confused about part-buy, part-rent.

Legacy_user

I really don't understand the basics of how this system works.
Using this example can you help me.

house value: £195,000.00
share price: £48750.00
share size: 25%
deposit: £48750.00 (I don't have that but lets just say I did)

monthly mortgage repayments: £0.00 (because of the deposit)
monthly rent payments: £335.16
service charge: £100.00
total monthly repayments: £435.16
25 year loan period

What would the above mean?
That I would have paid of the mortgage but still owe rent money to the 'company'?
That the rent is in effect a mortgage which I will be paying for as long as a mortgage?
They mention staircasing - Does this mean I can increase the rent payments and end up owning more of the property?

I basically need a milestone by milestone guide how this works, if you can answer this it will go a long way to helping me visualise this system.
Thanks

££sc££

Do you know the name of the part buy, part rent scheme you're looking at?-there's quite a few around. The above doesn't make sense to me but maybe it's a scheme I'm not familiar with.

Who is the company? Is it a private developer/builder?

££sc££

Having looked at this again, it's just the "25 year loan period" that threw me. But in the example you give you're not taking a loan/mortgage to buy your 25% share, as you have a deposit of £49k.

So, you'd use your £49k to buy 25%. The rent on the remaining 75% you don't own would be the £335 a month (to start with).

You would have to pay rent for the duration, i.e. there wouldn't be an end date unless you 'staircased'. This is where you'd use more money, by cash or mortgage to buy further shares in your property, e.g. another 25% so you then owned 50%. Your rent would then reduce as you'd only be renting 50% not 75%.

In most schemes you can staircase up to 100%, so you'd own the house outright. You then wouldn't pay any rent. However, in some schemes, to keep them 'affordable' properties you can only go up to owning a certain percentage.

£100 service charge a month for a house seems high, was this just an illustration though?

System

thanks for responding, maybe I'm dumb but this is the only way I'll be able to visualise this process.

I was just looking at this property,
http://www.a2dominion.co.uk/rte.asp?id=447&task=View&itemid=510
and then went to the mortgage calculator and started tweaking it to see how it works.

You answers has sealed a big gap in my understanding of this so I'm going to go away and do some thinking.

BitterAndTwisted

The only thinking you need to do is deciding that you won't be doing it.

Shared ownership was only thought up because people couldn't afford to buy these properties outright with a 100% mortgage less their deposit. Answer? Sell them a quarter of one.

The rent and service-charges have only one direction to go: and that's up. If that's not bad enough try selling one. There have been many, many threads on this forum by people trapped in their unsellable properties. Some of whom, after they bought and depending on the size of the development, found that a Housing Association had bought some of the properties and have put some of their ahem, more challenging tenants in there along with you.

I have no particular axe to grind as I've never bough one, but if I had a choice I wouldn't touch one with a barge-pole.

System

I understand your comments, thanks but my options seem to be limited, I wish I was paying attention when 'rent to homebuy' was available.

££sc££

Ahh, what I've said was correct then.
My personal opinion is that all tenures have their pros and cons. Some people regret buying shared ownership properties but realistically their only other options were to rent, with less security and ending up with nothing at the end of it. Yes buying a property on the open market would be preferable in my eyes but if people could afford to do that, they probably wouldn't be looking to buy shared ownership. Many people have had difficulty reselling their shared ownership places, particularly those in smaller flats as opposed to larger houses. There's quite a few reasons for this, including, many are in negative equity and there are not as many purchasers with sufficient deposits to get a mortgage as there was in 2007/8, when 100% mortgages were available. There are many in negative equity that blame the shared ownership scheme for not being able to sell, but i believe the reality is if they'd bought a property in the open market with a 100% mortgage they'd be in the same situation now, as property prices have fallen over the passed few years. I think a lot of the problem is people's properties have dropped in value. I know quite a few residents who bought in 2005/6/7 and sold quickly making a fast buck on their s/o place to then go on and buy a property on the open market. I doubt they are moaning about shared ownership.

My advice would be to make sure you research the scheme and fully understand the responsibilities of it, inc 100% repair responsibilities of the flat, regardless of the amount you own.

Also, I don't know your family make up but many single people have bought s/o 1 bedroom flats, to go on and get a partner/family. Try to think a little longer term as to if this property would be suitable for you.

B&T is right, rent will go up, usually by RPI + 1% each year, with inflation so high at the moment this could be a hefty rent increase each year.

I sometimes think that people get swept away by the fresh new paint of new build shared ownership, when in reality they might be able to afford the slightly run down 2 up 2 down freehold house down the road, which would be a better deal financially over time and may be more appropriate for them in the future.

System

Well the same site has a link for re-sale new builds but I haven't looked at the prices and compared them but that is something to note as well as your point about reselling a larger house will be easier.