Shared ownership/equity is a scam.

Idiophreak

brit1234 wrote: »

Another thread link about what a scam first buy is.

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

Did you say "thread", or "rant".

Sorry to say it, but it's another person who just doesn't get the point, at all.

ranter wrote:

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

Here's a person who's never heard of the word "remortgage".

ranter wrote:

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

Of course, because interest rate rises only effect people on the FirstBuy scheme...

ranter wrote:

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!

The numbers of this bit just don't work. :wall::wall:

Where's the lender, exactly, that's going to let someone add another £25k to their mortgage?...we're talking scarcely a 5% LTV. I doubt the ranter's really arguing that the value's going to have leapt so drastically in those 5 years that they can add another 25k to their mortgage without changing LTV. So the above is just not going to happen.

Of course, our dear ranter's overlooked the fact that the "equity loan" was, in fact, a cleverly disguised "loan". If they just "repay" the "loan" over the 5 year term, they don't need to add anything to their mortgage.

I think their worst point, however, is this:

ranter wrote:

They will be in awful debt and struggling to pay it

I just don't see what they're basing that assumption on, at all. A good many people can *easily* afford to pay a mortgage. Yes, even a 100% mortgage. Yes, even at 6%...even at 10%! People's ability to repay the thing has *nothing* to do with their participation in one of these schemes. Why can't people get that?

Once again, we see someone with a bee in their bonnet about high house prices, seeking to blame these schemes for them. There's no attempt to present any kind of balanced account of the pros / cons of the scheme and it presents the worst case at every possible turn.

There's no comparison between the scheme and alternatives. If someone had a 90% mortgage on the same property, their payments would be (shockingly enough) far higher each month than those in the example. There's no mention of how much rent on a similar apartment would cost. It's just a really poorly formed argument.

In short, it's just a bunch of hot, angry air and not much actual content. Which I guess explains why you were all over it in a flash. Hohum.

Idiophreak

"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

This, actually, I find to be quite despicable.

If they "can't afford" to buy on the open market, they "can't afford" to buy on shared ownership...that's just common sense. :wall:

Idiophreak

roof-in-sure wrote: »

:spam:

Spam reported.

sturgeon

Brit1234, your vehement attempts to put people off shared ownership isn't really helping anyone.

Yes the scheme you almost went with at one point wasn't great, but like any house purchase you need to be fully informed and clued up.

I bought mine on a development where most sales were not on FTBI schemes, the area's near the Olympic site, had a significant local regeneration investment and the build quality is excellent. It was not overpriced and I knew that at the time, in fact it was an absolute bargain for greater London. I was lucky to buy in the middle of the property crash and as suspected it was a wise investment, it has been valued just a few weeks ago at around £30k more than I paid.

Oh and I had to put only a £250 deposit down (no, I didn't miss out a zero) with no rent to pay on the % I don't own until the 4th year. This was a superb scheme for a first time buyer.

And no, there aren't ridiculous increasing service charges. We sacked off the management company and are using an excellent local company, all the costs are very carefully audited and they have actually gone down rather than up.

If I was less informed I'd have bought on a plot which was 100% for first time buyers, hadn't done any research on local sold prices, completely ripped off and in negative equity.

I think you're bitter about the fact that house prices are so high, yes it's ridiculous but good luck on your wait for them to reach sensible levels as I'm afraid that won't happen. These schemes are great if you know each and every pitfall.

Idiophreak

sturgeon wrote: »

If I was less informed I'd have bought on a plot which was 100% for first time buyers, hadn't done any research on local sold prices, completely ripped off and in negative equity.

OMG! Are you some kind of rocket scientist?
Actually working out the value of a property?
Reading the small print?
This must be voodoo, surely?

poppy10_2

Idiophreak wrote: »

OMG! Are you some kind of rocket scientist?
Actually working out the value of a property?
Reading the small print?
This must be voodoo, surely?

Sadly, shared ownership schemes tend to be targeted at the most financially naive - those that are desperate to "get on the ladder" and assume that you "can't go wrong with bricks and mortar".

They are precisely the sort of people who wouldn't be able/willing to work out the 'true value' of their property compared to others on the open market, instead being swayed by the low headline price for their 25% share.
They are also the least likely to read the small print and decipher all the restrictive clauses.

You might laugh at them, but for some people complex financial transactions really are as impenetrable as rocket science or voodoo. All they want is to get into a home of their own, and they actually think the government are helping them by encouraging them to buy with these schemes.

If you are going into it with your eyes open, then fine, it's your choice. But shared ownership is being marketed at the same financially naive consumers that were targeted for 125% 'Together' mortgages, 'Buying with Friends' schemes and other assorted scams.
That's why people get so heated whenever they are discussed - we're just trying to provide adequate counterbalance to all the puff pieces in the media and from the government that sucker in vulnerable people.

Idiophreak

poppy10 wrote: »

You might laugh at them, but for some people complex financial transactions really are as impenetrable as rocket science or voodoo.

In which case, if they're really that incapable of common sense, I'm sure they'd manage to find another spectacular way to lose all their money even if these schemes didn't exist?

I get that some people are more financially savvy than others, but I just can't believe there are *that many* people stupid enough to buy a house (or share thereof) without getting some advice, doing a little reading, engaging their brain cells a little.

So, out of curiosity, if they just changed the marketing for the scheme - and targeted it at cash-rich, deposit-poor couples, would you still object so strongly to it?

How about if they stiffened lending criteria? Say you could only have a mortgage on a 2x multiplier if you used the scheme?

(and FWIW, I don't think I've seen *anything* particularly positive about FirstBuy in the media..but *plenty* of negative stuff...)

- oh...and thanks for actually posting some kind of constructive criticism. Makes a refreshing change from the mindless vitriol than normally fills this thread

brit1234

carlaeliza wrote: »

I was slightly relieved to be given a label! I am a "mortgage prisoner", I try not to think about it most of the time, but not only did i take out 100% loan, it was split in two by a builders incentive to buy a new build...... I had 10 years to pay back the second mortgage but sadly i assumed we'd be able to move long before the 10 years were up...... no such hope now,..... the property is worth less than i payed and others in my block can't sell even at the lower value!! I have 3.5 years to save 50k or try and convince a lender to help...... hopeless! And if rates rise then im screwed! (Crest Nicholson's easybuy)

Another shared equity bad experience by an MSE member.

https://forums.moneysavingexpert.com/discussion/3885959

heathcote123

Idiophreak wrote: »

This, actually, I find to be quite despicable.

If they "can't afford" to buy on the open market, they "can't afford" to buy on shared ownership...that's just common sense. :wall:

When I bought my 50% shared ownership, the mortgage was around £400 and the rent £100 ish

To buy it all would have meant a mortgage north of somewhere around £900 pcm, which I probably could have just afforded, but didnt really feel comfortable with it at the time.

It's cheaper and hence more affordable. I don't get why people like you can't see that. Do you have trouble with numbers?

Mine will be paid off next month (almost 5 years to the month), and I'm really in a quandry as to what to do. The rent is now around 115 and it has a value of somewhere around 90k. I cant see myself ever buying that as the money would be better off in the bank, even at the silly low rates of today.

In the meantime, I've avoided paying market rent rates, and built up some capital. The low outgoings helped me in taking the risk in starting my own business which means I've since quadrupled my earnings. So Britt may want to add me to his list of good shared ownership stories

It''s just a shame some people can't spot the difference between a bad scheme and free money, and doggedly hold on to the belief that property ownership woes only come with shared ownership.

But I shouldn't complain. I'll be renting out my other property to the likes of Britt for years to come.

Idiophreak

heathcote123 wrote: »

To buy it all would have meant a mortgage north of somewhere around £900 pcm, which I probably could have just afforded, but didnt really feel comfortable with it at the time.

It's cheaper and hence more affordable. I don't get why people like you can't see that. Do you have trouble with numbers?

I don't. Do you? You couldn't afford to buy a house...so you bought *half* a house. It's hardly the same thing. The point I was making is that you couldn't afford to buy a house outright and...shockingly, you couldn't afford to buy the whole house using the scheme, either.

Make no mistake that the reason it's worked out for you is that you've had an increase in wages, so now *can* afford to buy outright if you want.

If your wages hadn't increased, you'd have found yourself, a few years down the line, owning (a portion of) half a house that was hard to move on and without any mechanism to raise extra funds to buy anything but...another half of a house. I've no idea how this would be considered as you being "on the property ladder" at all...