shared equity scheme

k1984

Hi there,

Im, again, looking for a bit of advice. I will be a first time buyer shortly (summer 2009) however was looking at peoples opinions on this.

I was 'looking' at a newbuild house which should be built by summer time. Its in Renfrewshire, scotland and are selling at between £150,000-165,000. Myself and my partner will be buying a house together (joint salary of £55,000). By summer time we should have about £15,000 saved for a deposit.

I was reading a post by a guy on here about a shared equity scheme (who was slated). The house builders were talking to us about this and saying basically we go and get a mortgage for 75% of the value take the £150k house (£112500) and 'they' give us a loan for the remaining 25% (£37500) which is 0%intrest and payable within 10 years. if the house goes up or down depends on how much you pay back of the loan - however there is a chance you can pay more.

As i am a first time buyer, I dont really have much in the way of experience at these kind of things. This 'scheme', to me, is effectively a 100% mortgage. I explained that we would have about 10% deposit to which the sales girl had said to keep in a decent savings account, then each month ut money away to pay off the loan in 5 or 10 years time whenever we decide to move.

This sounds good - but as a rule of thumb i tend to be very wary of sales people - im sure there is something in it for them along the way. (may i stress that there are some decent sales people before my head is bitten off)

What are people opinions on this? i know the shared equity schemes got slated in the previous thread but my circumstances are different to the guy in that thread - i dont have a house that i can sell to get a deposit from just now, scrapping together what i can when i can from my wages to put to a deposit.

the link to the website is http://www.millerhomes.co.uk/promo/miway.htm

Thanks in advance.....and be gentle!lol

K

aqueoushumour01

sounds an interesting proposition. looks like they effectively take a position on the future growth of house prices, and their remuneration depends on whether house prices rise or fall. The interest rate they earn equals the change in house prices over the period. Couple of things here:

1. Could be good in the short-term if you lack the money to get a house in the first place, but:

2. You effectively give up part of any increase in the value of the home, which may make it more difficult to trade up to a bigger house in the future.

3. What happens if this firm goes bust - do they require you to repay the loan with immediate effect? If so, you may be forced into a sale you do not want.

I think it would be important with something like this to have a lawyer look at the T&C's, and look into how long the company has been around etc...

FraudBuster

think it would be important with something like this to have a lawyer look at the T&C's,

An independant lawyer, not one introduced by the builder or sales person.


http://www.lawscot.co.uk/Public_Information/buying_house/

wymondham

My only comment would be that when you come to sell, you'll need to pay them 25% of what your home is worth at that time. This will make moving in the future very expensive for you as this is a cost you'll have to find yourself (what you gain this end, you'll lose the other end).

Keep in mind that this scheme is to help them to sell their houses, not to help you, so please be cautious and seriously consider the finances before going ahead. also, be sure to use your own appointed lawyer, not one appointed by the builder (they might insist you use theirs, for their own reasons..)

What has made you decide you want to buy at this time?

k1984

wymondham wrote: »

What has made you decide you want to buy at this time?

We're both living at home, and have been looking for about a year. Hopefully by summer 2009, the prices will have fallen a fair bit and we'd get a decend deal.

Id prefer a 'deal' whereby the builders knocked £x amount from the value of the house. Im loathed to buy a house just now and 6 months, 12 months down the line the house prices drop by 15% (id prob kick myself). Its just a matter of weighing up how much house prices will drop in the next 12 months, say. Anyone got predictions how much a newbuild, 2 bedroom flat, in renfrewshire at £150,000 will drop by in the next 12 months?lol

Thanks for the reply,
K

brit1234

Its a scam to keep prices high. Of course the builder wants you to do it, its in their interest.

Below is a BBC video of the dangers of the scheme.
http://news.bbc.co.uk/1/hi/business/7613781.stm

Developers will be forced to drop their prices early next year. Be patient, save and avoid this scheme like the plague, it is a dangerous gimic.

wymondham

k1984 wrote: »

We're both living at home, and have been looking for about a year. Hopefully by summer 2009, the prices will have fallen a fair bit and we'd get a decend deal.

Id prefer a 'deal' whereby the builders knocked £x amount from the value of the house. Im loathed to buy a house just now and 6 months, 12 months down the line the house prices drop by 15% (id prob kick myself). Its just a matter of weighing up how much house prices will drop in the next 12 months, say. Anyone got predictions how much a newbuild, 2 bedroom flat, in renfrewshire at £150,000 will drop by in the next 12 months?lol

Thanks for the reply,
K

If you can hold fire until prices hit the bottom you'll be immeasurably better off financially (whenever this is - could be next Summer, but I suspect not)..... You sound like you've got a sensible head for even questioning these things - keep saving and watching the conditions and you'll come out of this far better....

Keep in mind newbuild flats lose the most value of all (lots of posts on this). You could be looking at 20%+ drops (probably much higher).... not a wise investment by any means...

If you need to move on in life, then why not rent for a year?

Milly1974

Hi K1984

Regarding buying, you have to do what is right for you, but I would definitely agree with Wymondham about renting for a bit first.

OH and I decided to move out a year ago, and if we had bought a place we probably would have lost it by now. We have had the worst year of our entire lives circumstances-wise, including a redundancy, horrific bills, car vandalism and family deaths. Knowing that if the worst happened we could just give notice and move back home has given us a safety blanket to get through it all together.

Living together is nothing like going on holiday together, spending weekends/weeknights together, or even living with your parents together. I really think that renting together is the absolute BEST way to test if you can live together before you buy together.

Good luck

M x

Pssst

Here is an example of a similar scam..

See

http://www.rightmove.co.uk/property-for-sale/property-19618588.html?pageNumber=1&backToListURL=%2Fproperty-for-sale%2Ffind.html%3FlocationIdentifier%3DREGION%255E8356%26sortByPriceDescending%3Dfalse&locationIdentifier=REGION^8356&radius=0.0

The implication is that this property is worth £200,000

This is clearly rubbish.

IMHO,and in this example,i'd estimate this property value at around £130/£140k with some possibility of further reduction.

What they are doing is trying to perpetuate a dying market.

They represent the house as if a 50% share is worth 97k but in reality,its well over valued.
A 50% share in this house would be more like £65k and falling. In addition,theres the small question of the equity share.

This kind of thing is becoming popular and is storing up even more trouble for the future..

Behind every scheme is a schemer.

LandyAndy

k1984 wrote: »

I was reading a post by a guy on here about a shared equity scheme (who was slated).
K

This is the other thread.

http://forums.moneysavingexpert.com/showthread.html?t=1330391

This is unlikely to be a good idea.

k1984

Thanks for the advice everyone

We rented for a while but couldnt afford to save up a deposit at the same time so decided to move back home.

Hopefully (for us) the market falls a bit more in the coming 9 months and we'll be able to get a decent price.

Wymondham, you had said that new build flats are the worst investment and drop value by about 20% - as i said before i am a total newbie here, id have thought new builds would go up in price more? whats the reason for them dropping in price? is it similar to a brand new car?

K