Own Home Scheme Pros and Cons

BigTA78

We are planning to use this scheme. We were originally accepted last year but we've had to wait as the Co-Op wouldn't OK our mortgage as I had just moved jobs and was in a probationary period. Luckily our original acceptance is still valid. We can buy a 3 bed as those were our original acceptance terms, although now the rules have changed and a childless couple are only allowed a 2 bed. We are planning on staying in the house we buy long-term, so the scheme makes sense to us. We can cumfortably afford the mortgage repayments and put money by each month to buy back the shared equity. Without the scheme we'd either be stuck in a one bed flat or potentially struggling with debt.

Imp

Be careful, these look very similar to the shared appreciation mortgages which were popular the last time house prices were falling.

They seem very good in the short term, but if you are buying a "forever house" you could find that after 25 years you cannot afford to move out of the house because you still owe the scheme 40% of the value of the house when you sell it.

Seems good if you can get the mortage, pay off the 20%-40% and get onto a normal scheme. Seems very bad if you cannot or do not pay off the 20%-40% part.

thinksaving

I thought this might be the best thread to try and find out from those of you that have had/has experience with trying to purchase a property with the help of the Ownhome scheme and problems that they've encountered.

If you could also let me know how you got around the "5%-10% deposit that needs to be paid by exchange" issue as described below when you are not putting down any deposit of your own??

The problem that we have come upon now is the fact that the solicitors say that a deposit of up to5%-10% is needed by the time of exchange (which apparently is common practice) and Places for People only pays their part one day before completion, which shouldn't be any less than at least 10 days after exchange to enable them to claim the money from the Corporation.

Fact is that this wasn't made clear to us from the beginning and we do not have money for a deposit, unless we "borrow" it from somewhere after which the solicitor will repay that back to us pending all funds are received by completion -but we do not want to "borrow" this money.

Places for People and the Co-Op said that they do not know of any buyers that couldn't go ahead with their purchase because of this. My solicitor is adament that potential buyers might just not be reporting these issues and that this is part of the conveyancing process.

Both Places for People and the Co-Op have been great but this legal clause appears to be a problem for us so if anyone have been able to get around this please advice.

Also remember to comment on any other problems (cons) experienced with this scheme so that we can start making others aware.

Many thanks

michael1983l

I can't believe all the negative replies about this scheme on here, the only thing I can assume is it is from bitter IFSs who are pee'd off because the government cut them out.

If you cannot afford a deposit there really is no drawback to this scheme, yes you owe them a percentage of your house but that is a win win situation. If the property value goes up you owe them more money, but hey who cares your share has gone up at the same rate too. If the property value goes down then so does their share so not a big problem after all. If you owned your own home outright you'd lose alot more.

I can honestly say that if you are renting then that is 100% of your money down the drain, those that oppose this deal either don't know enough about it or have alterior motives to put it down. I myself are on this scheme and I think its great, my property will very likely not drop any lower and I can pay the scheme off in 5 years meaning I will not incur interest. If my property value goes up then I am not bothered as in 5 years I would have paid £37,500 of somebody else's mortgage if I was renting.

I cannot lose, house prices up, down or the same.

Wickedkitten

Of course you wouldn't be bothered, because you will have the money in 5 years to pay off the equity loan before the interest starts kicking in. How many people do you think can manage to whip up 40k in 5 years that would be applying for this with no deposit and barely any savings?

michael1983l

Wickedkitten wrote: »

Of course you wouldn't be bothered, because you will have the money in 5 years to pay off the equity loan before the interest starts kicking in. How many people do you think can manage to whip up 40k in 5 years that would be applying for this with no deposit and barely any savings?

This is a non issue as far as I am concerned as if they don't buy the house, instead of having a 60-80% in something they will have a 0% share of the mortgage they have been paying a landlord for 5 years instead. I didn't think it was a difficult concept to understand, but obviously I was wrong.

Wickedkitten

michael1983l wrote: »

This is a non issue as far as I am concerned as if they don't buy the house, instead of having a 60-80% in something they will have a 0% share of the mortgage they have been paying a landlord for 5 years instead. I didn't think it was a difficult concept to understand, but obviously I was wrong.

You are going to have to pay to live somewhere regardless of whether it is rented or mortgaged so it is hardly "flinging money down the drain".

Whilst you are on about how much of the landlords mortgage you will have paid off in 5 years, how much of the actual capital will you have paid off on your own in that time as opposed to interest?

Why don't you tell them about the drawbacks of the scheme as well?

michael1983l

Wickedkitten wrote: »

You are going to have to pay to live somewhere regardless of whether it is rented or mortgaged so it is hardly "flinging money down the drain".

Whilst you are on about how much of the landlords mortgage you will have paid off in 5 years, how much of the actual capital will you have paid off on your own in that time as opposed to interest?

Why don't you tell them about the drawbacks of the scheme as well?

But you will have paid something into your own pocket with your own property. Interest rates are hardly high for the scheme once they kick in, and my mortgage is considerably lower than my rent meaning I can save the difference for the remaining share.

There are no drawbacks for the types of people this scheme is aimed for as far as I can see. The only drawbacks will be to those that cannot plan for the future. If you are organised from the off you should be able to deal with taking on their share over a 25 year period. If you cannot then you should never have taken the scheme in the first place. But in the same instance you will never be able to afford a house full stop.

Wickedkitten

michael1983l wrote: »

But you will have paid something into your own pocket with your own property. Interest rates are hardly high for the scheme once they kick in, and my mortgage is considerably lower than my rent meaning I can save the difference for the remaining share.

Your mortgage is considerably lower because right now the base rate is at 0.5%. Will it still be considerably lower if in 4 years the base rate goes up to 4.5%?

There are no drawbacks for the types of people this scheme is aimed for as far as I can see. The only drawbacks will be to those that cannot plan for the future. If you are organised from the off you should be able to deal with taking on their share over a 25 year period. If you cannot then you should never have taken the scheme in the first place. But in the same instance you will never be able to afford a house full stop.

Sounds like a pretty big drawback to me. How is someone meant to be able to plan on dealing with taking on their share over a 25 year period unless they have a crystal ball and know exactly how much they will have to pay back by the end of it?

michael1983l

Wickedkitten wrote: »

Your mortgage is considerably lower because right now the base rate is at 0.5%. Will it still be considerably lower if in 4 years the base rate goes up to 4.5%?

My mortgage is fixed at 5 years, even so when Interest rates go up so do the rents. Whats the difference apart from I am paying my mortgage instead of somebody else's?

Wickedkitten wrote: »

Sounds like a pretty big drawback to me. How is someone meant to be able to plan on dealing with taking on their share over a 25 year period unless they have a crystal ball and know exactly how much they will have to pay back by the end of it?

Does anybody? Is it that different to somebody who took out a 100% mortgage that were readily available not that long ago?

No matter how you look at it, to buy a house you will have to pay full price eventually, you can either delay that 10 years whilst you save a deposit, or use one of these schemes and save for your share whilst paying your mortgage intead of somebody else's.

It isn't that difficult to see the concept in this, the only ones that will run into trouble will be those that would never get on the ladder in the first place regardless and they in theory should be screened out in the application process either by the scheme or the lender.

They are not lending to people who cannot afford it, they are simply giving these people instant access rather than forcing them to wait ten years, in which time they could have paid a large chunk of their share of the mortgage.