Shared ownership worth it if can buy outright?

Panda78

Hello there,

A lot of the new apartments in my area are only available on a shared ownership basis, which is a shame as they are often the only modern flats available in my area.

As i could afford to buy outright, would it be a bad move financially to buy a shared ownership property? I would be looking to stay in the property long term and would like to own the whole 100% as soon as possible.

Thanks for any advice.

apositivethinkingcat

I think shared ownership schemes are strict on overpayments - you may be tied in for a very long time paying them the 'rent' which is profit for them, and pure money down the drain for you. I would only consider such a move if it is your 'dream' flat and there are no other options.

Or - talk to the company, see if they have to sell them as shared ownership (it may well be in the legals they have to sell this way to build them) or if they are allowed to sell any outright - you may have to pay more short-term but save overall?

But really - I would suggest looking elsewhere - there are plenty more (house-shaped) fish in the sea.

mildred1978

apositivethinkingcat wrote: »

I think shared ownership schemes are strict on overpayments - you may be tied in for a very long time paying them the 'rent' which is profit for them, and pure money down the drain for you. I would only consider such a move if it is your 'dream' flat and there are no other options.

.

Not true - a relative staircased to 100% ownership within 3 years of buying theirs. It should be a good investment because of what/where it is. They are looking to capitalise on it though as the portion of the estate used for social housing is starting to become a problem.

gaz141

apositivethinkingcat wrote: »

I think shared ownership schemes are strict on overpayments - you may be tied in for a very long time paying them the 'rent' which is profit for them, and pure money down the drain for you. I would only consider such a move if it is your 'dream' flat and there are no other options.

Or - talk to the company, see if they have to sell them as shared ownership (it may well be in the legals they have to sell this way to build them) or if they are allowed to sell any outright - you may have to pay more short-term but save overall?

But really - I would suggest looking elsewhere - there are plenty more (house-shaped) fish in the sea.

That is not how shared ownership works. Who is "them" that you are referring to? If you mean the Housing Association then you do not pay your mortgage to them so overpayments is not even an issue. You take a mortgage on the share of the property you want to buy, overpayments are subject to the restrictions that your mortgage lender puts on you, same as any mortgage lender really, shared ownership or not.

brit1234

Look else where. Your have to pay lots of admin fees each time you staircase. There are also lots of conditions and possibly high service charges.

Its a bad choice go for a normal flat.

Pipz

From my experience (I'm looking at Shared Ownership as I can't afford to buy outright) you may find that the HA is selling some units outright. Often a development has a mix between, rented, social housing, shared ownership and outright buy, so give them a call.

If the only option is shared ownership then I believe the maximum initial share you can purchase is 75%, but check this with the HA. This will mean paying rent to the HA on the remaining 25% until you can purchase the remaining share when you do you will incur additional fees as Brit 1234 stated.

If you can find and afford it, buy outright.

opinions4u

Shared ownership properties struggle to hold their value compared to the rest of the market.

A wholly owned property on a shared ownership development would be likely to have the same issue.

Panda78

Thanks everyone for the advice. The HA is selling a few outright, so i have asked to be kept informed, but i think there will be a lot of competition for these.

If i can get a 75% share i may go for it, but will need to check out how much the admin fees are each time i buy another share, as brit1234 advised.

If i'm allowed to get to 100% within a few years, then i'd be fine with that.

kingstreet

The leases for shared ownership property tend to include the potential for higher increases in service charges in future years if some of the posts on HBR&S are anything to go by.

Whether you own 25%, 75% or 100%, it's still a leasehold property, so you still have to meet any increased costs

Gelly123

Hi,
I've had a shared ownership property in the past so can share my experience with you.

I couldn't afford a property outright so my only option was to buy through shared ownership. The share that was up for sale (it was a 2 year old 1 bedroom flat) was 40%. I rented the 60% from the housing association and paid the mortgage on the remaining 40%. At the time I was single.

I had to prove to the Housing Association that I couldn't afford to buy on the open market - sadly 3 x salary round here doens't make even half of the value of the flat. I also had to prove that I had saved enough funds to cover the purchase in fees, stamp duty, etc.

I susequently met my now husband and he moved in with me after a year. We then had a joint income and could afford the buy the rest of the share to own the property outright. At this point, I had been there for approx 18 months.

The housing association "valued" the property - this was done by their nominated valuer, not a local estate agent. He valued it at £158,000, less than the open market price at the time but still expensive for what it was.

We had terms placed on us that we couldn't sell the flat for a minimum of 3 months.

Once the 3 months were up, we are allowed to sell the flat on the open market as normal and were thankful that we made enough to enable us to put a deposit down on the house we now live in.

In my view, the idea of shared ownership is to give people who can't normally afford to get on the ladder, a chance to buy somewhere.

If you can afford to buy a property outright, I believe you should do so and give others the chance to get on the ladder on what may be the only way possible to them.

Hope this helps a bit.
Gelly

Panda78

kingstreet wrote: »

The leases for shared ownership property tend to include the potential for higher increases in service charges in future years if some of the posts on HBR&S are anything to go by.

Whether you own 25%, 75% or 100%, it's still a leasehold property, so you still have to meet any increased costs

Thanks for your reply. I thought once i owned 100% the freehold would be transferred to me?

I will check on the increase in service charges over the years, i'm sure that is something they would like to ensure and may use up money i was saving to buy the rest of the property.