Shared Ownership: A Good Idea?

JoeK_3

If you are unable to buy a property outright on the open market, then shared ownership is the ideal solution for you. Shared Ownership is a part buy, part rent scheme, which enables purchasers to buy a home in stages. Purchasers can buy an initial share between 25% and 75% of the value of the property and pay a subsidised rent on the remaining value of the property. Shared ownership properties can be provided by housing associations, housing trusts and local authorities. These organisations try be as flexible as possible with regards to the initial share purchased, but this may be as much as 50% of the market value at some of their developments.

A service charge will normally be payable to cover the cost of communal maintenance. The service charges payable can remain the same whatever percentage you own of your home and continues to be payable should you purchase your home outright where possible. You will need to have sufficient savings to cover the initial cost of home ownership: legal fees and stamp duty for example. You will need to be able to meet the costs of rent, mortgage, service charges and other associated outgoings.

As your income increases, you can buy further shares of your home until you could own 100% of the value and no longer share the ownership with the housing association or trust. The greater the percentage you own, the lower the percentage on which you pay rent. However, if you do not wish to buy more shares in the property, you do not have to. Obviously, the more you own, the less you pay in rent. And, if you can buy your home outright in the future, then no rent will be payable.

Are they a good idea?

mazmack

We lived in a shared ownership house for 5 years.

Personally I would not recommend it.

We had trouble selling as people found it hard to get a mortgage, and also the Housing Association set a high minimum income level for prospective purchasers and turned down nearly everyone who wished to buy from us.

Also the development we were in had massive problems with antisocial behaviour from some of those who were merely renting from the Housing Association and did not have the respect for the development which those investing their hard earned cash had.

Also we made much less profit when we sold than our friends who had bought smaller houses but owned the whole thing.

We still feel like first time buyers now in this second house.

We definitely wish we had just bought outright straight away, and would not recommend shared ownership to anyone.

Hope this helps.

MortgageMamma

I am pretty neutral on the shared ownership issue. I like seeing families own their first home but the fact they pay a rent and a mortgage is sometimes a bit of a stretch for them. I dont like the fact they are always newbuilds as this restricts choice and I'm not a huge fan of new builds anyway.

I know some people claim that these schemes keep house prices artificially high as people who would not ordinarily be able to buy at todays prices are given the opportunity to do so, but I think this impact must be minimal.

I have a lot of clients at the moment waiting for shared ownerships to complete building who exchanged months ago. One client in particular is going to have to reapply for her mortgage its taken so long to get the building done. I am really hacked off about it for her as the housing association wanted a 28 day exchange which we complied with and no she is out of pocket and I have double the work to do for the same money - well in fact the proc fee is so small I am at a loss.

Housing associations are such a nightmare with stuff like this that I am seriously considering knocking shared ownership on the head like I did with right to buys months ago.

Rant over,

MM

richiethekid

Would shared ownership not be worth considering if there's a possibility of buying the remaining share fairly soon? I've been looking at houses around the £120k mark, but have seen a 50% share in a new build for £75k. Obviously it would need further investigation but with a combination of saving and likely wage increases over the next couple of years, I'm thinking buying the other 50% in a few years' time shouldn't be much of a problem.

sortofok

When these schemes start showing their ugly head, as they did in the late 80s, you know you are in an unsustainable bubble into which the unwary are seduced with promises of "getting onto the ladder" at a knock down price.
These are some of the last desperate measures that are introduced when first time buyers cannot afford a decent home at reasonable price because of speculation fuelled by cheap and easy credit.

When broom cupboards and garages sell for 200k yet someone on average earnings can't even afforde a 2 bed flat you know something is wrong.

When these things start happening you know the game is up.

Do yourself a favour - clear your debts (if you have any) save and invest as much you can for the time being and postpone your dreams of home ownership until you can afford a whole house.

If you do go ahead, good luck. But don't forget you've been warned.