Shared Ownership or not?

Wasabi123

Hi,
I've only posted on here once before and I'd really appreciate some advice from everyone.

My hubby and I are living on one wage at the moment. He is working full-time but the pay is not great, he is also studying in the evenings to gain a qualification.

I was the main breadwinner before we had our son. But am now a stay at home Mum. I'm trying to start a childminding business and have tried to do so from our rented home and have approached rental agencies who seem reluctant to rent to a CM. Impossible. Landlords around here just aren't interested in renting to a childminder, in the area we live in. I am currently unable to work outside the home as yet as my toddler has some difficulties, which I dont wish to go into here. But currently working from home is my only option, and we want to buy early next year.

We will be 1st time buyers. We have a very very large deposit. But currently as its only one income, the mortgage amount available to us in low.

We need a decent sized property as we have a child, and I intend to childmind so I need a decent sized living area for the mindees to play in. BUT everything that we can afford to buy outright with our depoisit and the mortgage amount available to us, are tiny and unsuitable for our needs and will be outgrown in the next year easily. And also in not very nice areas and with very very bad schools nearby.

Our other option is to buy a shared ownership property in a decent area nearby with good schools and very safe. Its NOT a new built, but a 30 year old re-sale shared ownership. We have enough space in this type of property to grow into it and stay for the next 5 or 6 years. We wouldn't need a mortgage and can afford to buy the 30% share for sale outright. Then rent the remaining 70% for £250 a month, inclusive of building insurance and all charges.

The shared ownership property has already been "SOLD SUBJECT TO CONTRACT" 3 times in the last year. So we know its a popular choice for people in the same position as us. But all sales have dropped through as the owner explained that there is no "Mortgage Protection Clause" on the lease from Guiness Housing Association. Which means that banks will only lend to the applicant if they have 25% of the sale price for the share, which is about £16,000. All the buyers had less than this amount as a deposit so could not secure a mortgage.

Should we be even considering shared ownership re-sales to enable us to build up my business for a few years, have enough space and then re-sell 5 or 6 years later. Not interested in making a profit on the purchase, but don't want to make a loss. The properties we could afford outright are too small for our needs and will be outgrown within the year.

What do we do?

Wasabi123

Anyone? Bump.

HARSA

This is bound to open another can of worms. It has be argued that many times it is starting to be a really boring topic

It has worked for me personally but just be careful as there are a few horror stories

Just do a search on shareownership on this forum

brit1234

Wasabi123 wrote: »

Shared Ownership or not?

Not. :beer:

iwantasmallholding

hiya

Shared ownership is fine but read the small print, you want to know if you can eventually buy 100% of the property if you wanted to, this is important as many limit you to 80-90%.

DONT buy extra little bits as you will find it harder to sell, ie if you buy 50% of the house, then you can only sell a 50% share you can't go back to 30%, as shared ownership is aimed a first timers, then you want it to be as affordable as you can when it comes to selling.

Dont get used to £250pm as rent as in 5-6 years when you do upgrade you will probably be looking at 4 times this amount. If I was you I would pay the £250 rent and save £250pm ie £500pm as this way the housing market wont overtake you, and if the market goes down you wont be in negative equity and trapped. Also means when you do move out it wont be a shock when you have to find £750pm

Are you a key worker, or doing it through a building company?

Wasabi123

Thanks for your words of wisdom. Always helpful to get other's opinions. Cheers.

poppy10_2

Wasabi123 wrote: »

The shared ownership property has already been "SOLD SUBJECT TO CONTRACT" 3 times in the last year. So we know its a popular choice for people in the same position as us. But all sales have dropped through as [STRIKE]the owner explained that there is no "Mortgage Protection Clause" on the lease from Guiness Housing Association[/STRIKE] when the prospective buyers have arranged their mortgage valuations, it becomes apparent that the seller is vastly overpricing the property, and the mortgage company refuses to lend at sky-high LTVs

Fixed that for you. Stay away from shared ownership, it is a financially risky scam designed to benefit developers, while trapping vulnerable first time buyers into huge mortgages on houses with artificially inflated asking prices.
The current owner of the SO property is trying to find a greater fool to pass the property on to. Don't let it be you. Several prospective buyers before you have walked away, I'd suggest you do the same.

brit1234

poppy10 wrote: »

Fixed that for you. Stay away from shared ownership, it is a financially risky scam designed to benefit developers, while trapping vulnerable first time buyers into huge mortgages on houses with artificially inflated asking prices.
The current owner of the SO property is trying to find a greater fool to pass the property on to. Don't let it be you. Several prospective buyers before you have walked away, I'd suggest you do the same.

I fully agree.

Lola80

Hi Wasabi123,

My personal opinion is that Shared Ownership is a great scheme that has benefitted many people who would have otherwise been unable to buy a home but only you can do the research and decide whether is right for you or not. There are a couple of things you mentioned that I think you need to do a little bit more digging on before you decide whether or not to go ahead:

Firstly, you mentioned in your post that you would like to start a childminding business, some Shared Ownership leases do contain a clause which states that the home must not be used to run a business from so I would advise that you check this out as soon as possible.

A Mortgagee Protection Clause is included in all new Shared Ownership leases and it is designed to protect the mortgage lender against loss in the event of a shared owner defaulting on their mortgage. This clause has been made a requirement of all new leases over the past few years due to increased demand from mortgage lenders to protect their financial interests. In basic terms, if a shared owner defaulted on their mortgage the lender would be entitled to make a claim to cover all of their costs before the housing association can recover theirs. Many older leases do not contain the clause as it wasnt a requirement at the time the lease was issued which seems to be the case with the property you are talking about.

Without a Mortgagee Protection Clause its highly unlikely that any lender will lend on the property as their interests are not protected (which explains why several sales have fallen through in the last year). Whilst this may not affect you now as you would be purchasing the share outright without requirement for a mortgage this is likely to cause you issues in the future. If you wanted to sell your share at any point you would also be reliant on selling that share to someone who doesnt require a mortgage and, in the same vein, if you wanted to purchase extra shares in the future and required a mortgage to do so you may find that you are unable to borrow due to the lack of mortgage protection clause. If you are keen on the property I would ask that the seller speak to the Housing Association about what can be done to remedy the lack of the mortgagee protection clause, leases can usually be 'varied' to include the clause. It is in the sellers interests to try and remedy this, as it stands the lease in its current format makes the property pretty much unsaleable in todays housing market.

While we're talking about leases you havent mentioned the term that is left on the lease currently so I would check on this too. Most older leases were granted as 99 years and you have said that the property is 30 years old which would leave approximately 69 years left. As a general rule anything lower than 90-95 years left on the lease can jeopardise resale potential and have an impact on the market value so again it may be in the interests of the seller to think about extending the lease.

I hope this helps a little!
L

Wasabi123

Thank you everyone once again. Really appreciate the opinions on offer.