SHAREDOWNERSHIP is FANTASTIC!

St00zer

Running_Horse wrote: »

So why not just buy one outright?

I would also think they are cheaper than the 2007 peak, regardless of inflation.

The ones it might work for are those in an expensive areas getting a forever house.

There is nothing stopping you from buying outright. But let's look at the numbers....

Say your buying a £300k house on shared ownership.

Say you wish to buy a 50% share = £150K

Then assume you put down 50% of your share price = £75k and take out a £75k mortgage @ 3% Interest.

An you pay rent of od 1% of the % of the property that you don't own so £150k * 1% = £1500 / 12 = £125/month

A repayment mortgage over 25 years @ 3% for £75k = Payment of £355.66/month which is the same as paying of £168.16 principal and £187.5 in interest.

Instead of thinking of the rent you pay to the HA on the % you don't own think of it as cheap finance + service charge at £150.

In effect you are paying £125 + £187.5 + £150 = £462.5 in Interest a month. Add on the pricipal you pay of on your mortgage of £168.16 then you get a total monthly payment of : £630.66

Using the same example to buy a £300k house with a £75k deposit @ 3% repayment mortgage, your monthly payments are £1,066.98 which is broken down into £504.48 principal and £562.5 in interest.

Which do you prefer share ownership monthly payments of £630.66 + plenty of disposable income to save or Invest to buy out the other portion of your property or paying £1,066.98 per month and having less disposable income and paying more interest?

I prefer the shared ownership route as once I have paid of the mortgage of £75k in effect I have a permanentm morgage of about 1% of my property.

Where do you get 1% mortgages?

Not only that once I have paid of the mortgage I can use the excess income to buy High Yield 6-7% dividend paying shares, over several years the dividends will cover the rent.

And several years more I would have enough capital to buy out my HA.

Simples.

It seems where shared ownership has gone wrong for individuals are those who buy with low deposits and have financial problems in managing their debts. I think if people pay decent deposits and have steady jobs then this scheme can actually work out very well.

I also think there will be ALOT more takeup of Sharedownership schemes from FTB and this is going to be a more common route to homeownership for FTB, but I do think as time passes the rent portions will become less generous and less subsidised. But those that get in early and have contractual agreements in place it will be difficult for these to be altered at a later date.

St00zer

That's great it works for you and you seem really enthusiastic which is nice in this day and age. Do keep in mind though that each person that signs up to purchase a house using a scheme is directly responsible for keeping house prices artificially high...... ;-(

I actually disagree. IF you don't buy your flat/house what is the alternative? Rent? Well Renting stinks as your effectively paying your landlords mortgage - that is more akin to keeping house prices high then anything else as it is far more mainstream then SO.

Eventually your landlord will have enough equity to repeat the process and buy another place and so on.

Finance has been cheap the last few years, a lot of debt has been paid off. Brits have most of their wealth in property, HMG is not going to allow the masses to go to the wall in the form of sky rocketing interest rates. Financing will be cheap for plenty more years to come so I just don't see house prices dropping much at all whether you have SO or not.

St00zer

The rent reviews in that shared ownership lease are a nightmare. 2% plus RPI every year. The initial rents may look reasonable to you now, but they may look less reasonable to buyers a number of years down the line. Add on service charges and compulsory insurance payments (which are unlikely to be competetive rates) over which you have no control and the monthly payments could quickly become unmanageable.

You are responsible for the full costs of maintaining the property in one of these schemes (whilst only owning part) and then face restrictions if you want to sell.

Shared ownership would never be my choice.

Inflation is expected to drop back next year, it has been mainly led by Oil prices. I don't think Oil prices have further to go, certainly not to the extent where we keep seeing 5%+ year on year RPI inflation in my opinion.

If someones rent is £200 a month and it goes up an extra £20 i.e. 10% it is hardly a disaster. You just miss a couple of Friday night takeaways I suppose. Big deal.

It really is'nt as bad as most here make it out.

I think those that don't get on the ladder in the current period will regret it as Houses are the most affordable in the last 12 years & thye government is helping FTB buy a home. I strongly doubt we will see sky high interest rates like the 80s, the country would go bust. Infact the world would have to be in serious crap for that to happen.

I don't see how the authorities will let that happen, this is the UK not some third world country.

urban_chaos

The reason that I originally posted on this board was because of the issues I was having with the Shared Ownership Scheme I bought into.

I tried to link in my original post but I'm a new user so I am not allowed to.

Basically my service charge is going up by £100 per month and I owe them £400 for the "underestimated" service charge since I've been living there (October 2010).

I had a good deposit
I have a permanent full-time job with the NHS and was able to afford the service charge, rent, mortgage, council tax etc
I was prepared to live in it for the long haul
The property is in central London with a high demand for housing

The amount of stress that I've been under these past weeks is unreal. My dealings with the Housing Association have been pretty awful, they've been mostly unhelpful and unsympathetic

I feel quite bitter about it as I was a first time buyer and put all my savings into this scheme as I needed somewhere to live. I also had a financial interview with the HA before they approved the purchase and now it looks as if I'm going to lose everything

So, no I wouldn't recommend buying into a Shared Ownership scheme to anyone

sonastin

St00zer wrote: »

- 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 think the point is that this wish list applies to so few people who are interested in SO properties that a blanket policy of "Shared Ownership is a bad idea" is going to be right in the majority of instances.

You've forgotten to include
- the rent is reasonable
- the provisions in the lease for rent review ensure that the rent remains reasonable
- the service charge is reasonable
- there are provisions in the lease to permit residents to question the accounting for service charges should the management company appear to be paying inflated prices to related contracting companies and therefore unnecessarily inflating the service charges that the residents must pay
- the restrictions on selling don't make it impossible to sell should the "long term" plan need to change due to unforeseen circumstances.

Throw in the fact that very few SO properties include this sort of flexibility in the leases and becomes easy to understand why this is yet another example of a really good idea badly implemented.

sonastin

urban_chaos wrote: »

The reason that I originally posted on this board was because of the issues I was having with the Shared Ownership Scheme I bought into.

I tried to link in my original post but I'm a new user so I am not allowed to.

Basically my service charge is going up by £100 per month and I owe them £400 for the "underestimated" service charge since I've been living there (October 2010).

I had a good deposit
I have a permanent full-time job with the NHS and was able to afford the service charge, rent, mortgage, council tax etc
I was prepared to live in it for the long haul
The property is in central London with a high demand for housing

The amount of stress that I've been under these past weeks is unreal. My dealings with the Housing Association have been pretty awful, they've been mostly unhelpful and unsympathetic

I feel quite bitter about it as I was a first time buyer and put all my savings into this scheme as I needed somewhere to live. I also had a financial interview with the HA before they approved the purchase and now it looks as if I'm going to lose everything

So, no I wouldn't recommend buying into a Shared Ownership scheme to anyone

Is this the thread?

https://forums.moneysavingexpert.com/discussion/3413061=

urban_chaos

@sonastin - thanks, yes that's the one

Turnbull2000

Not happening to me thank god, but thought this would be worthy of a new thread saying as I often see SO queries.

http://www.guardian.co.uk/housing-network/2011/aug/25/shared-ownership-problem

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.


The housing association, Midland Heart, agreed to refund her initial deposit, but it was not obliged to do so.

Another problem emerged when tenants on a rent-to-buy scheme near the 2012 Olympic site were served with eviction notices in May – one year before their agreements were due to end. The Rent to HomeBuy initiative allows a tenant to rent a new property at below market prices (allowing a deposit to be saved) before deciding whether to buy the home. Again, the nature of their assured shorthold tenancies means that these tenants have no legal recourse.


Anecdotal evidence suggests that first-time buyers, at the bottom of the chain, are unable to ascend that metaphorical ladder not only due to the reluctance of lenders to provide mortgages, but also because of the spiralling cost of deposits.

skater_kat

everything about my SO flat is great, my experience has been 100% positive.

debrag

We are looking at SO as we will never be able to save enough to buy without this option. We are looking for 2 bed and basicaly staying in it for years so location is key. As long as we can get everything (mortgage+rent+service charge) under £650 then we are ok. Being able to save a little as well to eventually buy more shares.

will look into shared equity too.