How to get on the property ladder in 2 years.

IveSeenTheLight

Graham_Devon wrote: »

No, you are not correct.

You are mixing up shared equity and shared ownership, and getting them both wrong.

If you want to buy another 25% in shared ownership, the house is revalued and you buy at the market price, whether that's higher or lower than your original purchase price.

So as prices fall, extra chunks become cheaper to buy.

Thanks for clearing up, as I said it may not be fully correct as I did not have personal experience.
Thanks for clarifying.
Even more VI reason for price falls then.

Sounds like a poor contract to me, one that believed that prices would only rise.

A better contract from the sellers point of view would have been to set a lower ceiling based on the value at the time of purchase than leave them open to getting a lower return after a period of time.

chucky

doire wrote: »

Yeap. Saving hard for that all important deposit. Not expecting the banks to lend silly money again. Poeople should become more responsible. If you want it that bad you will save for it.

that's not a bad strategy.

the potential problem is that if house prices rise nominally you pay more for your house, if prices fall you pay less but if mortgage rates increase in that time you end up paying more for your house. you can't want house price falls and interest rates to rise, they contradict each other.

it's not an easy decision that could go very wrong...

Graham_Devon

IveSeenTheLight wrote: »

Thanks for clearing up, as I said it may not be fully correct as I did not have personal experience.
Thanks for clarifying.
Even more VI reason for price falls then.

Sounds like a poor contract to me, one that believed that prices would only rise.

A better contract from the sellers point of view would have been to set a lower ceiling based on the value at the time of purchase than leave them open to getting a lower return after a period of time.

Wouldn't neccesarily say its more VI for prices to fall.

From my experience, most in shared ownership don't want to buy more of the house. They use it as a stepping stone towards buying another house in the normal method.

It's normally cheaper to buy a percentage of a shared ownership property, than it is to rent the same house. Mortgage plus rent is often a good 20-40% cheaper per month than simple rent.

Not true in all cases, but in most cases it's true.

So this allows you to have a better standard of living, or allows you to save more each month, compared to renting.

Currently costs me under £400 a month for a 2 bed end terrace. Same type and size of house owuld cost £550-650 on the rental market. Plus you have the benefits of longer term tanancys (indefinate, for all purposes).

There are downsides. Such as the people around you. The waste of money on rent. Selling can be harder (but to be honest not seen that around me) and you only earn a percentage of HPI (the percentage you own).

However, you are also sheltered from falls in house prices. Again, I only lose on my percentage.

Shared equity is a different beast. And there are a lot more cons. Secondly, there are so many varients, dependant upon who's offering. Some make sure the buyer is responsible for ALL negative equity, regardless of the share. Some charge higher rates of interest on the loan. Some have some really harsh conditions....for example, can't sub let ever, regardless of circumstances. Can't have lodgers etc.

The worst part of shared equity however, is 1) in some cases you are liable for ALL pitfalls such as negative equity, but only gain a percentage of any increased value. 2) A loan for the percentage you don't own, which starts attracting interest, and also, if prices increase, the price to buy the rest of the house increases, while the loan interest ticks up and up. So a double whammy of interest on a loan makign the loan you need to pay off larger, and the share becoming more expensive to buy. You HAVE to pay off both before selling. So could cost a pretty penny to leave.

Government home buy was a half decent version of shared equity, however, some builders have now taken it one step further, and made the scheme extremely beneficial to themselves, by selecting the properties you can buy, selecting the services you can use to buy, and gaining twice on any price increases. Again, I say some.

ninky_2

Graham_Devon wrote: »

The worst part of shared equity however, is 1) in some cases you are liable for ALL pitfalls such as negative equity, but only gain a percentage of any increased value. .

and if the boiler goes not only do you have to pay to replace it but the landlord continues to get the same level of rent. the costs of properly maintaining a home are not to be sniffed at.

Graham_Devon

ninky wrote: »

and if the boiler goes not only do you have to pay to replace it but the landlord continues to get the same level of rent. the costs of properly maintaining a home are not to be sniffed at.

There is no rent in shared equity.

IveSeenTheLight

Graham_Devon wrote: »

It's normally cheaper to buy a percentage of a shared ownership property, than it is to rent the same house. Mortgage plus rent is often a good 20-40% cheaper per month than simple rent.

Not true in all cases, but in most cases it's true.

So this allows you to have a better standard of living, or allows you to save more each month, compared to renting.

I'm not aware of the details but this makes sense.

In my experience buying is cheaper than renting so if your part buying, your moving further alone the scale between renting and buying and as such the benefits of being an owner.