Shared ownership/equity is a scam.

jack_wilson_2

I'm just checking the possibility of buying under shared ownership closer to London rather than outright up north - so here is my (own) observation.

1. Most Estate agents says that you have to take a mortgage (otherwise you're not eligible) - I suppose they want to make a few bobs there.
2. The prices, especially for Flats, are inflated - they (the developers) won't get even 80% of the price in the open market! ...and the equity percent is another 'flexible' way to skin the cats...
3. Service charges are very high - a small flat attracts about £80 a month - a whooping £960 a year (ok, maybe it includes building insurance) - still extortionist sum in my view for a newly build block

Most schemes are time bombs, but people are willing to take the risk, because of all the hype

brit1234 wrote: »

Shared Equity and Shared Ownership schemes are Scams.

The reason they are scams as they are designed to keep house prices artificially high and stop them falling. They are in fact sub prime lending.

House builders through out the housing bubble distorted house prices upwards through land registry fraud using gift deposits and shared ownership schemes. This earned them big money till the credit crunch. They now use shared equity and shared ownership to keep these house prices artificially high. Just ask yourself who can buy any of these newbuilds without these schemes?

Gullible and desperate first time buyers are being deceived into these schemes. Shared ownership buyers are being milked with rents, mortgages and high service charges with little home rights and difficulty selling. Shared Equity is simply a 5-10 year mortgage time bomb. What happens when the loan needs repayment, how are you going to add it to your mortgage especially if you are in negative equity?

and_another_thing...

jack_wilson wrote: »

Shared Equity is simply a 5-10 year mortgage time bomb. What happens when the loan needs repayment, how are you going to add it to your mortgage especially if you are in negative equity?

By the time my loan needs repaying - that will be in 23 years time- I will have moved on. I already would have paid the 45% back to the HA with the money coming from the sale of the property. For young, single people living in London SE is a very good option. No one plans on staying in their first home for their entire lives, people tend to pair up and move on. To have some money to put towards a mortgage with a partner when the time comes will be a real bonus. And, if things don't work out that way, I will be able to safely downsize and buy 100% of somewhere smaller is a less desirable area. Still beats renting...

heathcote123

brit1234 wrote: »

Shared Equity and Shared Ownership schemes are Scams.

The reason they are scams as they are designed to keep house prices artificially high and stop them falling. They are in fact sub prime lending.

House builders through out the housing bubble distorted house prices upwards through land registry fraud using gift deposits and shared ownership schemes. This earned them big money till the credit crunch. They now use shared equity and shared ownership to keep these house prices artificially high. Just ask yourself who can buy any of these newbuilds without these schemes?

Gullible and desperate first time buyers are being deceived into these schemes. Shared ownership buyers are being milked with rents, mortgages and high service charges with little home rights and difficulty selling. Shared Equity is simply a 5-10 year mortgage time bomb. What happens when the loan needs repayment, how are you going to add it to your mortgage especially if you are in negative equity?

I think the problem a lot of people have with shared ownership is that they see one bad scheme and think it applies to all shared ownership.

In reality, there are a lot of different schemes, run by lots of different HA's.

I bought an S/O 4 years ago, and I couldn't be happier with it.
It's a nice house, in a nice area, and the rent on the half I dont own is £120 a month. Privately it would cost £800 a month to rent the whole thing, so the rent is less than a third of the true value. At purchase, the price was not inflated - if anything slightly below equivalent properties, because it was superficially a bit of a mess - nothing that wasn't sorted out in a weeks work.

There are no maintenance charges, and the rent does not become a loan after 10 years etc, it's HA owned unless you choose to buy it at some point. The rent raises (in my case) are capped (not to rise@) at RPI+1%, so over a very long period, it is possible it will eventually rise to market rates, but so far the rises have been very low - falling the year we had a little deflation. It's gone from ~115 to ~120 in 4 years so far.

I do agree that some schemes are dubious - especially new build with high maintenance fee's, but you really need to look at different schemes before you call the whole lot a scam.

If you do want to buy & find yourself pricd out, you really would be doing yourself a huge disservice by not actually investigating it and relying on what some moron on the internet said.

heathcote123

HAMISH_MCTAVISH wrote: »

Yes.

Don't listen to the advice of anyone on this board that hasn't actually experienced shared equity first hand, or that claims it's a scam because they want house prices to crash.

Ah hello Hamish, so this is where you hang out nowadays!
Theres quite a commotion going on at t'other place right now...

poppy10_2

2bFrank wrote: »

the £112 we are saving in rent is being put away, to help pay for the loan in 10 years.

How long is your mortgage fixed for?

2bFrank

poppy10 wrote: »

How long is your mortgage fixed for?

We have it fixed for 3 years @ 4.79% then it reverts to the SVR which is currently 3.99%. So we understand if mortgage rates go up, our payments will by £52.19 per percentage point (1%). So if the mortgaes goes up to 5.99% then our £112 will be wasted on the extra payments, however this isnt a issue, as instead of overpaying our mortgage, we will save this for the 15% loan. We can manage until rates rise to about 19%, by that time, we will need to make some serious cut backs.

brit1234

heathcote123 wrote: »

I bought an S/O 4 years ago, and I couldn't be happier with it.

It's a nice house, in a nice area, and the rent on the half I dont own is £120 a month. Privately it would cost £800 a month to rent the whole thing, so the rent is less than a third of the true value. At purchase, the price was not inflated - if anything slightly below equivalent properties, because it was superficially a bit of a mess - nothing that wasn't sorted out in a weeks work.

You bought at the peak of the housing bubble. I haven't seen a shared ownership property then which wasn't vastly overvalued.

Are you comparing against other newbuilds.

You problems will likely come if you have to move or re mortgage with the continuing price falls.

TOOTHACHE

IMO S/O isn't necessarily a scam..
We have lived in a stunning, historical, converted ex-army officers mess for the last 6yrs, built in 1937.
It is one of the oldest buildings in the area and highly desirable.
We bought at the very peak of the market, 50% @ £102,150.
It was the best flat out of all 18. High Ceilings, massive restored sash windows and huge rooms.
We put down a 10k deposit and got a cracking 3yr fixed deal.
When the market crashed the flats were still selling here (18 in total) and we frequently had admirers walking up to the building asking if any were for sale - not realising they were S/O.
We can purchase the full 100% if we so choose and if we didn't have two children and two bedrooms we wouldn't be moving.
We remortgaged with no issues whatsoever and have just sold for £6k more than we paid for the place 6yrs ago - which, in todays market I think is pretty good.
NOBODY has made a loss here (except the repo due to marriage breakdown - which in turn has made a cracking deal for the new owner) and yes it has it cons - you have to shout and nag to get things done because you aren't an owner or a tennant but compared to renting alone it has been much lower cost, a better quality of property and made us money.
They aren't all bad.

heathcote123

brit1234 wrote: »

You bought at the peak of the housing bubble. I haven't seen a shared ownership property then which wasn't vastly overvalued.

Are you comparing against other newbuilds.

You problems will likely come if you have to move or re mortgage with the continuing price falls.

I live in hertfordshire - If you care to check regional indices, you'll see we're actually slightly up on your 'peak'. Prices round here are as mental as ever unfortunately.

I am not comparing against newbuilds, my was built in the 80's.

I won't get any problems because:
1. I could buy the other half out for cash tommorow if I wanted to sell.
2. This particular scheme is very easy to sell, because the rent portion is so ridiculously good - it is in effect free money.

You may not have seen a so property that isn't vastly overvalued, but they are out there.

As I said, I don't disagree that a lot of S/O is awful - personally I wouldn't touch a lot of the newbuild stuff with service charges.

But, if you look around there are some cracking deals - though I suspect they get snapped up rather quickly, and it's the hard-to-sell newbuilt that you are seeing.

Remember, 90% of everything is crap.

dopester

Consider this too. Perhaps it doesn't apply in all Shared Ownership circumstances, but it would not surprise me if it does in the majority of them. I'm only going from the information in this story.

Apparently, nearly 1 in 100 households in England has a shared ownership lease. It therefore follows that 1 in 100 households are in for a very nasty shock, when they discover that they do not necessarily own a share of the property!

What the householder owns is the lease and nothing else – and once the lease has gone (when possession is given to L) then that is the end of the householder’s stake in the property.

In response, she sought an order for sale, arguing that she had a half share; the court disagreed saying that the relationship she had with L was not that of trustee and beneficiary (it was solely one of L and T). The 50% capital payment made on purchase had not bought her a half share in the property, it had merely bought her the lease – and nothing else.

This decision goes to the root of shared ownership – and, frankly, drives a coach and horses through it. It is of profound significance for all shared ownership householders. But, surprisingly, it has received little publicity.

http://www.practicalconveyancing.co.uk/content/view/10570/1124/