Shared ownership - something to look at if you "own" one

MrsE_2

getmore4less wrote: »

But the chances are that she will have no idea where this well paid job will be, so tieing into a property that could be difficult to sell and have restriction on renting it out is not sensible and a reason NOT to buy anything never mind a SO property.

Wait till the income job situation is sorted, job hunting you need to be a flexable as possible.

I hope you are funding a decent UNI and one of these seccond rate places.

I did a lot of recruitement for IT places and we had to stop looking at people from the second tier they just were not upto scratch.

Its nearby. She plans to stay with the corporate side of the NHS. She started a better job (same office) last Monday.

Salz

ztan wrote: »

You can remortgage in stages, or pay off lump sums.

Look at it this way: (Shared Equity that is)
A house is for sale at £165,000.
You put in an offer for £150,000. House is valued as such.

You get a mortgage for £112,500, with a deposit making your share up to £120,000. The developer agree to pay £30,000. (80/20)

Ztan, you do sound as if you are very sensible, and have thought this out thoroughly, so as long as your are sensible, I really hope it will work for you.
I would like to ask a couple more questions though
Can you negotiate the price on a shared equity house as I always thought the developers were quite firm on the prices
Do you get the mortgage rate that someone with a 75% LTV would have or is it the 95% rate that you have, because the £30,000 is in effect a loan/ second charge on the property - do the developers make you go with a specific Mortgage Provider.
If, in 5 years time the value of the house has not increased, are you happy that with the mortgage you will be paying, you will be able to save up enough to pay back the loan/remortgage with a decent LTV - Basically you have to save the £6000pa to be sure, which is £500 per month, which, if you have a new house which needs furniture, painting, a few pretty little pot plants etc, could be pretty difficult to do.
I presume the mortgage you are taking out is a repayment and not an Interest only?
I am genuinely interested to know how people can work this as I am not convinced by the whole idea.:)

ztan

Salz wrote: »

Ztan, you do sound as if you are very sensible, and have thought this out thoroughly, so as long as your are sensible, I really hope it will work for you. Thanks

I would like to ask a couple more questions though Of Course

Can you negotiate the price on a shared equity house as I always thought the developers were quite firm on the prices Yes, only to a certain extend, but we got £15,000 knocked off the original asking price. But then as people say, the houses are often overpriced so they can afford to knock off that much and more and still be sorted.
Remember a house is only worth what someone will pay for it!!

Do you get the mortgage rate that someone with a 75% LTV would have or is it the 95% rate that you have, because the £30,000 is in effect a loan/ second charge on the property - do the developers make you go with a specific Mortgage Provider.
The LTV is 95%. The additional "20%" is a second charge on the property, which is accounted for in the valuation. As if we had paid the full 95%.
There is no insistance on using a specific lender or provider, however there are a limited few who will offer Shared Equity mortgages. We were recommended to a mortgage advisor, who searches for the best deal, and gives you the information. Our's is Halifax, but others include Bank of Scotland and RBS.

If, in 5 years time the value of the house has not increased, are you happy that with the mortgage you will be paying, you will be able to save up enough to pay back the loan/remortgage with a decent LTV - Basically you have to save the £6000pa to be sure, which is £500 per month, which, if you have a new house which needs furniture, painting, a few pretty little pot plants etc, could be pretty difficult to do.
We're confident that house prices aren't going to rise, and have accounted all situations just in case. We can definitely have saved up to £6000 a year to chuck at the mortgage, reducing the LTV.
We are already fully furnished, and the house is spanking new, so there will be minimal outlay once we're in and connected to things like BT. Anything else has already been put on a list of donations wanted. My OH's grandparents have already brought us new towels and a lawn mower! :rotfl:

I presume the mortgage you are taking out is a repayment and not an Interest only?
Definitely repayment! Forgive me but I do not understand IO at all! If we couldn't do repayment, we'd still be renting.

I am genuinely interested to know how people can work this as I am not convinced by the whole idea.:)
You and a million other people... most people are critical but if you are sensible it really can work. If you want more info, check out my thread in MFW- It explains our story so far

Salz

Thankyou Ztan for answering all my questions - as long as you have towels and a lawnmower you are sorted :j
From your replies you sound as if you have enough a) income and b) common sense to make it work.
What worries me with these schemes is when people are stretching themselves to the limit on their mortgae repayments and not being able to save enough for when the time comes and the second charge needs repaying - basically just thinking that house prices are going to have risen so they will be able to remortgae without having to find the money from somewhere. I still don't agree with Shared Ownership though - differnet kettle of fish altogether!

Blacksheep1979

MrsE wrote: »

She & we have/are funding it, she hasn't got a loan.

Perhaps no one should bother with degrees then & we should all rent & line the pockets of a select land owning few & "know our places guvnor";)

That's not the case, but is there any value in anything if everyone has it? If everyone has 9 a-c gcse's how do you distinguish - oh A levels. But what if everyone has 3 A's at a level? Oh degrees - but what if everyone has a 2:1?

The labour government has devalued degrees by trying to get everyone to have one. I'm sorry but if you're not capable of thinking at a given level then you're just not capable - just like some people can swim faster or run faster some people are just smarter.

neverdespairgirl

MrsE wrote: »

I thought the idea of shared ownership was you bought as large a % as pos & bought more as you could until you got to 100%.

Depends on the scheme. With some, you can't ever buy more than a certain %.

gabyjane

Not quite sure why I'm replying as all said before but seriously these people who have nothing better to do than slate S/O really, please find something better to do! The fact is if people want to buy one then that is their problem isn't it?

We bought a new build almost 3 years ago for £153k the exact same houses near us were on private sale for between £165-£179k so we wondered why ours was so cheap..if you look back over my threads you will see i asked about this a long while back..anyway our mortgage is about to end on its fixed deal so we have secured another one..the property is being valued next week and is going to (hopefully!) come in at around the £180k mark but the EA reckons higher..(one went up for sale last week and one valued and both smaller so thats why he thinks more) therefore we have quite a bit of equity and have gained approx £10k per year since buying it. Our mortgage has dropped a LOT allowing us to overpay and get it knocked down even more..all in all very pleased.

BUT yes there is no assurance we will ever own this house outright..we have already discussed that if we pay off our % we will just rent the other half (at the mo this is £150 a month) so we can't really go wrong as far as i can see can we?

As for selling maybe we are lucky but the houses we have are in a lovely area, all landscaped, 10 min walk to the beach etc) and the waiting list for S/O is horrendous, i have no qualm that we would sell it quite quickly but we bought this as a home and not an investment and always knew/know that it may not sell (like many other normal houses) or we may lose money (like many other normal houses!)..so rather than paying our friends house off we are buying a little of our own..sure beats renting that's for sure.

I LOVE this house and would buy it again tomorrow if we had to start again. We have had no outlay other than boiler service and us changing bits so been a very cheap move too.

So long as you go into it knowing what you are doing and what the worst case scenarios are I can't see the problem.

gabyjane

Ztan great reply in the pink says it all to a tee really and would have saved me replying!

Salz again you say What worries me with these schemes is when people are stretching themselves to the limit on their mortgae repayments and not being able to save enough for when the time comes and the second charge needs repaying

Surely the mortgage is something you look really hard into? I realise they go up/down but at the end of the day you shouldn't buy one if you aren't 100%. Our S/O was the same as our rental fees were so we were no worse off BUT we did rent cheaply off a friend, when we looked at the prices of somewhere else for the future which would happen after a while the prices are in the region of £700+ a month..our mortgage comes in at under half that. The second charge bit I don't quite get do you mean that in regards to the S/O?

Graham_Devon

Shared Ownership has it's merits. For one, it allows me personally to pay £200 less than the equivalent private rent, and thats paying mortgage AND rent. So it allows me to save money and also, do things if I wish to in life, rather than the alternative, which I would have been, a slave to the mortgage month in month out if I had bought fully. Infact, in all honesty, I'd have probably been repo'd by now if I had done that (FTB in 2006, in the second most expensive area of the country...not easy!).

There are downfalls, big ones. But as long as you aware, then it's up to you which route you go down.

4 years on, I've paid some of the mortgage off as it's repayment, not interest only (again, if I had bought fully, it would simply have had to have been on IO), deposit for a "full" house is increasing. I've saved £200 every single month on renting the same type of house. The negative equity I was presumably in after the falls was only half my problem, so if the house fell by 10k, my problem was 5k etc.

The lease part is so that the mortgage company can get their money back if someone defaults. Otherwise, the banks would have no way of getting their money back.

Go in with your eyes wide open, know what you are doing, and it can be beneficial. Be aware of the large pitfalls, and if you can live with them you should be ok.

Not the best way to get a home, granted. But many of my generation only suffered from insane house price rises. Many of those slating SO gained massively from house price rises and simply didn't see the problems my generation face today, when they bought 10/20 years ago.

fleitner

I as well would like to share my positive view on shared ownership.

I bought a 50% share of a house one year ago. For this share I pay £360 per month on my mortgage, and an additional £150 for rent on the other 50%. This amount is less than the interest on my share.

My mortgage is only a smallish 55k, which I overpay by about £300 every month (can't do more as I would incur a charge). Due to the overpayment my monthly outgoings for mortgage + rent is now slightly higher than if I would rent a similar place. However, I can redecorate the place to whatever I like, which is a big plus to me.

If the interest rate does not increase significantly, I will have repaid the mortgage in 7 years time, and even if the rate increases to 10% it will add only a few years on this.
Afterwards I plan to buy the other 50%, as it will be a good LTV the mortgage interest will be as low as it can be at that time. Once I am at 100% I'll get the freehold of the property, removing all negative effects of shared ownership (t&c, resale, ...)

I could have gotten a mortgage for the full 100% in the first place, but the difference in the interest amount is more than the £150 I pay in rent now.

An almost identical freehold property in the neighbourhood - identical layout, smaller but nicer garden (ours was plain grass only), and with small conservatory - sold recently for slightly more than what we paid a year ago (edit: based on a 100% share)

According to my current plans the shared ownership helps me to save some money over the years, and the end result will be the same.
The gamble is that if house prices rise massively than I will have to pay more in the end, but I guess the price development over the next years will be far from the skyrocketing of the last decade.

So my opinion about shared ownership is that it is not evil by definition. You have to get the maths done beforehand, and stay dedicated to reduce the first mortgage as fast as possible to buy the remaining share, which implies that interest only mortgages and shared ownership do not match. But so far I would do it again.