Shared ownership offer seems crazy

smancslad

Hi there

I've just applied for a shared ownership scheme in South Manchester to get on the housing ladder. They've come back with an offer of me taking a 75% stake. Using their own calculations, as well as those from MIS, this leaves me with -£272 a month after all bills and food / petrol etc. Why would they offer this to me on that basis when it seems ridiculous?

Has anyone else had a similar outcome and is there anything I can do or any advice anyone can give me?

The houses themselves seem perfect.

I should add that I earn £24000 a year before tax / NI / student loan and I have one loan repayment of £125 a month. I also pay £100 a month into a pension. I have no credit card debt. The house value to buy 100% is £110000. The trust are offering stakes at 50%, 60% and 75%.

Cheers

leveller2911

Simple, they are desperate for money since the changes to their funding from Central Government...There were a few Social Housing providers in financial trouble who were on the governments watchlist about 18 months ago and there were rumblings of some going bust.

If you do go for it remember you will be liable for all maintenance and will need to get their permission to carry out alterations. Its also worth noting that "rural restrictions" can apply whereby the purchaser can never own 100% so make sure they check this before you spend any money.

Personally I can see what is in it for them (large wad of cash,no maintenance bills) but I'm not sure theres that much in it for the buyer(need to get permission to do anything,responsible for all maintenance,your buying leasehold not freehold,possible issues with selling down the line).

NB: I believe they now have to carry out due diligence as to whether or not you can afford to buy the property ,similar way to the mortgage lenders.

kingstreet

At 75%, or £82,500, you would pay the following monthly costs;-

£ 63.02 rent
£458.17 mortgage (assuming 5% deposit, 5% repayment mortgage over 25 years)
£? ground rent/service charge.

Things like existing credit will be taken into account. Your discretionary expenditure isn't. The SO calculator indicates you should be able to afford 75%. Have you asked for less?

smancslad

Hi Kingstreet

They're saying I'd be looking at around £522 mortgage and £63 rent with a £6 service charge.

Do you think I'd therefore be better off looking to buy an older property and not a newbuild or shared ownership?

kingstreet

That's entirely up to you. Only you can decide on your housing priorities. Presumably you have a low deposit, given the monthly payments you mention. A bigger deposit will open up more potential lenders to you. There's only one which offers SO at 95% and the rates aren't great, hence my use of 5%.

Have you considered shared equity, FirstBuy, or Help To Buy, its replacement? This may suit you better if looking at newbuild.

brit1234

smancslad wrote: »

Do you think I'd therefore be better off looking to buy an older property and not a newbuild or shared ownership?

Yes, Yes, yes. Steer away from shared equity/ownership. That way you dodge the restrictive conditions, avoid the extra cost, and get more property/better built for your money with an older property.