Shared ownership/equity is a scam.

AliceBanned

leveller2911 wrote: »

The percentage of people with Shared Ownership who have managed to staircase to 100% in the last 10 years is less than 5%

I don't see this increasing at all. The main usses seem to be affordability and associated costs of staircasing such as valuation fees,and mortgage fees.

Its a little long winded but def worth a read.

http://www.cchpr.landecon.cam.ac.uk/Downloads/Shared%20ownership%20second%20hand%20market%20-%20proofed%20final%20for%20publication.pdf

I think the "5% managing to staircase" issue might be misleading.

Having moved into my SO property I look at my options over the next few years, and one would be to staircase in 2-3 stages, possibly up to 100% depending on values not rising too fast for me to do this, and the other would be to sell the SO (it is in a convenient and popular area and flats in general sell quickly) and buy 100% on the open market.

What i am saying - several months later I know as I was re-reading this thread, is that perhaps more than 5% could staircase but choose not to, and perhaps many bought SO to get some equity but could never buy the full amount due to their salary being too low, but could buy elsewhere. After gaining some equity due to rise in value (depending on the area of course) they then had a bigger deposit for the next place. Just a thought.

Aside from values, I like my flat and it is in the perfect area for me, so I don't regret anything.

phemark

Idiophreak wrote: »

brit isn't really against shared ownership at all...he just wants house prices to come down, by any means...and he thinks that "spoting cr*p" about shared ownership all over the internet to anyone who'll listen is him "doing his bit" in the war on prices.

I can't urge people strongly enough to ignore brit's "contributions" to this thread - they're motivated purely by cold self-interest and do nothing to help people who're genuinely in need of help or advice.

I have just read all 29 pages of this thread (in a week or so). It was quite interesting seeing people come and leave, while brit posts random "failures" of SO/SE home buyers, which, in most of the cases were the fault of their own, due to buying into negative equity, not understanding a contract, or not thinking about how to pay a loan in SE for the first 8 years of 10, or failures which had nothing to do with SO/SE.

I have to thank others, especially Idiophreak who didn't go to brit's level of posting random nonsense and using logical arguments and examples to explain and help people out. So many times reading this thread I really wanted to just shout at some people repeating same things over and over again just for the sake of trolling (good thing i was reading historical comments )

Anyway, this thread helped me understand that even though SO/SE isnt perfect, it is not a bad thing, if you understand your current and future financial situation, contract you are signing and property you are buying.
In a case, brit helped with this too, because all of his bad examples happened to people who did what I wouldnt do anyway, so it wont affect me:)


P.S. And I agree with you Idiophreak, brit wants to make house prices drop, but I just cant understand why (and its not that he wants this for other people)
P.P.S. This thread started in 2011, but brit is still saying 5 years remaining to a time bomb (he even changed his pictures from 2013, to 2018:) )

Idiophreak

phemark wrote: »

I have just read all 29 pages of this thread

This must have been very draining for you

The thread rumbles on slowly, as does the world outside it. Every so often someone posts some nonsense, a few people dispute it, then we carry on....can't imagine it makes great entertainment!

Anyway, bit of an update from my situation...

It's now 5 years since I bought my flat on Shared Equity. In that time, the value of the flat has increased by around 25%.

I could now, therefore, remortgage if I saw fit and move to a "normal" arrangement on 80% LTV.

This is with no magic, no overpayments, no savings...I've lived in a lovely flat and paid half the equivalent rental for all this time. I could have been saving hard to repay the equity loan, sure, but house prices have been moving nicely, so I've spent all my money on holidays, getting married and general partying instead.

Now I'm looking to move up the ladder a little and I have sufficient equity to put down a 10% deposit on somewhere twice as expensive, if I wished...or 15% on something more modest...but, the real question now is...Do I go shared equity again?

I always assumed I wouldn't bother with it again and would become a "normal" homeowner at this point...I also thought that the Help to Buy scheme was a bit of a waste of time due to the fees applied after five years...but I've done a little more reading now and, on the face of it, it's hard to see why I wouldn't use it.

At the moment, I could afford a 15% deposit on a new place...if I took an extra 10% from Help to Buy I'd be on 25%, have a smaller mortgage and a lower rate. I'd need to remortgage again in 5 years, and/or save up in the meantime...but I don't really see what I'd lose there. My bets would also slightly hedged in the event of a house price collapse. (fingers crossed, eh brit )

So, that's my dilemma at the moment. I have to run the numbers on the H2B mortgages and see if the rate's really much better etc...and I have to make sure I don't overpay for the new place and that it is a good investment...all the normal checks you'd do when buying a house anyway...but if everything adds up, I think I may well be involved in the scheme for a little while longer yet

phemark

Idiophreak wrote: »

This must have been very draining for you

The thread rumbles on slowly, as does the world outside it. Every so often someone posts some nonsense, a few people dispute it, then we carry on....can't imagine it makes great entertainment!

Anyway, bit of an update from my situation...

It's now 5 years since I bought my flat on Shared Equity. In that time, the value of the flat has increased by around 25%.

I could now, therefore, remortgage if I saw fit and move to a "normal" arrangement on 80% LTV.

This is with no magic, no overpayments, no savings...I've lived in a lovely flat and paid half the equivalent rental for all this time. I could have been saving hard to repay the equity loan, sure, but house prices have been moving nicely, so I've spent all my money on holidays, getting married and general partying instead.

Now I'm looking to move up the ladder a little and I have sufficient equity to put down a 10% deposit on somewhere twice as expensive, if I wished...or 15% on something more modest...but, the real question now is...Do I go shared equity again?

I always assumed I wouldn't bother with it again and would become a "normal" homeowner at this point...I also thought that the Help to Buy scheme was a bit of a waste of time due to the fees applied after five years...but I've done a little more reading now and, on the face of it, it's hard to see why I wouldn't use it.

At the moment, I could afford a 15% deposit on a new place...if I took an extra 10% from Help to Buy I'd be on 25%, have a smaller mortgage and a lower rate. I'd need to re mortgage again in 5 years, and/or save up in the meantime...but I don't really see what I'd lose there. My bets would also slightly hedged in the event of a house price collapse. (fingers crossed, eh brit )

So, that's my dilemma at the moment. I have to run the numbers on the H2B mortgages and see if the rate's really much better etc...and I have to make sure I don't overpay for the new place and that it is a good investment...all the normal checks you'd do when buying a house anyway...but if everything adds up, I think I may well be involved in the scheme for a little while longer yet

Good to hear:)

I myself am in a "research" phase at the moment. I think I have a good understanding about SO/SE/buying outright, based on reading on the internet, forums, talking with Housing Associations (some were very nice in answering questions, some, however, just wanted to sell me a flat right away).

I think my next step will be to speak to an independent mortgage advisor to see how much I could borrow from a bank. I know that I wont be able to afford full mortgage, therefore I will probably need to take SE if possible, or SO if I'm lacking. Ideally, we would like to get a semi(new) build, 1bed flat in a good location (~looking at Greenwich now), and they cost ~300k.
At the moment, me and my GF are earning ~50k combined, paying 800 rent and saving 600 a month (we are living further away, in order to save). We would have ~15k deposit. So, if we provide 15k deposit, SE gives 20% which is 60k, then we need a mortgage of 225k, which would be ~1000pm+service charge (based on NatWest calculator), which we could pay quite easily, as that is less than our current rent+savings. However, I dont know if banks would lend 225k to us, based on our ~50k salary. That's why I will try to speak with a mortgage advisor first, before I start looking at SO.

P.S. We would still save in order to prepare for loan repayments in 5 years, and our salaries are likely to increase too.

kingstreet

If using HTB - EL, you need to add 3% of the equity loan and the ground rent and service charges as costs in affordability calculators.

river_storm

[FONT=&quot]I am in a similar position as loads of other 30 something, professional couples.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]My husband and I have been saving for years to try and get a deposit together to buy a property, but with house prices increasing a the rate they have been, our dream of buying a property outright has now completely slipped out of our hands.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]As such we have very reluctantly started looking at shared ownership properties and have discovered a much “darker” side to SO, than the glossy brochures banded around by the HA / Developers would like us to believe[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]First things first, and this is the most important part of SO that you need to understand.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]There is no such thing as “shared ownership”. This is a myth that is being sold to thousands of people. No matter how large the share you purchase in the property, you DO NOT own any part of that property. You are merely buying the lease and have no stake in the property. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]The Housing Association remain the owners of the WHOLE property up to the point where you buy 100% of the property.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]The case that brought this very much to the attention of the legal world was Richardson vs. Midland Heart Ltd (2008). As I am new to MSE, I am not allowed to post links, but if you Google it, you will find a lot of information on this case.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]From this case, you will see that the 50% owner of the property (in the case Mrs Richardson), who paid the full £29,995 cost for her 50% share in the property outright and continued to pay rent on the remainder for a further 10 years, lost everything because she fell behind on her rent for 2 months.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]“The second consequence is that the landlord is then entitled to retain for itself the whole of the tenant’s capital investment in the property.”[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]“The householder was not, it seems, the owner of a half share in the property, paying a rent on the other half share that the association still owns. There is no shared ownership at all. What the householder owns is the lease and nothing else, and once the lease has gone then so has the householder’s stake in the property. It is the way these two consequences intersect that makes the result so unpalatable. Once arrears have accrued, the tenant only has a short window of opportunity to pay the debt or lose the whole investment.”[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]I cannot stress how important it is that all people considering SO need to be aware of this. It doesn’t matter who the HA is, this applies in the vast majority of cases and I find it quite unsettling that solicitors do not bring this to the attention of buyers during the legal bits of the buying process.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Pros of shared ownership (If you could call it that):[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]A minimum of 5% deposit is required on the share that you are purchasing[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]In some cases, this allows you to “buy a share” in a property that you wouldn’t be able to afford on the open market[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Cons:[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]New builds and resale’s, which are normally new builds, are way overpriced for what you get [/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]Landlord control (i.e. the HA). You are not allowed to make any changes to the interior of the property (even minor changes) without the express prior written consent of the HA (for which they charge a fee of no less than £75 and in some cases, £150 + VAT per item). These changes also need to be carried out by qualified tradesmen (no matter how small the piece of work is), s[/FONT][FONT=&quot]o, DIY for anything other than a coat of magnolia is going to be out of the question.[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]It is also important to note that any improvements that are made to the property which leads to the value of the property increasing (let’s say an improved kitchen which you have paid for) – the HA will have a percentage stake on it. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]For example, if you “own” 50% of the property and you have done work which increases the value of the property by £2K. When you sell the property, £1K of that additional value goes straight to the HA, even though they have contributed nothing to the improvements that have been made to the property which led to the increase in value.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]There are limited amounts of Banks / Building Societies that offer SO mortgages. Those that do, charge high interest rate on the mortgages and higher mortgage arrangement fees due to low deposit paid. The Banks & BS still very much see SO properties as a high risk.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]No control over rent or service charge increases. [/FONT][FONT=&quot]E.g. rent starts at 4% of the original value of the equity (per year), but each year it is increased by RPI + 1%. In other words, every year you get an inflation busting rent rise.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]You are 100% responsible for all maintenance and repairs to the property, inside and out..[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]There is the possibility of large maintenance bills, especially in flats. [/FONT][FONT=&quot]On blocks of flats maintenance can be very expensive, and you do not get a say in whether it is done or not. If the landlord wants it doing, it gets done, and you get the bill. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]If it's major work like replacing external windows, then it can be a big bill. E.g. people who had bought their council flats, and had lived in them for a further 5 years, suddenly one day got a letter saying the external windows in the block all needed replacing - a bill for the work was enclosed £15k per flat, payable within 30 days. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]At least in a block with a high proportion of 100% owner occupiers, there is likely to be a residents association, where such matters will get appropriate discussion and residents approval, which is likely to include saving funds for several years (or a communal business loan, to be repaid over a few years). In these shared ownership blocks, or in block with large absentee landlord owners, the top landlord's decision is final.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]You are not allowed to rent out (sublet) bedrooms or even the whole property, should you fall on hard times or need to leave the area due to work commitments etc.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]You're obliged to sell back to the housing association as a first resort and for a period (usually around eight weeks), the housing association has the exclusive right to market the property. The effectiveness of housing associations in marketing property does vary, but many shared owners feel that they don't 'sell' as effectively as an estate agent would for those first two months. [/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]Don’t think the HA are doing you any favours by marketing your property for 8 weeks. You will need to pay them a sellers fee, usually 1% of the whole property value ![/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]You can only sell to certain people, i.e. first time buyers, people who meet the HA financial eligibility criteria etc etc.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]Even if you own 100% of the property, most HA have a clause that state for a period of 21 years after you have bought the full property, if you want to sell the property, you need to give them first refusal and sell through them.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]Depending on the property you have bought (flat / house), you are still liable to pay service charges etc. to the HA, even if you own it outright.[/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]If you do want to staircase and increase your share of the property, you have to have the property valued through the HA, normally at a cost between £500 - £700, plus you then have to pay full solicitors fees again, as you are changing the lease and are technically going through the whole “buying process” again. You might also have to pay further mortgage arrangement fees etc., depending on your mortgage.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]So if you are thinking of increasing your share by 10% or 15% increments at a time, this will work out to be very costly ![/FONT]
[FONT=&quot] [/FONT]
· [FONT=&quot]If you fall behind on your rent, even by a small amount, the HA can impose a possession order, which means you will lose all your equity and the property and will find yourself on the street with nothing to show for all they money invested in the property and a destroyed credit rating.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]If you are considering buying a SO property, ask the HA if you could have a copy of the lease to read before you make any decisions as this is where the real truth of the matter comes out.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]HA differ all through the country, but the main principles remain the same, so approach SO armed with all the facts and make an informed decision.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]My personal opinion is, as long as you pay all your bills on time, have no intention of making any changes to the property (even minor), are willing to have all the responsibility of a home owner, with none of the rights, or have no intention of selling / moving, SO if probably an OK option. [/FONT]

leveller2911

I agree with most of what you say but if we didn't have Government intervention with these Schemes then the housing ladder would stall because prices are too high. Now if the ladder stalls then either people would just stay where they are or if they need to move then prices would fall to an affordable level.
The housing market will never find its true level until Governments stop subsidising it.

As you say land is a finite commodity so do you think if the Government gave the green light to developers to build 200,000 houses each year for the next 10 years they will actually build them?.
I think developers will restrict supply of new houses to maximise profit margins. No point flooding the market with cheap affordable houses if your profit margin is lower. Especially given the fact that the supply of good quality building land is limited, no point using it all up with affordable housing.

Ulfar

This is why we need a government that will build large scale social housing.

I also want to win the lottery.

I know which option has the highest chance of happening.

leveller2911

Ulfar wrote: »

This is why we need a government that will build large scale social housing.

Which Government would that be?..

The current lot aren't interested unless they see £££ signs and the last lot who were in Government for 13 years did next to nothing too. They allowed Housing Associtaions to build a few thousand then changed the funding criteria so HA had to get their funding from the markets..

brit1234

Bumping this thread. Lots of things have changed over the last couple of years. Now in addition to shared ownership and shared ownership we have Help to Buy 1 and 2.

Personally I don't believe these schemes based on the evidence actually help first time buyers but actually help builders to keep their prices inflatted for benefit of builders only.

What's your thoughts?