FTB needs advice on part buy

MORPH3US

ight, firstly, apologies if these questions are stupid or impossible to answer, as above, myself and gf will be FTB so very new to all this.

At the moment we rent a flat for £360 a month. Thinking of moving cos flat is damp and contract up in end of Jan. We found a new flat which looks nice, same price.

However we would ideally like to buy because we see it as money down the drain renting (although don't want to open that argument again!)

My question is:

are the "buy 50% of a house" deals worth it. I.e. buy 50% and rent the other 50%? I have just seen a 3 storey town house on that deal which looks nice. Should mention money here, 50% share = £85,000 At the moment we have zero deposit and about £5,000 to pay back on loans + student debts. We both earn about £20k a year in our stable (touch wood) jobs! I think we could scrape a 5% deposit on the £85,000 from parents and money we were saving to pay off debts although maybe not because I think we would need this to pay fees etc!

The other options are to carry on renting and then get a deposit together eventually, or buy a 1 bed flat for a similar price as the 50% share on the bigger house!

Any comments or advice?!?

Thanks

M

houndour

Hi,

I've been doing my research on shared ownership schemes and I'm still yet to make up my mind on them.

The biggest thing to do is read the small print and ask lots of questions.

We just looked at our first offer for a shared ownership house. It's worth £173000, 72% share meaning we'd pay £124000 for it. The rent was £36 a month and there were maintenance charges of £60 a month.

Every scheme may be different and these might be some things you want to ask:

• Are there maintenance charges? How much? and what do they cover?
• Who is responsible for what? For example you may be responsible for internal decoration. The 'landlord' may be responsible for external decoration.
• Can you buy more shares of the house in the future? And at what kind of increments?
• Can you potentially buy 100% of the house?

So the positives are that because you mortgage is under £120k theres no stamp duty. It's usually affordable. You probably get a bigger house or at least in a nicer area than what you could afford if buying 100%.

The down sides: maybe not allowed pets. May need to ask permission to decorate. Will prob definitely need to ask permission for anything structural.
Everytime you buy more of a share you will (i think definitely) have to pay for a re-valuation.

Hope that helps

ivegotabig1

there may be no alternative for you, but in my opinion, there not much cop,not the ones ive looked at anyway, in the long term property prices are heading south, no question, our buoyant economy has been based in large part on this relentless growth, these schemes are just a lame attempt initiated by the government to fend off the reverse in property prices....which....as i said...is goin to happen at some point anyway....

mercurystar999

i have purchased a house in this way over 12 months ago now. I don't know if you know but the house has not got to be allready on the shared owbnership scheme. I have got nothing but praise for the scheme for it has given us our foot on the ladder. We would never of got a house of this size any other way.

As far as i can see there are no bad points, you get to live in a house that you do own, we have no communication with the housing association at all, we can do pretty much what we want to the house.We can buy more shares as and when we want, there are no maintanance charges.

I have a friend that got a house on the shared ownership scheme 6 or 7 years ago, so i can't see where the above post has got the idea that its a government way of keeping house prices up.

My wife and i were waiting and waiting for the supposed crash or even slight reduction in house prices but nothing has happend yet. I live in Hereford and our house is worth another £10,000 on what we paid last year. Even if it did go down we could then buy the rest of the house from the housing association, for less than they paid as they have a legal obligatioin to do so. I checked this out with my solicator while it was going through.

zag2me

ivegotabig1 wrote:

there may be no alternative for you, but in my opinion, there not much cop,not the ones ive looked at anyway, in the long term property prices are heading south, no question, our buoyant economy has been based in large part on this relentless growth, these schemes are just a lame attempt initiated by the government to fend off the reverse in property prices....which....as i said...is goin to happen at some point anyway....

Sureley that makes them even better?

A shared ownership property in a decreasing market is an excellent investment as when you do want to buy the extra 50% it will cost you less, as its based on market valuation at the same time.

Now for my question. Do you have to be a first time buyer to get on this scheme?

mummytofour

http://forums.moneysavingexpert.com/showthread.html?t=125818

That thread is also useful.

I have had S/O for almost 7 yrs and IMHO I would use it as only a very last resort, we did, its was that or homeless.
I have posted my views on the other thread.

Vxx

mummytofour

zag2me wrote:

Do you have to be a first time buyer to get on this scheme?

Not always, it depends on your case in our case we had been owners, then renters then homless (hostel were just about to chuck us out) so as we were in hostel accom we were given max points (yes they work on a points scheme).

However my now beef is we are over crowded, but as we are classed as owners the council wont help us and the H/A have said tough... We would have a lot more tied up in the house if we had not spend so MUCH on doing work to it... maybe then it would be easier to move on.. :mad:

indiegirl_2

I'm exchanging this week on a (massively delayed) shared ownership flat. Where I live (Milton Keynes), it is a very popular scheme and many people have bought and sold this way. With house prices the way they are, it was the only way I (and my sister, who bought her S/O house two years ago) could get on the market.

You don't need to be a FTB to get one. However, you may need to be registered with your local council for S/O - or certainly registered with the Housing Associations (I had to be for mine).
Although the schemes in various areas of the UK will differ, the principle is the same. Some schemes are only open to Keyworkers though.

The way I see it, if you're renting at the moment and can stretch to afford the mortgage, rent, maintenance and insurance charges, then it's a step on the ladder and any payments you make are towards your mortgage and the ownership of your own place.

houndour wrote:

Every scheme may be different and these might be some things you want to ask:

* Are there maintenance charges? How much? and what do they cover?
* Who is responsible for what? For example you may be responsible for internal decoration. The 'landlord' may be responsible for external decoration.
* Can you buy more shares of the house in the future? And at what kind of increments?
* Can you potentially buy 100% of the house?

So the positives are that because you mortgage is under £120k theres no stamp duty. It's usually affordable. You probably get a bigger house or at least in a nicer area than what you could afford if buying 100%.

The down sides: maybe not allowed pets. May need to ask permission to decorate. Will prob definitely need to ask permission for anything structural.
Everytime you buy more of a share you will (i think definitely) have to pay for a re-valuation.

* We pay maintenance charges which covers us in the flat, and also incorporates the service charge for the maintenance of the communal areas of the flat. As an example - my sister's boiler broke down the other week and her HA dealt with the repairs.

* The flat is ours in terms of ownership - ie we are able to treat it as if it was our own. Therefore, we're responsible for the maintenance, decoration and upkeep of the flat itself, anything outside the flat is our Housing Association's responsibility.

* Buying more shares in the property is known as staircasing. Almost every S/O scheme will allow you to do this, although in most cases you aren't able to staircase until you've been in the property for at least a year.

The Stamp Duty is a slightly grey area. Even though your mortgage would be under 120k, you are responsible for the stamp duty on the full valuation price of the property. However, you have a choice. You can either:
1) pay full stamp duty on intial purchase, and not pay again when staircasing.
2) pay the stamp duty on your purchase, and then pay again when staircasing.

For example: my flat is (laughably) worth £162,500. My 50% therefore is £81,250 - I can either pay £1625, or £812.50 and pay again when staircasing.

Indeed, anything structural that affects the property has to be granted permission before anything is done... so even having a Sky Digital dish has to be 'approved' before I can get one installed

The way I've viewed it is that a S/O place will always sell (well, certainly in MK), and even if house prices stay the same, you'll make money because you're paying off a mortgage on the place.

MORPH3US wrote:

At the moment we have zero deposit

Ahh. This is where your downfall may be . The main problem I found was that there aren't many banks/building societies who will lend on an S/O. The few that did, would only lend 95% LTV - so you'll need at least 5% to put down.

The other thing I should mention in this essay(!!) is that some other lenders will not lend on low shares. Some schemes here in MK (the Keyworker schemes, I've noticed) sell anything from 30% shares upwards. Nationwide will not grant a mortgage on anything under 40% of the purchase price on a S/O scheme (Abbey will lend down to 30% but they were the only ones I found).

One final thought - I'm buying a new build property - if anyone reading this is also thinking of a new build S/O - ask what you get in the property. Most HA's won't give carpets / flooring, and some don't supply ovens / hobs - you will need to factor this cost into your budget when purchasing. Also factor in for delays - my build has been delayed in total by 5 months now - which has cost me in extra rent for those 5 months!!

If you (or anyone reading this thread) has any questions, I'll be glad to help out because I've been through the minefield of researching it all and am now going through the minefield of buying!

follyfoot

mercurystar999 wrote:

i have purchased a house in this way over 12 months ago now. I don't know if you know but the house has not got to be allready on the shared owbnership scheme. I have got nothing but praise for the scheme for it has given us our foot on the ladder. We would never of got a house of this size any other way.

How does one go about buying a house not on the shared ownership scheme? who should i approach if i was interested in this scheme?

mercurystar999

I went through a mortgage advisor at countrywide when we first started looking at buying a house and she recommended the scheme to us. She had all the forms and everything we needed to apply.She also said that we bought, we were told that as we were a couple with no childeren we would only be able to apply to buy a 2 bedroomed home up to £120,000. After talking to the housing association they said that we could have any sized home up to £120,000. We ended up getting a 3 bedroomed with an extension on for that. We were quite lucky as the previous owners were desperate to sell.
I must say that it went on for a long time, the house had to have a detailed survey done and anything that was wrong with it had to be rectified before they would buy with us.

Your local housing association would be able to point you in the right direction.

follyfoot

mercurystar999 wrote:

I went through a mortgage advisor at countrywide when we first started looking at buying a house and she recommended the scheme to us. She had all the forms and everything we needed to apply.She also said that we bought, we were told that as we were a couple with no childeren we would only be able to apply to buy a 2 bedroomed home up to £120,000. After talking to the housing association they said that we could have any sized home up to £120,000. We ended up getting a 3 bedroomed with an extension on for that. We were quite lucky as the previous owners were desperate to sell.
I must say that it went on for a long time, the house had to have a detailed survey done and anything that was wrong with it had to be rectified before they would buy with us.

Your local housing association would be able to point you in the right direction.

were you first time buyers?