day one, with interest ticking up on a loan almost inevitable.

Lumping all schemes under the umbrella scam is what gets my goat. None are scams. But each scheme has it's downfalls, and also positives. I agree, the lastest invention by builders is merely a way to prop up prices and to help builders only, with false spin laid on to make it look good for buyers. Basically, it's a desperate last ditch attempt to keep house prices, or at least the ones they are selling, high, and lay all possible downfalls on the buyers lap.

Wickedkitten wrote: »

They have a 94k mortgage, they are getting 98k for the house, and they still have to give Bellway 17k of the selling price. If it wasn't shared equity, they would be 4k up.

Erm, if it had only been valued at the cost of the element they covered with mortgage & deposit, maybe.

It was valued, as they knew at £145k. If, just if, they had bought it outright at £145k, and they had now sold at £98k, they would have an outstanding debt of £47k (assuming the £4k difference between their mortgage and the sale value was their deposit).

As it is, partly due to what I assume is a shared risk element to the shared equity, they are faced with just a £12k difference. A HUGE saving of £35k Thanks to Shared Equity!

They must be idiots to blame shared equity rather than their own purchase of an over-valued property and their failure to plan ahead. :cool:

Even if shared equity works out as planned, ten years down the line you are faced with raising tens of thousands of pounds; in the one we looked at, £40,000. Despite us both working, there is no prospect we could save that, which means putting it on the mortgage. Just when the difficult early years are behind us.

The mentality being pushed by the saleswoman (who informed us the cheaper houses advertised had just sold and prices just gone up), was that "something will turn up" in those ten years. Well, so far nothing has.

But that phrase does have a familiar ring:
http://en.wikipedia.org/wiki/Wilkins_Micawber
Something will turn up.

Having said all that, and despite believing shared equity and shared ownership are designed to prop up inflated prices, I wouldn't forbid others from going down that route if it was right for them. But I would beg them to think about all the possible pitfalls.

Orpheo wrote: »

SMI is a licentious giveaway of public funds to unemployed debtors. It is scamming the taxpayer. SMI is a SCAM needs its own sticky thread.

Why hasn't this thread been stickied yet?

I trust you would same the same about HB/ LHA also?

Out on a limb: why one man regrets getting involved

Miles Brignall
The Guardian, Saturday 20 October 2007

One man who wishes he'd never got involved in a shared ownership scheme is Peter.

He and his partner - who, as a teacher, is a key worker - are thinking of selling the 25% share they bought in a two-bed, riverside flat in south London.
"We've been living in lovely flat that normally would have been well beyond our means, but the downsides have been huge. The association has shown almost no interest in problems with the property or the residents.

"None of the key workers has a good word to say about the housing association - we all feel they have left us on our own to deal with problems as if we owned the whole flat - even though they own most of it and we pay them rent."

The pair, who don't wish to be identified, also say they were unaware that they would have to pay all the associated costs that go with occupation - even though they only own a quarter.

"I suspect that we paid slightly over the odds in the first place, although I can't be sure. I don't think it has gone up in value over the past three years. Once you add up the rent, the mortgage and the service charges, we are paying more than £1,100 a month, which isn't exactly cheap."

The main problem with shared ownership, he says, is that most people doing it simply can't afford to buy a bigger stake. "If they could, they wouldn't be buying shared ownership in the first place."

He suggests that the other fundamental flaw is that almost all the properties are one or two bed flats. "Many couples who moved in were childless. Several years on, everyone needs to move as they have had children. The fact there are very few three-bed houses on offer means that shared ownership schemes are simply delaying the exodus of key workers out of London by a few years," he adds.

http://www.guardian.co.uk/money/2007/oct/20/moneysupplement.firsttimebuyers