Shared ownership/equity is a scam.

brit1234

The £705,000 'affordable' home

Some housing associations are stretching the meaning of 'affordable home' to the limit



Probably the most expensive ever new-build by a housing association: Central Square in London EC1, where anyone buying a 25% share of the biggest flat will have to pay £2,322 a month for rent and mortgage. Photograph: David Levene for the Guardian

In a busy road sandwiched between the office blocks of the City of London and the bijou streets of Islington lies what housing association One Housing Group calls a "calm home base where you can recharge the batteries". The association, which last year received a £20m government grant and says it is dedicated to "building affordable homes", :mad: has developed a block of 60 shared ownership apartments on the site. But if you are a hard-up house-hunter hoping to put your first foot on the property ladder, take a deep breath.

The biggest of the apartments, with a floor space less than the standard three-bed semi but without a garden, are on sale for between £695,000 and £705,000. It is, probably, the most expensive ever new-build offered by a housing association, yet it still meets the official criteria used to describe "affordable" – and qualify for taxpayer support.
Part-buyers of a 25% share in a flat will have to stump up £2,322 a month to cover the rent and mortgage. The housing association says buyers will need an income of £59,000 to qualify, but in reality even that income, nearly double the London average of £33,850, will leave them with little left over after paying the bills.

There are cheaper one-bed flats in the block – they start at £365,000 – but even these require the buyer to pay £1,209 a month for a 25% share.

Last week housing minister Grant Shapps traded blows with shadow minister Jack Dromey over the number of affordable homes being built in Britain. The Tories say they are up 25%, Labour says they are down. But however many are built, are they really "affordable"?

:eek:

One Housing Group assistant director Matthew Saye says: "Affordable means something that is above social rent but below market levels." That means that as house prices have escalated in the capital, so has the price of "affordable" homes.

rest of the story below
http://www.guardian.co.uk/money/2012/jun/22/affordable-home

It really pees me off that developers are getting tax payers money to keep house prices in London extremely inflated. :mad:

brit1234

jellytot83 wrote: »

Hi guys,

Hoping someone can help de-confuse me please...

My fiancee and I bought a new property from Bovis in September 2008.
We paid £195,000 and bought it with a Jumpstart shared equity scheme, where the builder contributes 25% of the property value as a deposit (effectively). For the first 5 years you pay them nothing, then you pay them 3% interest afterwards or sell and give them 25%.

Now, I'm getting worried as property values have dropped in this area and my property is probably worth £185k now.

What are my options next year when my 5 years comes up?

I think they are:

1) Sell the property, negative equity of not, and the builders take their 25%. We've paid back £5k or so of our mortgage capital, so this would essentially leave us with £7,500 negative equity - meaning we'd need to raise this sort of money to break even.

2) Keep the property and pay the builder their interest. Bearing in mind this is 3% on £48,750 (I presume their equity loan amount doesn't adjust due to market value) the monthly repayment > £850 (!)

3) Magic solution from you guys...??

So, I guess my questions are:

- Do my options 1 and 2 look 'right' enough to you?
- Can you give me an option 3 - which is tastier??

Thank you so much in advance!!

Jellytot

http://forums.moneysavingexpert.com/newreply.php?do=newreply&p=54944109

Just another example of the shared equity time bomb starting in 2013. This will turn out to be a mini UK sub-prime scandal.

Idiophreak

Another link to people who've decided to start thinking about their strategy 4/5 years into the deal. If they'd started planning in year 1, they wouldn't be posting now.

Their maths is also off on option 1.

If they bought for 195k and it's now worth 185k...
The initial contribution was 48.75...they'll now need 46.25 to repay.
Original balance of mortgage was 146.25. According to OP, they've now reduced this to 141.25.

So, 185 - 46.25 - 141.25 = -2.5k, not -7.5k.

I think we should propose magic option 3:
Start planning for repaying the loan as soon as you take it out, or be prepared to pay the interest if you don't.

There's nothing scandalous here at all. The OP was in no way mislead, they just didn't make provision for repaying a debt and are now worried about paying interest at a rate they agreed to.

Idiophreak

Also, I've no idea how they're working their repayments for option 2...But they need to pay "for the second five years there is an annual interest rate fixed at just 3%, payable monthly, on the original sum provided by Bovis Homes"...So that'll be a payment of 121.87/month, on top of whatever they're paying for their mortgage...Not exactly a horrific interest charge on a debt of £48.75k...

Dan:_4

brit1234 wrote: »

http://forums.moneysavingexpert.com/newreply.php?do=newreply&p=54944109

Just another example of the shared equity time bomb starting in 2013. This will turn out to be a mini UK sub-prime scandal.

You said that the Shared Equity Time Bomb will start in 2008, 2009, 2010, 2011, 2012 and now 2013

p.s. love your images

Idiophreak

Just an update, while I'm here, on my current shared equity situation...
Neighbours just had their flat valued, as they're looking to refinance and pay back their equity loan...Value is 10% above what we paid in 2009. If we wanted to, we could now refinance, 3 years in, and switch onto a 90%LTV without having saved a penny for a deposit. For the time being, however, we're quite happy on the nice low rate the 25% deposit affords us and would rather overpay on the mortgage than repay something that's at 0%. Oh, and we're currently paying £420/month less than the rented flat next door. No complaints so far.

bitsandpieces

brit1234 wrote: »

http://forums.moneysavingexpert.com/newreply.php?do=newreply&p=54944109

Just another example of the shared equity time bomb starting in 2013. This will turn out to be a mini UK sub-prime scandal.

Haven't they actually lost less money with the price falls than they would have done if they'd bought 100% of the property? The large debt they took on is clearly a potential problem, but in absolute terms they've lost a bit less than they otherwise might have done.

Idiophreak

bitsandpieces wrote: »

Haven't they actually lost less money with the price falls than they would have done if they'd bought 100% of the property? The large debt they took on is clearly a potential problem, but in absolute terms they've lost a bit less than they otherwise might have done.

Shh, don't go confusing brit....He's firmly under the impression that negative equity only happens to shared equity purchases...

brit1234

Beware shared ownership Service Charges

The thing with shared ownership is people are told its an affordable scheme as you only buy a share and rent the rest. However there is a 3rd payment on shared ownership with the rent and the mortgage payments. These are the service charge.

I am not saying service charges are limited to shared ownership because they are not but they should be taken into account. Service charges on shared ownership properties are not only linked to flats but increasingly added to shared ownership houses.

These service charges can go up fast and make what you thought was an affordable option becoming unaffordable. A latter high service charge can make shared ownership properties even harder to sell than they ar now. Here is a MSE users experiences on rapidly rising shared ownership service charges:

Trapped in my flat by huge service charges...!!

Hi guys,
I have a shared ownership flat in Preston that is half owned by me the other half by the housing association and i've been trying to sell the flat for 3 years but in this time the service charge has gone from £60 a month to £215 a month as the housing association believe that works are required in the near future to fix various issues with the block and fit new windows so i can't afford to live here any more.
The problem is that due to the excessively high service charge no one will buy it even tho everyone that comes to veiw it is keen to buy until the service charge is explained.
I've been to the LVT and they sided with the housing association so i'm stuck here.... i've even offered to sell it back to them at a cheap price or even give it to them leaving me with a £20,000 debt but they refused.I can't even walk out on the place as they said they would chase me for the service charges while the flat is empty anyway by charging my mortage company who will then pass the charges onto me....
I'm at my wits end... this is consuming my life and i feel like i'm trapped here forever..... my life is on hold...!

Has anyone any experience of this type of treatment from a landlord especially a housing association,they are supposed to help low income people are'nt they..?

Please... any surgestions on my next move would be very welcome.

thanks in advance

https://forums.moneysavingexpert.com/discussion/3534855

Just something for first time buyers to consider with shared ownership.

brit1234

Dan: wrote: »

You said that the Shared Equity Time Bomb will start in 2008, 2009, 2010, 2011, 2012 and now 2013

p.s. love your images

No I didn't, prove it.

Scheme started 2008, equity loan repayments 5-10 years after purchase. 2008 + 5 years = 2013

Shared equity problem will come a lot more preminant next year when we pass this date whilst shared ownership people are suffering already.

Baddeley-Chappell says shared equity and shared ownership borrowers are “high-risk” for lenders.

He says: “They are complex models with a combination of potentially higher risk borrowers with more complex needs.

“The risk comes not just from mortgage lending but increasingly reputation and regulatory. There is a strong case to suggest you can lend on shared ownership in a successful way but there are other risk factors.”

Lentune Mortgage Consultancy director Stuart Gregory says there is a lack of demand for shared ownership.

He says: “Every first-time buyer I have seen recently had assessed shared ownership and decided instead to save for a 10 per cent deposit and buy on the open market. Many who have bought homes are finding it a struggle to sell them which is putting buyers off using it.”

http://www.mortgagestrategy.co.uk/latest-news/nationwide-warns-regulations-are-stifling-shared-equity-market/1057488.article

It's good to see that the message is getting out to first time buyers that shared ownership is dangerous and hard to sell. I just hope the ftbs increasingly realise that shared equity and Newbuy is not a brilliant scheme to help them but a con to keep new build prices inflated.