SHAREDOWNERSHIP is FANTASTIC!

St00zer

vesimsr

I think shared ownership can work quite well for individuals if they meet the following criteria in my opinion :

- A decent deposit is put down on the share the buyer buys (20% atleast of the market value of the property in my opinion)
- 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

Based on the above ...

Deposit of £66K
A person with a salary of £30k net takes home £1,896/month, £35k salary takes home £2,180/month and a salary of £40k takes home £2,463 ( I have used 3 salary figures as these schemes have a min income to buy etc )

A 45% share @ 148,500 - £66k deposit = mortgage of £82,500 @ 3% interest rate over 25 years this is a monthly payment of £391.22

Total monthly payments currently: £416+£250 + £391.22 = £1057.22 / month

This leaves the £30k a year earner £838 of disposable income to pay bills/food/clothes etc, £35k earner £1123 of disposable income to pay bills/food/clothes etc & £40k earner £1406 of disposable income to pay bills/food/clothes etc.

Clearly £40k earner is in the best position with the ability to withstand big hikes in monthly costs. I suspect mr £40k would still be comfortable with hikes of £3-400/month in costs, whereas mr £30k could become uncomfortable with such rises as a £3-400 to pay utility bills, council tax, food, clothes etc could potentially push my £30k over the edge.

If it was me I would'nt go for this scheme in this scenario if I did'nt have a 20% deposit minimum & If I did but I was only earning £30k I would'nt got for this scheme. I would feel comfortable if I was earning £40k and had atleast a 20% deposit. As I think it would be affordable and shocks such as rate rises, rent/service charge hikes, utility bill rises etc can be absorbed.

Based on the information you have given me in PM If I was in your shoes I would look to build a bigger deposit. And I am not so sure I would want to pay that kind of money for a 2 bed in Harrow, If It was in Central London then I would probably be more keen.

These are my views only and are not intended as advice, please conduct your own research and seek a qualified financial advisor for further guidance.

vesimsr

Thanks for your reply st00zer.
I am still reading and trying to understand everything, but is SO really worth it considering the HA can increase the rent & service charge to anything?

by the way I was looking at house prices in Harrow, where I currently rent & 2 bed house prices are over 300k, which is over 10 times my salary, so it would not be possible to get on the ladder I guess.
And with regards to the deposit, even if I wait another 5 years & build up, I cant see the way the market is going that I will be able to buy. Looks like a chicken and egg situation to me.

St00zer

vesimsr wrote: »

Thanks for your reply st00zer.
I am still reading and trying to understand everything, but is SO really worth it considering the HA can increase the rent & service charge to anything?

by the way I was looking at house prices in Harrow, where I currently rent & 2 bed house prices are over 300k, which is over 10 times my salary, so it would not be possible to get on the ladder I guess.
And with regards to the deposit, even if I wait another 5 years & build up, I cant see the way the market is going that I will be able to buy. Looks like a chicken and egg situation to me.

I should add a further point and that is despite Mr £40K with a deposit of £66k and a good take home salary, after paying the deposit of £66k Mr £40k would have to take a mortgage of £264K to purchase the property.

Bank's won't lend £264k, they would perhaps lend £120-160k i.e. 3-4 times earnings, therefore Mr £40k can't afford to buy the property on the open market but with the help of SO the property becomes affordable.


I am still reading and trying to understand everything, but is SO really worth it considering the HA can increase the rent & service charge to anything?

I don't think this is true actually, HA defines how the rent will increase, I have heard it is usually Rpi + 1 % or so etc but the service charge is less clear cut.

The most extreme case I have heard is service charge increasing by £100/month, I doubt it will be significantly higher then this but clearly each case is different and individuals should seek guidance from the HA.

by the way I was looking at house prices in Harrow, where I currently rent & 2 bed house prices are over 300k, which is over 10 times my salary, so it would not be possible to get on the ladder I guess.
And with regards to the deposit, even if I wait another 5 years & build up, I cant see the way the market is going that I will be able to buy. Looks like a chicken and egg situation to me

Maybe the answer is to consider one bed and then look to trade up in a few years when financially possible? Just seen a shared ownership property in Harrow 1 bed market value of £150k. Buy 50% @ £75k with £30k deposit, £45k mortgage at 3% = £189/month mortgage, rent = £75k * 0.0275% = £2062.5/12 = £171 month, service charge of £123/month

Monthly paytments of £123 + £171 + £189 = £483/month

Very affordable for Mr £30k, £35k, & £40k who can withstand hikes in rent, interest rates, service charge, bills etc In my opinion.

vesimsr

Thanks St00zer. Which is a good site to look for SO / non SO properties?


btw, i cant buy 1bed because of family.

St00zer

Vesimisr

Google shared ownership properties

I would walk away from this development though as Service charge is expensive and rent is the same as paying interest on a mortgage so does'nt really feel like it is subsidised and thus affordable and rent will also increase annually, infact it seems it is cheaper for you to rent then buy this flat. Shop around there are better deals....Probably worth looking in differnet boroughs too



Total Property Cost: £330,000
Share I plan to buy: 45% (£148,500)
Rent (2.75% on remaining share): £416 pcm (55% = £181,500)
Service Charge: £3000 pa (YES £250 pcm)
Lease: 125 years
Mortgage payment: £575 pcm
Total monthly payments currently: £416+£250+£575 = £1241 pcm

vesimsr

thanks St00zer

k1985

St00zer,

Could you give me your thoughts on this scenario?

We are a mid 20's couple looking to buy a SO 2 bed apartment, nice development, have friends living there who bought on SE. We only have approx £6k deposit, and looking at a 50% share for £60k. Our combined income at the moment is just over £30k, but all going to plan should be 35 to 40k in the next 3 months. I think the flat has already lost it's newbuild value as it's approx 2.5 years old. A friend paid £148,000 on SE for an almost identical flat.

Monthly rent and service charge comes in at £178 inclusive.

The property is a SO resale, being advertised by the HA and an estate agents. It is in Plymouth, Devon.

I really can't see us being able to save up the £22,500 (15%) we would need as a deposit for an average house here at the moment due to us being in the throngs of marriage planning

We plan to get married in May 2013. If we bought now we would look at selling again in approx 4 to 5 years to buy a house outright as it works out roughly that we will be able to put away £1k a month towards a deposit for a bigger place.


Worthwhile or worth staying away?

St00zer

k1985 wrote: »

St00zer,

Could you give me your thoughts on this scenario?

We are a mid 20's couple looking to buy a SO 2 bed apartment, nice development, have friends living there who bought on SE. We only have approx £6k deposit, and looking at a 50% share for £60k. Our combined income at the moment is just over £30k, but all going to plan should be 35 to 40k in the next 3 months. I think the flat has already lost it's newbuild value as it's approx 2.5 years old. A friend paid £148,000 on SE for an almost identical flat.

Monthly rent and service charge comes in at £178 inclusive.

The property is a SO resale, being advertised by the HA and an estate agents. It is in Plymouth, Devon.

I really can't see us being able to save up the £22,500 (15%) we would need as a deposit for an average house here at the moment due to us being in the throngs of marriage planning

We plan to get married in May 2013. If we bought now we would look at selling again in approx 4 to 5 years to buy a house outright as it works out roughly that we will be able to put away £1k a month towards a deposit for a bigger place.


Worthwhile or worth staying away?

Are you currently renting? What is your rent? Is it cheaper then the £178/month you will pay on your property?

A £54k mortgage at 3% = £256 monthly payments on a Repayment basis over 25 years

A £30k salary = £1896 - But I suspect it is higher for you as you each have a personal allowance and therefore will pay less tax.

£256 + £178 = £434/monthly

= £1462 disposable income to spend on food/bills

On top of this your salary is expected to increase to £35k = £2180 month

Then you are buying a re-sale property that is 20% below it's new build sale price and the flat seems to be modern and you are prepared to live in it for 5 years.

Although your deposit is only 5% of the value of the property, your income is good which makes it very affordable to make payments and manage unexpected hikes in rents/service charges. Especially if you can put away a £1000 a month on a deposit for a new place.

If the alternative is that you rent I would buy the flat.

My view is house prices are unlikely to get significantly cheaper for as long as there is cheap finance, but I don't think prices will increase significantly either. It certainly beats renting though. I expect rates to stay low for a long time with minor hikes which will see cuts etc. And in the interim a lot of debt will be paid off, people would have built up equity in their home etc so the dooms day scenario quite a few are hoping for most likely won't pan out IMO.

The Central Banks are getting the printing presses out it seems again, those that hold cash for long periods of time will see the value of their cash erode as everything just gets more and more expensive IMO.

It seems like a good example of where SO can work very well for people in your circumstances as you could'nt afford on the open market but SO has made it affordable for you to purchase a property that is affordable and it does'nt sound like you are overpaying either.

These are my thoughts only, please conduct your own research.

geoffky

Shared equity does not lead to full ownership



This is a report by the respected Joseph Rowntree Foundation and they are a group who are listened too..

http://www.insidehousing.co.uk/ihstory.aspx?storycode=6501770

Have a read of the comments

Shared ownership is failing to act as a stepping stone to full home ownership, leaving many people in worse positions than if they lived in other types of housing, researchers have found.

A Joseph Rowntree Foundation investigation shows that only a very small proportion of residents are actually able to move into full
ownership.

While some shared owners are able to move on due to improvements in their finances, many are unable to afford the greater cost of a full ownership mortgage, the study found.

Shared owners’ typical starting investment has declined from 50 per cent to 40 per cent, with 25 per cent shares now more common.

St00zer

Geoff

That is actually an old report. I think people should take more responsiblity and do their own research as to whether they can afford to buy a house/flat etc using SO and eventually own it outright.

Everyone needs to have a plan as to exactly how they intend to own the property outright and how long they intend to stay etc