Shared ownership/equity is a scam.

AliceBanned

Idiophreak wrote: »

Really? I've not come across a scheme that prevents you from staircasing to 100% before and, in a word, EEW!

The big problem with that is that you can only ever sell it as a shared ownership property...which greatly reduces the number of buyers available to you and, most likely, the price you'll get for selling. It also means you'll never be free of this extra "partner" in your property, no matter how long you stay there. I'm no expert in these things, but that sounds like a fairly ugly condition to me...

There are a few such schemes. I think it depends on the property whether it will reduce reselling options. This is in a fairly expensive area and there are few other shared ownership flats around, so it may be snapped up more quickly. Some people do advise not buying too many shares if your intention is to sell on; it can work both ways I think. I would prefer the option to go to 100% though, having said that!

kkqd1337

I don't know if this is right place to post this question but I want to buy a property in London and want to do it sooner rather than later and shared ownership i thought was a way for me to do it. however seeing this thread has made me nervous.

i'd like to ask the people so against shared ownership what they do recommend someone like me should do. here's my typical story...

I currently rent in East London, a 1 bed property for around £1,000PCM, trying to save money is therefore difficult. I thought it would be best if I could buy a property ASAP, paying a similar amount monthly but I would as least be contributing to MY OWN mortgage rather than my landlords... and if shared ownership is a means of doing this then surely it is a good thing for me?

A 1 bed property in my area goes for around £220-£250k currently i have £25k savings and earn £30k/yr. So my problem is getting a mortgage for more than £140k because of my salary limiting me to a property with a value of £165k (basically a garage in my area) - I have however just started a new career and within 3-4years i will quite reliably be earning £50-60k.

So I thought a shared ownership property would allow me to get a place NOW, start paying my own mortgage and stop furnishing my landlords pockets, and I should be able to take on the full mortgage in 4 years or so.

My only one foreseeable problem would be if I needed to move house before I could take on the full mortgage and so not be able to rent it out and move.

If all went to plan long term i'd want to buy this property - live in it for 5years or so - then rent it out and move elsewhere.

I thought it all sounded like a good plan to me? am i wrong?

I'm expecting some may tell me to wait 4 years until I earn more to get a bigger mortgage - but why should I when I can buy now with shared ownership?

richardw

Kkqd1337, in 3-4 years how likely is it that you may have a life partner to have a joint mortgage with?

kkqd1337

richardw wrote: »

Kkqd1337, in 3-4 years how likely is it that you may have a life partner to have a joint mortgage with?

haha that made me laugh

i'm 28 at the moment - I want to get moving and not really rely on what may or may not happen with my relationships

anyway - its not going to happen in the foreseeable future

kafkat

Hey guys, my girlfriend and I have recently been considering purchasing a shared ownership flat through the First Steps scheme. Just been reading through this thread and it's been interesting. If anyone can offer their advice that would be brilliant. I'm basically trying to objectively look at the pros and cons of this scheme and decide if it is worth it when put against the prospect of wasting all my money on rent for the next few years, not being able to save anything.

At the moment my girlfriend and I pay around £1000 pm on a 1 bed flat in South East London. So although there is relative freedom to move around when the contract ends, that is around 12,000 pa just gone, wasted, without being able to save much at all. Going much lower than this in monthly rent and the flats get very grim and depressing very quickly, it is not how I'd like to spend the next few years.

So we like the building/estate we are currently renting, there is a SO opportunity on a flat in this building, priced at £210,000. Note that this is not a new build, we would be buying from a previous shared owner.

So, if we went for this, at a share of 25%, it is estimated that our outgoings on the flat would be around £600 pm.

Rent - £200
Service Charge - £100
Mortgage - £300

Immediately we would be saving £400 pm, or £4800 pa.

Yes, service charge and rent will increase each year, but surely this is the same as renting a flat? If we went full ownership we would still need to pay this service charge. Also, as people have been living there for the last few years, we would have heard of extortionate service charges in the building surely?

Anyway, we are thinking of using this as a way of saving up a deposit for larger flat/house down the line, in 4 years, with just the saving between renting and part buying, we could save approx. 20,000 in 4 years, the rate we're going now we would have nothing saved in 4 years time.

It seems to me the two main cons are:

1: Not being able to sublet.
- Yeh, this is crap, but for my industry, all the work in the UK is based in London, and my gf's job is almost untouchable, so I feel this is not a huge issue.

2: Possibility of getting 'trapped'
-This is my main concern, and an aspect of the scheme I am not sure I understand fully. People in this thread have mentioned that if the HA's estimated value of the flat is higher than others in the area, you are effectively trapped. From reading the HA's FAQ they mentioned that after an agreed timeframe we would be able to sell on the open market. How likely is it the possiblity of getting trapped? Has the scheme changed at all to help prevent this situation? The area we are in seems to be constantly growing more popular, and I find it hard to see this changing, is it a very rare case that people are unable to sell?


I can see where people are coming from when they label this scheme as a 'scam', the downsides are quite massive, taking full ownership responsiblities without any of the benefits (I heard the HA are even narcky about painting the walls!), but living and working in London, I just feel at the moment this is potentially the best opportunity available. Yeh we could find a much cheaper flat to rent, and save that way, but as I mentioned, they get grim very quickly as the price drops, and the areas/buildings can get a lot rougher I'm sure.

So yeh, if anyone has any advice that would be brilliant, I feel very confused at the moment.

Thanks in advance!

richardw

How much cash have you got kafkat?

kafkat

richardw wrote: »

How much cash have you got kafkat?

Hey, well I don't really have any savings, but my gf's parents are willing to 'gift' us money for the deposit etc.

As for salary, I'm on £25,000 pa and my gf is on £27,000 pa. Hope that helps some.

Also I found out the HA we would be dealing with is considered a 'Charity/Not for Profit', does this actually mean anything?

fionajbanana

Problem with many young people is:
. They can afford to get a mortgage and pay pcm, but cannot put down a deposit
. They have a deposit - mainly from inheritance and saving a lot when living with their parents, but due to their salary, unable to get a mortgage to cover a 1 or 2 bed property


The latter applies to me as my salary is £13.5k pa. I did inherit a lot from my late grandmother and bought a place with my ex and putting down the deposit down with my own money. I also signed an agreement that the deposit was mine. A couple of years later, I dumped him and sold the property for 8.5% more than I bought the place for. Placed the money into several high interest accounts and put away about half of my pay away into more savings. My parents only wanted £100 board and it was another £120-140 for mobile, car insurance and fuel.

I was bored one day and discovered some new builds with shared ownership 15 min drive to work and the rest is history.

richardw

Kafkat, perhaps research what a mortgage lender may need with regard to gifted deposits and assess if your gf's parents would comply.

fionajbanana

Kafkat my parents recently purchased an additional 20% share for my place. Their solicitor told them its classed as a gift. If both die within 7 years then it would be included in their estate and subjected with inheritance taxes. My parents' house and savings are more than the threshold. Though they are 63 and 65 respecively and 2 of my grandparents died aged 87 and 86 plus have a grandmother aged 85.