Shared Equity with Persimmon

littlewebby

Ok so here's the deal:

Own 100% of the property
Pay 80% of the asking price
5 year payment and interest free loan for the other 20%
After the 5 years is up either buy remaining 20% at market value or continue with the loan for another 5 years paying interest at 1.7%
After the 10 years is up you would have to buy the remaining 20% at market value.

I've read a lot of negative reviews on shared equity schemes and can definitely see the pitfalls. There is the risk that you might end up in the situation where you can't afford to buy the remainder or the value of the property will increase and you will end up paying over the odds. However this is my situation and why I'm in two minds. I'd appreciate advice/opinions.

Me and my partner have been private renting for about 10 years (renting together for 6). We do not have much savings as we have had to move every year or so and have been paying off our debts. We both have secure jobs and have a joint income of just over £60k. We're in our early 30's and would like to get married, settle down and start a family, but unfortunately can't afford to do it all.

We have a £10k deposit but that is not enough for a mortgage these days. We now earn too much to be eligible for any key workers or government schemes. However we are eligible for the offer mentioned above. We could stay in rented acommodation and continue to save, which would take a few years and delay starting a family or we could go into the above scheme and use our disposable income to save to pay off the 20% balance.

We are planning that the home we will buy will be our family home for many years. We're sick of renting and having to move every year or so when the landlords choose but a little scared of getting into a scheme like this.

Any thoughts?

Thanks - x

brit1234

Here is the link to the forums main shared equity/ownership thread. Have a read to make sure you know what you are doing.

https://forums.moneysavingexpert.com/discussion/3177256

Personally I believe you will be buying a very overpriced home, and lose you £10k equity in a few months with the price falls.

I think you will find that most of the people here find shared equity a bad idea. Your better off saving a bigger deposit and enjoying the price falls.

The article below talks of a 20% fall in prices, that is the same as your equity loan, however I reckon your newbuild will be more overvalued than that.

http://www.newstatesman.com/blogs/david-blanchflower/2011/04/house-prices-levels-rates

poppysarah

littlewebby wrote: »

Ok so here's the deal:

Own 100% of the property
Pay 80% of the asking price
5 year payment and interest free loan for the other 20%
After the 5 years is up either buy remaining 20% at market value

Say it's £100 now so you pay £80 and in 5 years they revalue it and market value is £80 ...

Do you still owe £20? Or is the 20% now 20% of the original price, or the then current market value,

What it after 5 years it's only valued at £70? You have a mortgage for £80k (minus what you've paid off) ... so do THEY owe you money?

What they actually mean is "our houses are too expensive but we want you to buy them anyway"

TrickyDicky101

poppysarah wrote: »

What they actually mean is "our houses are too expensive but we want you to buy them anyway"

I would reiterate this sentence: in principal there's nothing wrong with shared equity. In practice, the reason why these options exist is because the houses are overpriced and this is one way to obfuscate the issue for buyers and get them to shell out for the property.

poppysarah

TrickyDicky101 wrote: »

I would reiterate this sentence: in principal there's nothing wrong with shared equity

But if prices were sensible there would be no need for it.

It is a snake biting it's own tail ...

myhouse_2

Nothing against shared equity schemes under the right conditions, but I'd be very wary of any scheme that forces you to buy the remaining equity at a certain time in the future. What happens if you can't pay exactly at that time - can you defer or is there a penalty? You might divorce/lose your job/etc weeks before the 10 year deadline. What if you move house after 3 years - any complications caused by that?
My advice is to pay off your debts, save a better deposit and then buy.
Alternatively push the builder hard for a big discount that makes it more worthwhile for you.