Shared ownership/equity is a scam.

geoffky

Go over to consumer action and see the poor sods who are getting repossessed if buying these overpriced newbuilds is a good idea...They are for the financially illiterate..

Have a read of this by rowntree trust a very well respected charity
and read the comments
http://www.insidehousing.co.uk/ihstory.aspx?storycode=6501770


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


here is one of the clauses they insist on,,
A: You may sell at any time, but you must inform us in writing that you want to move. We will arrange for your property to be valued, for which you will need to pay a valuation fee in advance. You will also be required to pay the Association's legal costs when you sell your share. Unless you own the property outright, you will normally have a 'nomination period' in your lease. This is usually one or two months during which we will try to find a buyer from the HomeBuy Agent's register. We charge a fee for this service. If we can't find a purchaser within the nomination period, you can put your home on the open market - please bear in mind that an estate agent will also charge a fee for their services. There may also be a clause in your lease enabling us to restrict the sale price to the district or independent valuation. The reason for this is that we want the property to remain available to the people for whom Shared Ownership is intended.

and therefore limiting who you can sell to????

and a good one in times of high inflation

Q: Does the rent ever go up?
A: Yes, the rent will increase each year linked to inflation. On most properties this will be RPI +0.5%, but check with our Sales team for more information regarding your chosen apartment. Full details are in your lease and will be explained at your financial interview.

brit1234

muhasib wrote: »

in the thread that Brit1234 links to wouldn't Lido33 have a problem anyway in moving because of the fall in value whether they had used the LIFT scheme or not?

Yes but the size of the debt is far bigger with shared equity, so making the situation far worse.

Orpheo

big_john_studd wrote: »

Only downside with staircasing seems to be the independant valuation on the property (£120).

The property was valued at £120? :eek:

Muhasib

brit1234 wrote: »

Yes but the size of the debt is far bigger with shared equity, so making the situation far worse.

Could you explain that as wouldn't the fact that they have less of the total equity mean their share of the loss of value is less??

brit1234

muhasib wrote: »

Could you explain that as wouldn't the fact that they have less of the total equity mean their share of the loss of value is less??

Shared equity effectively means you are borrowing more money than a normal property with less deposit. The initial cost of shared equity properties is far higher than other properties when you consider the loan. You have very little deposit for the scheme especially when you consider the overall cost on the loan.

A normal property you would of needed a bigger deposit and paid less so you would have less risk of negative equity.

J_i_m

I still think describing this scheme as a scam is a bit harsh.

Sure it may not be the most attractive or lucrative option, but if it helps people get a home when there is otherwise little chance of them being able to buy a property then that's a good thing isn't it?

If I can secure a mortgage for 100% ownership of a reasonable property in an area that isn't a complete disgrace then I will do so. Yet, if I'm in the situation that no lender is going to give me more than 60-80k, add that to a realistic(ish) for me deposit of 20k, then that gives me a budget of 80-100k. And frankly that would risk landing me in very unsavoury areas, brand me a snob, or criticise me for setting my expectation too high, but I know what I don't want and honestly I'm entitled to that position.

So! If a shared ownership scheme helps me get a home that's satisfactory and isn't in the middle of slumvilles with drug addicts everywhere you look... then I'd take it frankly. Sure it might be slightly harder to staircase the rest of the ownership... it might be difficult to sell, I might even be paying more than some forum poster think's it's worth... but it provides a better life.. then it's got to be worth it.

GGB

Anyone reading this thread and then the linked threads, remember that the people most likely to post are those with bad experiences, the majority of people on these schemes will be managing just fine.

I would however shy away from recommending a shared equity scheme to anyone who looked at it as a cheap and easy way of getting on the ladder, you need to have a viable exit plan that would survive a few bumps on the way (5 years can be a long time).

If you are happy with the numbers, then go for it

Martin81162

We never had any problems buying or selling our shared ownership property.

Muhasib

brit1234 wrote: »

Shared equity effectively means you are borrowing more money than a normal property with less deposit. The initial cost of shared equity properties is far higher than other properties when you consider the loan. You have very little deposit for the scheme especially when you consider the overall cost on the loan.

A normal property you would of needed a bigger deposit and paid less so you would have less risk of negative equity.

If you had bought this property with your own deposit wouldn't you have lost more of your own money though? Isn't the overall cost lower as on the shared equity stake you won't be paying back for 5 years (on the government scheme) and then at a lower level of interest afterwards?

2bFrank

I am going to throw my 2p into this mix with our own example of shared equity that we are completing on, on Thursday.

We have bought a home on the barratts HeadStart scheme. The house is £110,000, we are paying a 5% deposit, barratts are lending us £16,500 10 year interest free loan based on 15% on the house and we are getting a mortgage for the other £88,000. This scheme has enabled us to buy a house, in an area we like.

The bonuses for us is that we managed to get a house and not paying rent any more (The mortgage is £112 cheaper than we pay rent), we are paying less interest on the mortgage as the 15% that is being loaned is interest free, and barratts take a small hit if house prices decrease. The money we have been saving for a deposit can now be split, into overpayments for the mortgage and saving for our wedding.

The pitfalls are that if house prices increase, we have to pay more than we loaned (although this will be a good thing as the house is worth more and no doubt we will be moving on), we are actually no better off in monetary terms, as the £112 we are saving in rent is being put away, to help pay for the loan in 10 years.

The house is about the same price as we would expect to pay for a 2 bed house in the area. It was slightly overpriced at £119,995 however, the mortgage valuation came in at £110,000, as they can only value it on its second hand value (apparently new houses have a slightly higher value at the beginning), Barratts finally accepted this valuation after negotiation and thus it does match the local value.

If house prices go down, then we are still making a saving, by paying a mortgage and not rent, if house prices go up, then we will be very happy as we can then move on with the additional equity.

I am very happy with the scheme and it has worked for us. It is certainly not a scam in our eyes.