Shared Ownership Advice

dpr666

Hi,

I am a 25 year old single first time buyer, and whilst I am not ready financially to get a full mortgage, I have been looking into the option of shared ownership. I have been looking around at flats and have finally found a nice new build 1 bed that is just what I've been looking for. It is priced at £55500 for 50% equity. I know that my responsibilities are to get a mortgage for my 50% and then pay a small amount of rent on the 50% I don't own (normally 3%). I have £10k for a deposit and using that the average mortgage I can find for the remaining £45500 is around £240pcm. And I estimated the total rent on the 50% I don't own to be £135pcm (@3%). A total of £375pcm.

When speaking to the estate agents they said that the total monthly payment from me would be £310pcm. He said that £125 of that is rent and the rest is mortgage repayments with a 5% deposit.

My main question is does that seem right? To me it seems too good to be true. Does it mean that they will arrange a mortgage on my behalf?

Many thanks in advance!

space_hopper

What term is your mortgage? That's pretty important as it will indicate where you should be.

Shared ownerships are great, but I'd seriously reconsider a flat on a shared ownership, beware of ground rents, beware of shared responsibilities with regards to heating/plumbing etc

Yes, the management/shared ownership provider may well include building insurance, but please double check! Going forward, shared ownership flats are difficult to sell on again, as opposed to houses.

I don't want to scare you off at all, but really do take what an estates says with a pinch of salt, commission is commission.

dpr666

Thanks for getting back to me space hopper!

Although I agree with everything you have said, I must explain that within 5-10 years I am expecting a large inheritance of around £100k to come through. I was planning on using some of that to get me to 100% ownership before I sell on.

I am trying to make sure I find out about all the hidden costs that I may encounter. But when I asked them over the phone to give me a breakdown of the monthly costs/fees. They said £310. Does this seem a reasonable amount or would you expect much more like me?

The mortgages I have been looking at have been for a 2 year fixed mortgage. With a term of 25 years with a £10k deposit.

TY again!

brit1234

space_hopper wrote: »

Shared ownerships are great,

Shared ownership is not great and most of the poster on MSE will agree. Just save a bigger deposit. There are so many nightmare and restrictive situations which shared ownership bring up.

Please research threads on here on shared ownership to see what you could get into.

Shared ownership is a scam

dpr666

brit1234 wrote: »

Shared ownership is a scam

I have a friend who bought a flat using the scheme a few years back and he now owns 80% equity and is very nearly in a position to hold 100%, so I'm afraid I disagree. I feel that as long as you are certain (as I am), that you will eventually have to funds to gain 100% of the equity then where is the harm in starting to pay it off sooner rather than later?

The problem I have is that I cannot justify renting, as a similar flat to the one I am looking at would be around £750pcm and out of my budget. The thought of staying at home with my parents is even more of a depressing thought

I really do appreciate your thoughts, thanks.

debtfreeby2013

I was readin about SO today but can't quite get my head round it. Haha. Found a property that is eligible on one estate agents website but they don't actually give any information. How did you find out about it?

dpr666

Originally I heard about it from my friend who I mentioned in my last post. If you want to know more about it there is the website "shared-ownership.org.uk"

About half way down the homepage are a few paragraphs that explain the scheme.

vivster

Check if there's a service charge to pay on top of the rent, as that might affect your monthly outgoings.

I had a shared ownership flat for several years and it worked well for me. When I bought in 2005 buying outright would have been a stretch, as would renting a place of my own in the private market. SO gave me several years of very affordable housing costs and security of tenure.

I didn't ever add to my equity and sold my share on last month very easily. I am in London though, which might make a difference.

It didn't make me crazily rich (although I more than doubled the equity I put in) but that's not why I got it. I wanted to live somewhere that was secure and affordable, and it worked for me.

dpr666

vivster wrote: »

Check if there's a service charge to pay on top of the rent, as that might affect your monthly outgoings.

That is why I phoned before going to view the flat. At 3% of the equity they own I was expecting around £150pcm. But as you said I was more interested in service charges etc. A few flats I looked at were above my budget because of excess charges for concierge etc.

I really appreciate your feedback Vivster, It just shows that the scheme does work, as long as you do your research and keep up with the payments.

I have a flat viewing tomorrow, I am planning on asking loads of questions to try and get as much information on costs as possible. As a first time buyer, it's quite daunting!

brit1234

dpr666 wrote: »

I have a friend who bought a flat using the scheme a few years back and he now owns 80% equity and is very nearly in a position to hold 100%, so I'm afraid I disagree. I feel that as long as you are certain (as I am), that you will eventually have to funds to gain 100% of the equity then where is the harm in starting to pay it off sooner rather than later?

Does your friend know the dangers of stair casing to 100% and being able to sell. See with shared ownership they have very restrictive conditions so linked to selling the property. By stair casing to 100% they will have difficulty selling due to such a small pool of potential buyers. Have a look on the linked threads here on the horror stories who get to 100%.

With shared ownership it is better to pay off the mortgage on existing part rather than buy more shares. Remember the people who go for shared ownership do it for initial price, so a small share seems affordable. That same group would be excluded if you owned 100%. The buyers who could afford to purchase 100% would be put off by the higher price set by the housing association compared to the lower priced normal properties and of course it would not be new now. 100% shares only benefit the housing association and the buyer.

Again I say do your research before going further.

richardw

I was browsing SO yesterday and what I found was with some flat developments, the service charges can be nearly £200 per month, not sure what you get for your money in that though.
It seems to me that you really need clarity with regard to the service charges, insurances and maintenance/ sinking fund costs.

Also with some properties the market values were stated at over £250,000, so the council tax would be quite high.

So high service charges and high council tax give high monthly costs on some which is a big no no.