Shared ownership/equity is a scam.

brit1234

Banks under fire over FirstBuy mortgage rates

Monday 25th July 2011

Banks have come under fire for charging FirstBuy applicants hefty premiums.

The scheme, launched at the beginning of the month, aims to provide 10,000 loans to first-time buyers helped by equity being pumped in by developers and the Government.

FirstBuy borrowers then take out a mortgage on 75% of the value of the property.

However, Halifax is charging FirstBuy borrowers 4.49% for a two-year fixed rate deal, compared with 3.59% for those outside the scheme.

It means that FirstBuy borrowers with a £150,000 loan would be paying £890 more a year than non-FirstBuy borrowers.:eek:

Halifax charges no arrangement fee, but Barclays charges £299, and Barclays also charges FirstBuy borrowers more – 4.59%, compared with 3.58% for standard borrowers.

By contrast, Nationwide Building Society charges a £400 fee but does not charge FirstBuy borrowers extra, allowing them to take any deal in its core range that is available to those with a 75% deposit.
A FirstBuy borrower with Nationwide would pay 3.24% for a two-year fix, compared with Halifax’s 4.49% for the same deal and Barclays’ 4.59% for a three-year fix.

Melanie Bien, of Private Finance, said: “It seems unfair to charge FirstBuy borrowers more, when the whole point of the scheme is to give them access to more competitive mortgages.”

A total of 14 lenders are currently signed up to the FirstBuy scheme.

http://www.estateagenttoday.co.uk/news_features/Banks-under-fire-over-FirstBuy-mortgage-rates

cassidy0111

I have spent the last couple of days reading this thread on-and-off. I have been looking at shared equity properties in and around Glasgow. (Glasgow and Lanarkshire are my areas of choice)


To summarise... the pros

• the price of the property may rise hence increasing the value of your stake.
• you can "staircase" to full ownership.
• no risk of landlord "kicking you out" at the end of the contract.
• you can decorate etc as you choose.
• a good way to buy given the mortgage issues FTB are experiencing currently.

the cons

• the purchase price of the property may be inflated.
• you still have to pay rent/service charge which can increase.
• the property may lose value quicker in a price crash situation.
• you may have EXTRA difficulties when selling up.

Can anyone think of anything else I have not weighed up before I make some appointments regarding these schemes?
Or anyone with experience of shared equity in Glasgow/Lanarkshire have any advice??

brit1234

cassidy0111 wrote: »

I have spent the last couple of days reading this thread on-and-off. I have been looking at shared equity properties in and around Glasgow. (Glasgow and Lanarkshire are my areas of choice)

You are describing Shared Ownership not Shared Equity.

cassidy0111 wrote: »

To summarise... the pros

• the price of the property may rise hence increasing the value of your stake. (A house is a place to live not an investment. When house prices rapidly go up in value it makes it harder to buy a bigger property as the price gap increases. House price rises are not always good.)
  
• you can "staircase" to full ownership.(There are issues about ownership with shared ownership not getting the same legal status as normal home owners)
  
• no risk of landlord "kicking you out" at the end of the contract.(You wouldn't get that if you bought a normal house, however you can be evicted by Housing Asociation in certain situations.)
• you can decorate etc as you choose. (Whoopie, I want shared ownership as I can decorate it:rotfl:)
• a good way to buy given the mortgage issues FTB are experiencing currently. (Its a very bad way to buy however it can be puchased by FTB not bothered to save a deposit and other subprime cases. The issues isn't mortgages but high house prices which shared ownership aim to maintain)

the cons

• the purchase price of the property may be inflated. (Is inflated)
• you still have to pay rent/service charge which can increase. (Increase rapidly under RPI)
• the property may lose value quicker in a price crash situation. (yet the housing association won't allow you to price to sell.)
• you may have EXTRA difficulties when selling up. (lots extra difficulty selling as they are a con)

Can anyone think of anything else I have not weighed up before I make some appointments regarding these schemes?
Or anyone with experience of shared equity in Glasgow/Lanarkshire have any advice??

The main issue apart from being overvalued is the dozens of extra conditions which will cost you dear and strangle you.

Avoid at all cost shared ownership it is an dodgy scam.

brit1234

injectionday wrote: »

I bought 60% of a shared ownership property from a housing association in 2001 which I'd now like to sell. I've just realised that there may be a problem as there are only 78 years left on the lease. I've spoken to the HA and although we don't have a legal right to extend they will do so but it looks like we'll have to pay around £1k in legal and valuation fees before we pay for the actual extension. I just wondered if anyone had an experience of this and if it really would cause a problem selling, what the cost of extending is likely to be and if it's worth doing.

Thanks

We are all aware of the big extra costs to increase share or even sell, now you have to pay a lot more extra to extend the lease compared to normal properties.

cassidy0111

brit1234 wrote: »

You are describing Shared Ownership not Shared Equity.



The main issue apart from being overvalued is the dozens of extra conditions which will cost you dear and strangle you.

Avoid at all cost shared ownership it is an dodgy scam.

I take your points on board. My research has shown that the schemes do vary wildly. I have found one of the better schemes so might well take a look at the end of the week.

poppy10_2

Interesting read in The Independent today:

At the bottom of the ladder: Why shared ownership ends in disappointment for many people

Amie_J

My partner and I purchased our first home on a shared ownership scheme and I for one am glad to see the back of it. Whilst on paper it seems a great way to get on the property ladder and out of mum and dads house, in reality it is very expensive and a pain in the backs**e to get out of!!!!

Staircasing, as it is called, is all well and good and can eventually allow you to own 100% of the property, but what they don't tell you is that when you decide to move you have to find a buyer to buy your entire share. We initially purchased 40% then "staircased" over the next few years to 80%. At the time we saw this as a good thing, however trying to find a first time buyer able to get a mortgage for 80% with a small deposit is not the easiest thing to come by! We evntually did find someone, but I'm just glad we never went on to buy more shares. Not to mention that when you move the company charged us an admin fee of 1% of our share value, fees relating to dealing with leasehold matters AND their legal fees. Add this to the stamp duty, solicitors fees, mortgage arrangement fees, moving costs etc that you are faced with when you purchase another property it was going to cost us the best part of £6,000 to get out of Shared Ownership!!!! It ended up that these costs were just too much for us so we have sold up to cut our losses and have had to go back to living with parents to save more £££!! I wish we had stayed at home for an extra year or so back when we decided to buy a home and had done it the traditional way.

I wouldn't go so far as to say it is a scam, but I would not be jumping up and down to recommend it to anybody any time soon. The only people who seem to benefit are the people who own the other share!

brit1234

As shared ownership schemes have been round longer we are increasingly seeing this stair casing problem on threads on MSE.

The natural thing for people on shared ownership is to want to buy bigger lumps. However it is increasing noticeable that those who do are pricing themselves out of the market.

The big pull to buyers is the little money needed to purchase, stair casing stops this.

However I do see a solution. In stead of buy more shares instead overpay on the mortgage. That way you don't have the extra survey costs, you increase your equity and it would be easier to sell to first time buyers.

Amie_J

You took the words right out of my mouth brit1234 - we almost priced ourselves out of the market by upping our share. I think we got lucky in the fact that our buyers were relatives of another family living in the same development and had been desperate to purchase a property there for a couple of years, having just missed out on one when they were first built (it was a new build development).

We tried the mortgage overpayment route, but shared ownership mortgages are quite strict and ours didn't allow overpayments. We really were stuck!!

Laynee_82

Would you still discourage me from going down the s/o route, even if the plan was to eventually own 100% of the property?