Shared Ownership

sue2510

Hi We are looking at buying through a shared ownership deal on a new build home. To my untrained eye it looks like a great way to get on the housing ladder, as we wouldn't be able to raise enough with a convential mortgage.

However, is it too good to be true? Am I missing something very obvious??

We can afford repayments, will be able to 'staircase' eventually, will have no need to sell in the near future.

Any very basic advice that the smiling people in suits haven't told us would be very gratefully received, thanks

Sue

jngothi

Hi Sue,

Firstly I think most people dont prefer or suggest the SO schemes because they are too complicated and moreover its NOT affordable housing as it should be. All it is for the builders/developers and the government to make money.

I looked at a 2 bed flat in my area for 375K. Seriously!! They must be joking..

Just make sure you gauge your requirements carefully and if you really cant wait for a few more months & save more deposit?

With regards to staircasing each builder have their own rules, but as I understand after 3 months you can staircase by any amount. Preferably do it in 1/2 go as there are fees involved like legal etc.

Its very strange I am asking you to be careful with regards to go for a SO, but I am myself being tricked into it because of allocated parking, beautiful view, free gym membership and a conceirge service.

But yes, its very very exciting paying for your own mortgage rather than for someone else's. And life is too short, so if you dont make a move now, it might be late. So take your step quickly, but think hard about it.

Hope this helps..

Thrugelmir

sue2510 wrote: »

However, is it too good to be true? Am I missing something very obvious??

A lot will depend on the actual scheme.

Post up the details and let us chew them over.

scheming_gypsy

I didn't find shared ownership complicated.
My house was £127,000 and i own a 60% share of it so i got a mortgage for 60% and i pay £57 a month rent (including building insurance) on the remaining 40%. That's for a 3 bedroomed new build 'mid mews' in Preston.
If i sell then I have to try and sell via the shared ownership scheme first but if i can't, i can then sell normally and the HA get 40% of the sale price whether it's higher or lower than the initial investment..

Not sure how it's a way for the builder to make money as they just got the build value of about 69k... Yes the HA are making money but it's still affordable housing ALTHOUGH not all are as cheap as mine as i've seen some with silly rent - 4 / 5 / 6 times what i'm paying

opinions4u

I'm not a fan.

1) Mortgage finance is often limited to a handful of lenders making rates uncompetitive and remortgaging difficult
2) Raising finance to staircase later on can be difficult or impossible
3) Housing associations often have inflexible terms around their side of the arrangement
4) Sellers often struggle to find buyers for such properties when they want to move on
5) If house prices grow significantly it can put the next share purchase out of reach
6) If house prices fall, your existing negative equity makes buying the next share massively difficult unless you are cash rich
7) You have a double risk of default - failure to pay rent or mortgage can cost you your home

If you can't afford a full house, rent.

Remember, housing associations and builders want to sell you the property. Lenders want to lend you the money. It is all shiny and nice for them. Probe every potential pitfall closely if you are still thinking of going ahead.

purplelila-2007

Shared ownership has all the pitfalls of homeownership and none of the benefits.

For example - any costs of repairs etc you will have to foot fully yourself.

Any alterations/ extensions etc you would have to gain permission from the housing association .

It's a lot harder to find sellers as well . Why would someone want to work paying the mortgage and end up owning a quarter of a flat ???

charleyroo

Just to put my two pence in.

There are quite a lot of differences between shared ownership and shared equity.

My experience was;
Purchase price £117,000, mortgage of £77,805. I bought shared equity with a housing association on the open market (a very rare opportunity now I believe). I picked the property - a 1900 3/4 bedroom terrace in Wales.
Rates aren't always uncompetitive. I got a 3.59% fix in March... better than the 5 or 6% a lot of first time buyers face with low deposits. The only pitfall here is there are hardly any (well, none that I could find) long term fixes. I would have taken 10 years if I could! So there is an argument that the range of products is smaller, but I didn't find the rates on offer to be too shabby at all.

Every time I make a significant improvement to the property I write to the HA and list costs/quotes etc. When selling, this will be deducted from their profit (obviously I hope for a profit) at valuation when selling, ensuring I keep 100% of the fruits of any work I do. Of course, the rest of the profit OR loss is shared 70/30.

I pay no rent, or interest, and am under no obligation to ever pay back the loan (until my death!) but I am also entitled to pay the loan at any time (only it must be in full, not part)

I can sell on the open market when the time suits me.

This scheme suited me because due to my OH's adverse credit history the max mortgage I could obtain on my own was around £100,000 at the time. We were renting, so the saving was going quite slowly, and also the type of properties near us for around the 100k mark all needed some work doing - which financing for would be difficult given that the deposit was forming so slowly anyway.

We thought long and hard because you do read everywhere that these schemes are a scam, but I think we were very lucky to get quite a good SE scheme. The best bit was that we are comfortable with what we have to pay on the mortgage (and as only my income was taken into account it gave us some confidence that our own affordability sums were reasonable), so much so that we are able to overpay our mortgage every month and continue saving at the same speed as when we were renting.

I do believe though, that the builder schemes are a bit frightening - if you don't have the 30% now, what is going to happen for you to have it in 5 years when interest starts to be added? I also find that some SO schemes' rents are a bit high sometimes. And to further babble on (!) I disagree with owning 25% - 50% of your property - in these circumstances I believe that there are more pitfalls than advantages, especially as most of these type of schemes seem to include flats with high service charges, ground rents etc so the buyer is stretching him/herself from the start with little room to save on top. However, this is is only a generalisation; every scheme seems to vary its conditions slightly and some can be advantageous.

OP, if you provide a few more details around the scheme and TC's someone may be able to provide a good assessment