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SHAREDOWNERSHIP is FANTASTIC!
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St00zer
Posts: 178 Forumite
I have been doing some research on Shared ownership & I think it is a great scheme for first time buyers looking to buy a house/flat providing....
- A decent deposit is put down on the share the buyer buys
- The buyer has the ability and can afford the payments of the mortgage and the rent
- The buyer is prepared to live in the property for atleast 5 and possibly 10 years or longer & is not looking to sell out soon after buying
-The property can accomodate future changes in personal circumstances e.g. larger family size
-The property is in a very good location with high demand for property
I have read this thread with interest : https://forums.moneysavingexpert.com/discussion/3177256
"Shared ownership/equity is a scam"
It is worth pointing out the pitfalls highlighted by opinions4u
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
https://forums.moneysavingexpert.com/discussion/3448053
And also worth pointing out the following :
According to the main test case, that of Richardson v Midland Heart, a shared owner can be evicted for non-payment of rent. Richardson had failed to pay her rent for the share she didn't own. Was she an owner, or a tenant? In the end, the court decided that not only could she be evicted, but she was also not entitled to the share of the property which she had owned, and which had increased significantly in value.
According to the main test case, that of Richardson v Midland Heart, a shared owner can be evicted for non-payment of rent. Richardson had failed to pay her rent for the share she didn't own. Was she an owner, or a tenant? In the end, the court decided that not only could she be evicted, but she was also not entitled to the share of the property which she had owned, and which had increased significantly in value.
http://www.guardian.co.uk/housing-network/2011/aug/25/shared-ownership-problem
The truth is a buyer does not have to buy the remaining share of their property, people in the UK are obsessed with owning their own property.
By only owning a share of the property the buyer still has control of who lives in the property & can't be evicted provided they keep up payments.
If a FTB buys 50% of the property & pays of the mortgage and continues to rent the balance of the property at the subsidised rent they can be quids in. The subsidised rent is only about 1-3% of the equity that the buyer does not own.
On a £200k property * 0.5 = £100K = 1% rent = 1K / 12 = £83.33/month
How is that different from having a 1% interest only mortgage that increases with RPI for the next 25 years?
If the average salary is £1k a month after taxes etc and the buyer is paying £83 in rent/month they have a large chunk of their take home pay as disposable income providing the mortgage is paid off in full on the share you do own.
The individual can then Invest the balance of this cash in the stock market, just buy dividend paying stocks that pay 6-7% dividends/per year & eventually the dividends will pay the rent once you have a big enough investment pot.
Once you have built up enough cash you can use this cash to buy a big house outright and then perhaps keep the SO property as a Mon-Fri close to work place to live or even sell it.
And in the period you have saved up your spare cash whilst paying only 1% rent on the equity you don't own. In effect you have had a 1% interest loan without the heartache of seeing interest rates rise out of the blue from an MPC meeting every month. Where can you get a 1% mortgage? Nowhere unless you was smart enough to buy a lifetime tracker at less then 0.5% above base before the financial crisis and even this is not 'permanent' as when rates rise this will increase your costs.
The great thing about SO is it is a VERY GOOD hedge against property prices, the truth is property prices are HIGH, very expensive. They willl probably drop at somepoint and overshoot to the downside, at what point that is it is hard to call but it will probably happen once interest rates rise a significant amount at which point one can just buy out the share of the property they don't own outright.
I don't think it makes much sense to be holding a large pile of cash waiting for house prices to dorp so you can buy a house at a more 'realistic price' as those that have done that the last 10-15 years have seen the price of houses keep rising and with 5%+ inflation they are in effect seeing their wealth destroyed.
Houses are the most affordable in the last 12 years and adjusted for inflation houses are cheaper then their 2007 peak, finance is cheap when taking inflation into account it is almost as if your getting free money to buy a house.
Please note all these posts are my views only - Please conduct your own research. I am just sharing my thoughts.
- A decent deposit is put down on the share the buyer buys
- The buyer has the ability and can afford the payments of the mortgage and the rent
- The buyer is prepared to live in the property for atleast 5 and possibly 10 years or longer & is not looking to sell out soon after buying
-The property can accomodate future changes in personal circumstances e.g. larger family size
-The property is in a very good location with high demand for property
I have read this thread with interest : https://forums.moneysavingexpert.com/discussion/3177256
"Shared ownership/equity is a scam"
It is worth pointing out the pitfalls highlighted by opinions4u
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
https://forums.moneysavingexpert.com/discussion/3448053
And also worth pointing out the following :
According to the main test case, that of Richardson v Midland Heart, a shared owner can be evicted for non-payment of rent. Richardson had failed to pay her rent for the share she didn't own. Was she an owner, or a tenant? In the end, the court decided that not only could she be evicted, but she was also not entitled to the share of the property which she had owned, and which had increased significantly in value.
According to the main test case, that of Richardson v Midland Heart, a shared owner can be evicted for non-payment of rent. Richardson had failed to pay her rent for the share she didn't own. Was she an owner, or a tenant? In the end, the court decided that not only could she be evicted, but she was also not entitled to the share of the property which she had owned, and which had increased significantly in value.
http://www.guardian.co.uk/housing-network/2011/aug/25/shared-ownership-problem
The truth is a buyer does not have to buy the remaining share of their property, people in the UK are obsessed with owning their own property.
By only owning a share of the property the buyer still has control of who lives in the property & can't be evicted provided they keep up payments.
If a FTB buys 50% of the property & pays of the mortgage and continues to rent the balance of the property at the subsidised rent they can be quids in. The subsidised rent is only about 1-3% of the equity that the buyer does not own.
On a £200k property * 0.5 = £100K = 1% rent = 1K / 12 = £83.33/month
How is that different from having a 1% interest only mortgage that increases with RPI for the next 25 years?
If the average salary is £1k a month after taxes etc and the buyer is paying £83 in rent/month they have a large chunk of their take home pay as disposable income providing the mortgage is paid off in full on the share you do own.
The individual can then Invest the balance of this cash in the stock market, just buy dividend paying stocks that pay 6-7% dividends/per year & eventually the dividends will pay the rent once you have a big enough investment pot.
Once you have built up enough cash you can use this cash to buy a big house outright and then perhaps keep the SO property as a Mon-Fri close to work place to live or even sell it.
And in the period you have saved up your spare cash whilst paying only 1% rent on the equity you don't own. In effect you have had a 1% interest loan without the heartache of seeing interest rates rise out of the blue from an MPC meeting every month. Where can you get a 1% mortgage? Nowhere unless you was smart enough to buy a lifetime tracker at less then 0.5% above base before the financial crisis and even this is not 'permanent' as when rates rise this will increase your costs.
The great thing about SO is it is a VERY GOOD hedge against property prices, the truth is property prices are HIGH, very expensive. They willl probably drop at somepoint and overshoot to the downside, at what point that is it is hard to call but it will probably happen once interest rates rise a significant amount at which point one can just buy out the share of the property they don't own outright.
I don't think it makes much sense to be holding a large pile of cash waiting for house prices to dorp so you can buy a house at a more 'realistic price' as those that have done that the last 10-15 years have seen the price of houses keep rising and with 5%+ inflation they are in effect seeing their wealth destroyed.
Houses are the most affordable in the last 12 years and adjusted for inflation houses are cheaper then their 2007 peak, finance is cheap when taking inflation into account it is almost as if your getting free money to buy a house.
Please note all these posts are my views only - Please conduct your own research. I am just sharing my thoughts.
0
Comments
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I dont know much about it, but have to say I havn't really heard good things.
There's a post on here today form a person saying their rental on a shared ownership property had gone up 15% in one go.
Sounds abit iffy to me.0 -
San09
I have read that thread with interest : https://forums.moneysavingexpert.com/discussion/3451895
The poster should contact their HA and find out why the HA has suggested an increase of 15%....as the user states
I have had a look at the RPI for June 2010 - June 2011 which is currently 5%. Plus 2%, equals 7%. Last year the monthly rent payable on my share was £129.50. I calculate 7% of this to be £9.07pcm. Whereas Bromford propose to put the rent up by £30.03pcm. (I appreciate that this does not sound like much but over a year this is a rise of £108.84 or £360.36!!! And what happens next year when they put it up above the amount stipulated in the contract?!)
https://forums.moneysavingexpert.com/discussion/3451895
But to be honest an extra £30 a month is hardly a disaster, how is it any different from interest rates going up 0.25 or 0.5% for someone with a mortgage?0 -
Is this a parody?Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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Turnbull
I think if a buyer can meet the following criteria :
- A decent deposit is put down on the share the buyer buys
- The buyer has the ability and can afford the payments of the mortgage and the rent
- The buyer is prepared to live in the property for atleast 5 and possibly 10 years or longer & is not looking to sell out soon after buying
-The property can accomodate future changes in personal circumstances e.g. larger family size
-The property is in a very good location with high demand for property
Then Sharedownership can work out really well for them....
Once they own 50% of the property outright, they could even consider taking a Buy to let mortgage to buy out the housing association and then just pay of the mortgage as they would do on a normal mortgage with the help of a lodger if they wanted.
Basically I see SO as a route to cheap finance providing the scheme is very affordable to the buyer from the outset.
If your only putting down a 10% deposit of the share you wish to own and the don't plan to live there for atleast 5 years and the location is not that great I would steer well clear of a scheme like this.
Basically one needs to avoid getting trapped in this scheme, they need to see the light at the end of the tunnel right from the outset & not see it as a scheme to get on the property by any means possible...0 -
I am applying for one of these at the moment, check my thread in this section!0
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Just a thought, I have a shared ownership flat and DO NOT pay any rent on the 25% I don't own. The deal is when I sell they get 25% of the sale. Sounds good to me....other than the fact that it's nearly impossible to sell in this market....but everyone would have the same problem shared ownership or not.DMP Mutual Support Thread Member No 19017/05/08 - Total on DMP: £10025.7007/05/14 - Total on DMP: £1666.20 DFD: July 2017!!Baby Tomos born 5th June 2009 - 6lb 5oz :jWeight Loss Target - to lose 60.8lb by NYE 2015 - 37.6lb TO GO0
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Just a thought, I have a shared ownership flat and DO NOT pay any rent on the 25% I don't own. The deal is when I sell they get 25% of the sale. Sounds good to me....other than the fact that it's nearly impossible to sell in this market....but everyone would have the same problem shared ownership or not.
Thats a great deal you have there!0 -
Just a thought, I have a shared ownership flat and DO NOT pay any rent on the 25% I don't own. The deal is when I sell they get 25% of the sale. Sounds good to me....other than the fact that it's nearly impossible to sell in this market....but everyone would have the same problem shared ownership or not.
Jvic what location is your property in ? I think if you can get a very good location then you should'nt have problems selling the property.0 -
I dont know much about it, but have to say I havn't really heard good things.
There's a post on here today form a person saying their rental on a shared ownership property had gone up 15% in one go.
Sounds abit iffy to me.
mine goes up a set percentage each year. I can't remember exactly how much but when i bought the place 7 years ago i was paying £50 a month and now it's £57.0 -
Just a thought, I have a shared ownership flat and DO NOT pay any rent on the 25% I don't own. The deal is when I sell they get 25% of the sale. Sounds good to me....other than the fact that it's nearly impossible to sell in this market....but everyone would have the same problem shared ownership or not.
You have Shared Equity rather than Shared Ownership...I have that too. Soooo much better than Shared Ownership as you can sell the property to anyone when you choose to sell up!0
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