Shared Ownership

Dummie_2

I've just come across some houses on rightmove that are on different offers and am somewhat confused to say the least!

I've copied the web incase my thread confuses anyone. I'm not known for making much sense!

http://www.rightmove.co.uk/action/publicsite.PropertySearch

Shared ownership - if someone was to buy 70% and pay a mortgage and then pay rent on the remaining 30%, why not just pay a 100% mortgage? Would the monthly outgoings not be the same?

Outright sale - does this mean the houses are being sold as 'normal'?

70% discount sale - mortgage for 70% and no monthly rent to pay. Sounds too good to be true. It's offered on a 99yr lease. What does that mean? I'm not going to be around in 99yrs so how would that affect me?

Thanks in advance for your help.

lynzpower

the issue is with shared ownership, would you get mortgaged for the full amount. ROund here the SO flats are about 230k one bed, now I certainly would never have got mortgaged for that amount, so i took a SO property getting mortgaged for 40% instead. and thus pay the rent on the rest.

Yes outgoings are similar but if lenders wont lend you the full amount, this is a halfway house IYSWIM

Bargain_Rzl

In my case the outgoings will work out cheaper. I am currently buying a shared ownership flat which is worth only about £15k more than I could afford i I was buying outright. The maximum I could (realistically!) afford as a mortgage would be about £118k, and I had been saving towards a £12.5k deposit plus about £5k for costs, prior to finding (quite my chance) the flat I am now buying. I live in London but am open-minded as to which area I live in, but even so, for that sort of money I would be looking at a one-bed flat in zone 3 or 4, probably in need of some work, or a small studio in an inconvenient part of Zone 2. I would have a little under £700 a month going out in mortgage repayments alone - not including service charges - at today's interest rates which may well rise. That's almost half my net salary. To rent a property of the same type would cost me, again, around £700 a month. The shared ownership scheme has enabled me to put in for a property valued at £145k, and my outgoings will only be £300 mortgage + £218 rent + £75 service charge. That's under £600pcm all in, and it's a nice new-build 1-bed flat in Zone 2, only 15 mins on the bus from my office. The split of rental and ownership means that I have a good balance of protection from fluctuations in interest rates AND I know the rent won't go up much (it's linked to the RPI). It is a win-win situation for me, as it is by far the most inexpensive option for having my own flat. And it's enabled me to buy NOW rather than waiting until I had saved a larger deposit

Dummie_2

What's in it for them then? I assume they are not charging interest?

Bargain_Rzl

Who's "them"? The housing association? New developments above a certain size are obliged to inclide a certain proportion of "low cost housing". Housing associations do deals with the building firms on the prices for which they can buy the properties, and then in order to offer it for sale the property is valued as if on the open market. The HA recoups a large part of its outlay from the sale of the equity share, and the ongoing rent on the remainder is set at a level that, while cost-effective for the HA, is not for profit. Any profit is ploughed into making other properties available for shared ownership. At least that's how the HA I'm going though (Southern Housing Group) works.

Bargain_Rzl

Just to give you an idea, here is the FAQs page from Southern Housing Home Ownership's website: http://www.shho.org.uk/faqs.asp#so1 ... However if you've been looking up properties on Rightmove, chances are that these are resales ... i.e. properties that were bought new from a housing association and are now being sold on by the owner-occupier ... Most of the HAs have a policy where when you want to sell up, you have to offer it for sale through the HA for a certain period of time (so the HA's current client list has first chance to benefit) but if it doesn't sell, you can then offer it on the open market - obviously the buyer takes over the owned equity AND the HA tenancy on the remainder. Your Rightmove link isn't working (search sessions expire after a while) but I would imagine this is the sort of thing you might have been looking at ... I can't say I know about this 70% discount sale thing though!

Bargain_Rzl

By the way, on the link I've given you above, you need to click on "New Build Homebuy" rather than "Intermediate Rent".

welnik

When I bought my house in 1989, interest rates were 15.5% and I borrowed 75% of the value. I was paying £385 per month in mortgage. My rent was £12.00 per month. I sold my house 2 months ago and even after all those years, the rent had only increased to £21.00 per month. This also included the buildings insurance premium! The equity owned by the Housing Association was £26,000 so when you work out what the monthly mortgage would have been on that, its a lot more than £21.00!

Worked out really well for me. I even extended it and added to the value and all the extra value I added on was 100% mine.

The only thing I would say is that my house plummeted in value by 25% and I was trapped with negative equity up until 1997. But then, if I had purchased it outright, I would have lost 35% of the value, whereas, being shared ownership the housing association's share also lost value at that time.

Hope this helps

Dummie_2

The houses I'm looking at are in Northfield, Birmingham (where the old Rover factory used to be).

West Mercia's website says:

New Build HomeBuy - new homes on a part buy/part rent basis where you purchase a share in the property, typically 50% (this can vary between 25% and 75%) and pay a discounted rent to whichever Housing Association owns the remaining share. Over the next two years several hundred new homes will be built across Herefordshire and Worcestershire and you will in due course be able to view these on our property database search.

I understand this to mean that I buy a % of the house and then pay rent on the remaining %. At any time I can buy more % which will mean paying less rent. This option is better for those who can't get the mortgage needed to fund buying a property outright. Is my understanding correct?


Open Market HomeBuy - this offers an equity loan to people in priority housing need. You must be able to afford a mortgage for 75% of the equity in a property of your choice from the open market, subject to certain criteria. The remaining 25% will then be funded through a loan which becomes repayable at the market value when you eventually sell your home.

This is the 70% offer I was talking about. I understand this to mean that I buy 75% and the remaining 25% belongs to the housing association. There is no rent payable and will not have any affect on me unless I decide to sell my property. This sounds too good to be true!! I mean, if I never sell it then I've brought a property with a 25% discount! If I do sell, then I give them a 25% share which is fair enough considering I didn't pay for that 25% in the first place! I'm thinking there's a catch here!

So what you're saying is that there is some kind of law that requires house builders to offer a % of their houses at a cheaper price and they do this via the housing associations?

I'm pratically jumping with joy here! Pls tell me there's a catch. It'll be easier to believe! Then, why oh why doesn't everyone buy houses this way? Why pay for 100% when you can pay just 75%?

KayEdwards

Open market homebuy is what I have applied for too. Would be interested to know if there is a "down side". I spoke to a housing association that said once you are approved you can buy any house on the open market (within their coverage area). As I don't have a deposit this is a great scheme for me.

welnik

From my limited knowledge, you dont pay rent for the bit you dont own. They just register a charge against your property so that if you sell, they get their share of the equity. If you were repossessed, the lender gets first dibs on the money and the homebuy scheme get second and then you get whatever is left (if any)