Shared ownership/equity is a scam.

poppy10_2

Laynee_82 wrote: »

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

Plans often don't work out. Have a read:

Shared equity doesn't lead to full ownership

RecoveringAlcoholic

Set up to fail.

A cautionary tale:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=167948&st=0

poppy10_2

RecoveringAlcoholic wrote: »

A cautionary tale:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=167948&st=0

Ouch, that sounds painful. Yet another victim suckered in to the SO scam:

Values are as follows - £ full value / £ 1/2 value
(bear in mind I owned half as it was shared ownership)

Purchased [2007] for - £158,000 / £79,000
Valued August 2010 - £118,000 / £59,000
Valued May 2011 - £112,000 / £56,000

...the deficit has been huge. The drop amounted to £46,000 in total which despite the crash in prices seems incredible to me... Myself and my ex have had to take out a personal loan each to pay for our respective 1/4's of the shortfall (11,500 each) and will be paying this off for some time to come. I feel that the initial price this property was sold for must have been well over its true value
...
My main thought with the value is that because it was a new build and for the "affordable housing" scheme, somebody surely has made a massive increase on the house which goes against the basic idea of the scheme... I understand that a profit needs to be made on it of course, but it seems irresponsible to have priced it at that value.
...
One interesting point was that becasue I was selling 100% share I was selling the housing association's half too. I was also responsible to pay for any shortfall between the valuation of the housing association's half and the price I received for it if it was less. Had this been a profitable sale to a 50% ownership buyer I understand that the rules dictated that there could be no profit made on the sale by me because it would cause an unbalance in the 50/50 ownership split (nice of them).

dippy

A lot of the shared ownership/equity scams are worded so that you own your share, pay rent of the housing association/housebuilder's share, only stand to gain on any increase in value on your share, but stand to lose on any fall in value for the whole flat. :eek:

That is a massively unfair system, and is used as a mechanism to sell overpriced rabbit-hutches anyway.

pararct

One interesting point was that becasue I was selling 100% share I was selling the housing association's half too. I was also responsible to pay for any shortfall between the valuation of the housing association's half and the price I received for it if it was less. Had this been a profitable sale to a 50% ownership buyer I understand that the rules dictated that there could be no profit made on the sale by me because it would cause an unbalance in the 50/50 ownership spli

That one sentence sums it up perfectly.... It is win win for the lenders/housing asso only... Everyone else gets ripped off.

Mind_Overload

Hi, wonder if any experts on here could help:

I signed up to a shared ownnership scheme in west london ( near heathrow) back in May 2007.
My property is a new build 2 bedroom flat with a pretty big balcony private parking, valued at 196,000 which i got a 50% share on for 98,000

I put down 10% so got a mortgage for 88,000. In this time i have managed to pay off approx 5,000, I also got a lodger in the spare room shortly after I moved in so have managed to save 15,000 up and reduce my mortgage years down from 30 when i moved in to 17 years now.

I dont know the exact value of my property now but hearing from other people near by i think it is worth approx 170,000 - 175,000 which is not good, but what i would like to know from anyone would it be better for me to use some of my saving to staircase or carry on saving and try paying off some of the other 50% share?
I think i will have a lodger for at least a couple of more years and can offord to staircase at the moment, but obviously a bit scared to do it to add more solictior fees, stamp duty etc

Thanks

brit1234

Marcus what we have discovered on this thread it is better not to staircase with shared ownership as it is harder to sell. Instead overpay your mortgage to boast equity that way.

The higher value you own through stair casing the harder it is to sell to first time buyers as it is too costly. However if you pay off all your 25% mortgage for example a first time buyer will have an easier time being able to pay that share.

After all the rent should be subsidised so it common sense to reduce the mortgage quicker instead.

Good luck.

PS that way you don't have to pay the other admin costs

Mind_Overload

Thanks alot for your reply!

Do you think new builds like these schemes only appeal to first time buyers then? I thought all walks of life might be intrerested if i chose to sell.

I do have some regrets getting into a S/O now, but my hands where tied at the time and that was really the only easy option for me, im just so glad i have a lodger and savings i can use to overpay my mortgage now

P.S what happens if i pay the full 50% off and still live here, do i then have to buy the other 50%?

brit1234

marcus-darkus wrote: »

Do you think new builds like these schemes only appeal to first time buyers then? I thought all walks of life might be intrerested if i chose to sell.

No but I would say its a sizeable majority.

marcus-darkus wrote: »

P.S what happens if i pay the full 50% off and still live here, do i then have to buy the other 50%?

No you don't, they can't force you. I spoke to a on site mortgage advisor with a shared equity development, they advised to stair case rather than pay off mortgage. However then were far from independent and it is in the housing associations interest not yours to stair case.

Just look at the figures and it clearly shows it is financially better to pay off the mortgage rather than stair casing. Stair casing passes more risk to you from the HA and reduces the amount of subsidises rent exposure they have making them more profit.

The more you stair case the smaller the pool of buyers you get. If a buyer wants a big share they can buy your part and more from the HA. If you have higher stair casing then buyers with less money are priced out.

brit1234

Rival tread below on Shared ownership trying to make it sound good.

https://forums.moneysavingexpert.com/discussion/3453017

I think the evidence from this thread shows that it is a complete scam.