Shared ownership/equity is a scam.

ste_w

Yeah thats true. Has given me alot to think about this week. I don't want to be caught out in 5 years (If I don't manage to pay off the 20%) knowing that I owe out such a huge sum and that the interest rates can fluxuate. I keep seeing alot more negativity towards these schemes than positivity. Think I'm going to walk away and look elsewhere.

Thanks for your help

Idiophreak

ste_w wrote: »

Yeah thats true. Has given me alot to think about this week. I don't want to be caught out in 5 years (If I don't manage to pay off the 20%) knowing that I owe out such a huge sum and that the interest rates can fluxuate. I keep seeing alot more negativity towards these schemes than positivity. Think I'm going to walk away and look elsewhere.

Thanks for your help

I wouldn't write shared equity off altogether. There are much better schemes available than the one you've been looking at. You do see an awful lot of negativity towards all the schemes, but this is normally
a) People pushing their own agenda or
b) Simply poorly informed

The criticisms I accept are that it can *encourage* people to overextend themselves financially and that builders can *try* and overcharge for properties offered on the scheme.

Both of these are well mitigated against by just not letting your mind turn to mush when you start thinking about one of these schemes.

I know a few people (including myself) that have bought on shared equity. None of them are idiots, none of them plunged themselves instantly into swathes of negative equity and all of them are happy enjoying the stability home ownership offers.

ste_w

Hey I've just spoken with Gleesons independant mortgage advisor and politely told him that the firstbuy scheme is not for us. He is now going away and looking for other options for us.

Hopefully he comes back with a better deal!
Just incase we are keeping all options open and viewing existing properties.

brit1234

shall78 wrote: »

Hi

I have been off the housing ladder for a year and decided to get back on with the newbuy scheme, I found a nice Redrow home and visited it a couple of times, two weeks ago I told the I wanted to buy it and negotiated the stamp duty being paid and 5% off the purchase price, or this could be used as deposit.

I had the mortgage adviser do his affordability check and I told him I was intending to use the newbuy scheme, no issues, deposit paid £1000 and solicitor informed, mortgage application underway with Natwest. Reservation letter sent to me a sent back to redrow outlining the agreed deal.

Go into the site office today to fill out some more paperwork, and am told they cannot offer the agreed discounts and incentives as I am on Newbuy scheme, I was livid, having driven an hour down to the site, to be then told that , on challenging the sales lady (who on my last visit could not rember who I was) told me I never mentioned it to her, which I did, she told me she needed to call the sales director, I said I did not mind waiting and she flapped around. I eventually left and she agreed to call me back,

Gutted and unsure what the next move is. Buyer beware

Thread on the mortgage page

http://forums.moneysavingexpert.com/newreply.php?do=newreply&p=52161681

poppy10_2

Some mainstream media coverage of this scandal:

The Independent:
Future home dreams shattered in the traps of shared-ownership

First-time buyers desperate to become homeowners have complained of being locked into part-buy part-rent schemes with little hope of selling on.

The scheme's popularity has boomed in recent years as high house prices, strict mortgage lending and the need for chunky deposits make it difficult for young first timers to buy a home outright.
But, after using the scheme as a compromise between renting and ownership, some shared-owners are regretting the decision.

Negative equity, in which the money owed on the mortgage is more than the value of the property, has affected many owners who bought properties before the market took a nosedive in 2007.
This hasn't just affected shared ownership, but typically had an impact on new-build properties. Shared-owners have also been left reeling from rising rents, mounting costs for repairs or maintenance to communal areas and inflexible contract terms in their agreements with housing associations, which run the schemes.

"The feedback we are receiving is that these buyers often feel they are over a financial barrel with little effective way of redressing this imbalance."


Legal experts warn that adverse terms in shared-ownership agreements are often only exposed when it's too late. Attention to small print is sacrificed at the start because buyers want to get moving and the agreements take too long to digest.
...

Idiophreak

poppy10 wrote: »

Some mainstream media coverage of this scandal:

The Independent:
Future home dreams shattered in the traps of shared-ownership

So, most of the *real* issues in that thread are due to negative equity - something that is in no way specific to shared ownership. The rest of the issues seem to stem from people either not reading the small print ("agreements take too long to digest" - !!!!!!!? You're buying a house!!) or just not thinking about how they plan to staircase / move on from this place. Sorry to say it, but I've no idea what a 60-something couple were hoping to achieve by buying shared ownership...

I'm starting to agree a little bit with the rest of the folks on this thread who seem to think people need protecting from themselves...

brit1234

Cassandra_W wrote: »

I have seen a FirstBuy scheme peddling a £140k 2 bed flat saying the prices was £111,800 with Firstbuy.
That is a lie because the 5 year loan does NOT reduce the price.

*FirstBuy Price of £111,800 is based on 80% of the purchase price on paying 80% upfront with a 20% equity loan for the remaining amount - interest free for 5 years. Monthly payments of £442 based on a FirstBuy price with a 2 year mortgage of 3.49% over 35 years including a 5% deposit from the buyer"

35 year mortgage!! At say 6% on a normal mortgage the total interest would be £185k.

After 2 years the fixed rate expires and the FTBS have no idea what interest rate they have to pay on say a £105k balance (£140k - £7k 5% deposit - £28k 20% interest free loan) At a mortgage rate of 6% the mortgage payment would be £609.58

After the 5 year interest free loan expires the mortgage is say £133k (140k - £7k 5% deposit) At 6% that would be £797 a month. If interest rates were 10% the mortgage would be £1,197 a month!

Government induced 35 year debt slavery for 2 bed apartment. Is this what they call "growth"?

What needs to be remembered is that at the moment our interest rates are suppressed because the government is printing money to buy our own debt. They will accept any yield on it. That cannot go on or we would face a currency collapse. The coalition originally planned to reduce our deficit to zero in 5 years but instead like Labour they started printing money. This pushed reducing the deficit to zero to 7 years instead. Each time they print money it pushes a zero deficit further into the future because printing money allows more government spending. All the time the deficit is not zero we will be adding to our debt pile. When these FirstBuy schemes mature we won't be printing money, our debt to GDP will be over 100% (It's 80% now from 42% in 2007) and interest rates could easily be in double figures because they will depend on the yield other investors will buy our debt for, not the B of E.

FTBs being duped into these schemes are going to be crushed. After 5 years they will get a letter telling them they have another 20% mortgage to pay and the whole mortgage could be at a much higher rate. They may as well put bars on the windows and buy prison clothes. They will be in awful debt and struggling to pay it or have to sell and then councils will incur losses because by then we will have the property crash that our artificially low interest rates have only temporarily delayed.
These schemes should be avoided like the plague. They will make more money for house builders and banks but "helping" a few FTBs into debt does not solve the problem that house prices are too high. The other issue is that banks will loan money on these schemes hand over first - more reckless lending. Banks have little downside. Banks get their bonuses now on this lending but only have any loss if the house prices drops more than 25% in 5 years. They don't care about 5 years! It's councils and the government that will be footing the losses. It's a typical short term measure by a government - push the problem into the next parliament.

Another thread link about what a scam first buy is.

http://forums.moneysavingexpert.com/newreply.php?do=newreply&p=51351673

brit1234

Idiophreak wrote: »

So, most of the *real* issues in that thread are due to negative equity - something that is in no way specific to shared ownership.

How about all the issues of paying all the costs with a fraction of the ownership, the difficulties selling and all the extra restrictive conditions.

We could go on as there are many other problems with this shared ownership scheme which has been dropped by the government.

Idiophreak

brit1234 wrote: »

How about all the issues of paying all the costs with a fraction of the ownership, the difficulties selling and all the extra restrictive conditions.

So, if you bought the house outright you *wouldn't* have to pay all the costs? Did people not think this was the case when they bought?

The article didn't talk a whole lot about the difficulty selling (beyond the difficulty caused by negative equity), but did point out that it's worse in rural areas than London.

There are more restrictions, yes...but people signed up to them!

I've said from the outset that I think shared ownership is pretty stupid in most cases...and in no way should be compared to shared equity...but I do understand how it can be made to work for people. The difference between the people who make it work and those that don't seems to be:
a) actually reading the small print
b) having some kind of "exit strategy" to move up the ladder
c) having the income to implement b)

I don't see why we'd feel sorry for people who signed up for this scheme on a whim and without any thought to whether it would actually help them at all. I think the fault's partially with the scheme - I think that they should do a lot more to regulate c), in particular - but largely the fault's with the people who just didn't think before they got involved.

brit1234

The problem is the bad issues about shared ownership are never publised in the adverts or when going to view. It is all one sided.

"Shared ownership is a fantastic scheme to help first-time buyers get onto the property ladder who could not otherwise afford to buy on the open market," says Julie James, Sales Manager for Hightown Homes

http://www.whathouse.co.uk/news/affordable-new-homes-in-buckinghamshire-hightown-amersham-882

When I looked into shared ownership the sales and onsite mortgage advisor turned out to be deceptive. They tried to talk me out of a way which would of limited my risk putting more of the risk onto them. I wanted a small share and to overpay on that, they wanted me to staircase as much and as quickly as possible. I never went back.