Homebuy - no deposit?

SelbyJay_2

This specific scheme does have it's negatives, but Shared Ownership as a whole can and does work and sweeping statements that it's a scam are bull and unhelpful.

vicshippers

I hear what you're saying Monkey, and appreciate the fore warning on things like contracts. I have a friend that's a very senior lawyer who has offered to go everything in addition to the seller's recommended IFA...so I do get some comfort in that.

Do you think that you managed to secure a 3.14% rate because it was only fixed for 2 years, where the IFA offered you a rate fixed for 5? It would be more interesting to see a like for like term to compare.

I am also very aware that the developer is not running this type of scheme as a charitable action, they are a business - of course they want a financial return. For me it's more about can both parties enter into this will all the information and BOTH come out the other side having gained from it? For us, yes.

For us to rent an apartment like the one we're looking to buy would be £700 a month whereas our mortgage will be closer to £500...even if house prices maintain, I have gained 3 -5 years good payment history on a mortgage and the capital I have paid off (however measly that may be). If they increase, I've gained more. If they fall - I've had cheap rent for 3 - 5 years.

geoffky

Shared ownership is failing to act as a stepping stone to full home ownership, leaving many people in worse positions than if they lived in other types of housing, researchers have found.

A Joseph Rowntree Foundation investigation shows that only a very small proportion of residents are actually able to move into full
ownership.

While some shared owners are able to move on due to improvements in their finances, many are unable to afford the greater cost of a full ownership mortgage, the study found.

Shared owners’ typical starting investment has declined from 50 per cent to 40 per cent, with 25 per cent shares now more common.

And evidence suggests that just 3 to 5 per cent of shared owners are able to move on to another property.

Report author Alison Wallace said: ‘There is confusion over whether shared ownership provides affordable market housing or is another form of social housing.

‘Clarification is needed on the social policy aims to focus on the role of providers in supporting or controlling the ability of shared owners to move on to their next property.’

Karen Doran, senior policy advisor for the Council of Mortgage Lenders, said: ‘Local authorities should be able to decide on whether to have limits on staircasing, based on evidence of housing need.

‘Some want to keep the homes affordable in perpetuity.’

Lucy Thornycroft, policy officer for the National Housing Federation, said: ‘Mobility has been a problem in the general open housing market over the last ten years, because prices have gone up so much. So the lack of mobility of shared owners is not necessarily a reflection on the shared ownership scheme.’

http://www.insidehousing.co.uk/story.aspx?storycode=6501770

its for the financially challenged.... if you cant see the problems with the system ..good luck..

alexnotts

The original poster is talking about HomeBuy Direct, which is *NOT* shared ownership, but an equity loan scheme to remove the need for huge deposits.

alexnotts

Monkey_Speaks wrote: »

I feel the need to stress, that if the worst were to come to the worst and the bank was forced to repossess the home and sell it on, you, as the buyer, are only entitled to whatever remains AFTER the bank and the government have recouperated their share.

Yes, if its reposessed.

But I was talking about price drops.

A lot of the problems and negatives here are things that can happen with any house ownership.

iscrimger

I agree with an earlier poster, Poppy does seem to browse the forum looking for shared ownership/equity topics only to put a downer on them and claim it's a scam.

This isn't helpful, and in some cases Poppy's opinion causes more stress to those looking at entering such a scheme. When you enter these schemes are advised to seek financial advice on the matter and how you will repay it over time.

I'd advise Poppy to read more into what he/she is commenting on before giving advice which is incorrect. A recent thread on the LIFT shared equity as an example, Poppy advised the user or something completely untrue and evidently Poppy has no idea of the scheme. The LIFT scheme has no rent or charges applied to the loan a person receives. The Scottish Government seek to only have their percentage share returned after 2 years, then every 2 years thereafter upto 19 years (or from the sale of the property - whichever is sooner). I don't see how that is a scam and I'm fully intending to use the offer I've had from the scheme.

poppy10_2

vicshippers wrote: »

For us to rent an apartment like the one we're looking to buy would be £700 a month whereas our mortgage will be closer to £500

And if mortgage rates double, which they may well do? What then?

poppy10_2

iscrimger wrote: »

A recent thread on the LIFT shared equity as an example, Poppy advised the user or something completely untrue and evidently Poppy has no idea of the scheme. The LIFT scheme has no rent or charges applied to the loan a person receives. The Scottish Government seek to only have their percentage share returned after 2 years, then every 2 years thereafter upto 19 years (or from the sale of the property - whichever is sooner). I don't see how that is a scam and I'm fully intending to use the offer I've had from the scheme.

Hey buddy, out of interest, what would you do if house prices fall over the next few years and you need to move house for work or personal reasons? From the sounds of it you are not putting in any deposit of your own, so any fall would leave you instantly in negative equity.

If you take a £80,000 mortgage to buy a £100,000 house, with the LIFT scheme contributing £20,000... say prices fall by just 5%, then the government will expect a return of £19,000 (20% of £95,000) and you will get just £76,000 from the house sale - not enough to clear your mortgage. You will be stuck in your house (unless you can raise four grand), with no way to take up a new job offer or move in with a partner somewhere else in the country.
Unlike proper homeowners, you won't even be able to let your house out and move into new accomodation.

vicshippers

You are presuming a 5% fall in house prices though Poppy - presumably in that circumstance you DONT SELL!?

Poppy10 - have you been bitten by this scheme? You seem so unwilling to consider anything other than rather drastic worst case scenarios...almost like you've been witness to the scheme failing (maybe a friend or relative maybe).

In response to your other comment - my mortgage would be less than my current rent, presuming an 8.5% interest rate (I too like working with worst-case scenarios when I manage my figures). If they do rise above this point then I can afford my repayments up to 16%. It was a valid comment that you made, I just thought Id highlight that just because I might be making the most of a scheme such as this - I am NOT niave.

SelbyJay_2

House prices can always drop. This is a risk with property. In an ideal world, we would all save 25%+ deposit for a house, but this is just unrealistic for most people. It could take decades to save £30k/£40k/£50k, by which time, house prices could have shot up anyway.

Even if mortgage rates shoot up, you've still only got a mortgage on a percentage of the property so are actually more protected from huge increases. A £100k mortgage at 7% is about £700 pcm, whereas a £50k mortgage would be £350. Chances are, any rent payable wouldnt increase at the speed interest rates would, giving a little more protection on your expenditure.