Shared ownership - My experience just about to complete

Julis7239

Hello,

I am three days (fingers crossed) off compleitnig on buying a shared ownership property in central London. I came to this forum several months ago to seek advice and often found that Shared Ownership posts elicit quite alarmist and unhelpful responses from posters who actually have never been through the process or probably have had to rent in central London and deal with landlords coming round their house every week uninvited!

As I have; I thought it would be good to provide some insight into this process that I hope will help people that will be in the same position as me.

Mortgages - it is difficult to get a mortgage on shared ownership and many mortgage brokers do not have experience of this at all. I ended up using one recommended by the Housing Associatoin development who I was lucky enough was good. My first quote for a mortgage at a 10% deposit on my share (50% of 275,000K for a two bed in zone 1/2) Out of all the mortgages available to me was 6.9%! I was lucky enough to be able to increase my mortgage deposit to 20% and this opened two more options. Overall only 3 lenders would consider me so this is something you have to take into account. The best deal I got was 5.5%. My flat is also a new build which factors into this as many HAs overvalue their properties. I think most of them do actually so make sure you do massive amounts of esearch on prices in the area.

At the moment most lenders are still seeking 25% + deposits -even on shared ownership!

As a whole of market broker who can help on SO I would recommend London & Country as a starting point.

Also - I was told lastminute.com - that my mortgage repayment rate was higher as the interest was paid off annually rather than monthly - "becuase your shared ownership" (an excuse Ive heard alot over the last few months!) my mortage repayment is £8 higher a month than it says on mortgage calculators.

Research your housing association - definately do this - some housing associations have a track history of being terrible - increasing service charges, being inefficiant when it comes to selling on (will get on to this shortly), over valuing new builds / Properties, and information is readily available on the internet regarding how Housing Associations perform. How your housing association acts will tremendously influence how successful SO is for you. The audit commission often do auditing and provide reports and the government is regulating HA more and more. Many HA are in it for themselves and although non-profit will have their own targets to hit when it comes to sales. Do not be fooled into thinking because its social housing it will be OK.

Factor in your costs
Many SO schemes advertise that you need access to only 4K to buy an SO property - I think this is a pile of crock used for marketing. The start up costs are pretty much the same as buying a house outright - perhaps even worse. You still have to pay legal fees, valuations, conveyancing all the usual BUT what is also worse is you often have to pay 2 months Service Charge fees upfront as well as 2 Months rent upfront. One plus is that you can chose to opt out of paying stamp duty until you staircase over the threshold amount.

Service Charges
Fact of life - they can up them how they like so you need to double check that your HA has a good history when it comes to managing their service charges, Time will tell with my one, but they seem to have an ok history.

Can you afford it
It is easy to be swayed into buying a super lush penthouse apartment on shared ownership which is one of the benefits - you wouldnt be able to get a sniff of a property in a development of that standard outright (a con for housing market generally as well as it keeps prices high but for you a bonus!), but if all your repayments are more than 40% your income you could get into trouble

You cant rent it out
- you really are tied in and then you have to go threough the HA to sell on. They get three months before it goes open market to sell on. So you cant chose who you sell it to. YOU have to pay for all the valuations though (and all the repairs0 they never have to pay for anything! Some HAs request you use their valuer which is a problem for some people and they dont get the best deal. Make sure you can chose your valuer should you wish to staircase or sell on.

Paperwork
The legal paperwork is a nightmare and there are no guides to help you through the process. It is very very complicated and this shocked me as its supposedly social housing! I was absolutely shocked as the sister of someone who is vulnerable and lives in social housing how there was very little infomration to guide me through the process from the housing association itse;f. Its all marketing bumpth about, affordablility yoga and lattes then nothing! Im lucky enought to have a lawyer friend but even he was confused. The solicitors were recommended by the HA and were awful! But I got there in the end

Is it a good ROI?
No way would i get a mortgage on my own for 275K for a two bed flat in central London, it works out £100 cheaper than me renting round the corner and the flat is amazing! Showstoppign amazing - but - you pay for all repairs and everything and stil have to pay rent with little room for any change in your circumstance. You could probably buy a flat (not as nice) but further out of central london for the same monthly repayments. It is a lifestyle choice as it definately does not work out hugely cheaper but it is a good option should you wish to live centrally.

Now is a good time to do it!
As a single non keyworker a few years ago the flats in my area were going for 50K more.

I would not have been shortlisted so quickly.

I would not as a single woman been allowed to purchase a 2 bed. I would have had to buy a one bed. People are reluctant to buy at any level at the moment so their is more choice for SO in london at the mo.


I need to get on with work now. But will update this thread with more info after Ive moved!

reverend

Thanks so much for this incredibly useful summary. I was on the point of Completion selling a 1 bed shared ownership flat and buying a larger shared ownership flat in central London. I have had unbelievable setback after unbelievable setback. At the moment, I am teetering on the edge of collapse.

Once all this is over for me, one way or the other, I will add to Julis7239's useful summary of the Shared Ownership Experience.

Cannon_Fodder

Might I suggest that some responses on SO may be alarmist, precisely because those posters are capable of reading the small print, have therefore made a deliberate choice not to go through the process, and wish to point out limitations to those who come to fora such as this for opinion/advice.

Those who wish to ignore such opinions are perfectly entitled to, and your useful additional contribution from being inside the process bears out a lot of what others have deemed to be alarmist, but which turns out to be valid.

Finally, the only reason today might be a good time to do it, is because prices have fallen so far. If SO take up was less, prices would fall further. Making tomorrow a good time to do it.