shared ownership... good deal?

pricedout_1

So I have been looking into these FirstBuy Shared Ownership properties and it looks to me like bum deal. If you do some basic figures with most of the props I looked at you actually end up paying more in rent, charges and mortgage for your 33% (or whatever they deem you can afford) than you would if you had a normal mortgage out on 100% of the property. So, not only is it not making housing more affordable, its providing a bad deal on the biggest financial transaction of your life?

Graham_Devon

That's not shared ownership...

And yer, not a great deal, UNLESS you plan to stay in the house for the long term and have little other way in buying your own place.

The ones to do well out of this deal are the builders and banks. Not the buyer.

pricedout_1

how is that not shared ownership? You own a % and the government owns % that you pay rent on.

But even if you stay in the property long term its still bad. Say you stay for the 25 year mortgage term (without staircasing which apparently hardly anyone is doing). You have effectively paid the same as if you had been paying for 100% of the property for the 25 years, and at the end of it you end up with your x% and you are still paying rent!

Its just disgusting the way government uses tax payers money to prop up the bottom of the housing market, instead of allowing the market to correct naturally.

R_P_W

Correct naturally.....to what?

wymondham

If you need a scheme to buy a place then it's overpriced, so yes it is a bum deal...

Graham_Devon

hughgallagher wrote: »

how is that not shared ownership? You own a % and the government owns % that you pay rent on.

Firstbuy is shared equity. Different monster.

grizzly1911

Like most things in life if you can't afford to buy them from your own means and personal finance package you will tend to be pay over the odds.

Personal Car purchase/leasing plans are similar.

Drop into that buy now pay later high street store and the total purhase price will be a lot higher than you bobbing onto the internt and picking up a fast deal.

The new buy schemes are one way to keep the builders going, keeping prices higher than they probably should be. They aren't for the real benefit of of the person needing a roof over their head.

N1AK

hughgallagher wrote: »

So I have been looking into these FirstBuy Shared Ownership properties and it looks to me like bum deal. If you do some basic figures with most of the props I looked at you actually end up paying more in rent, charges and mortgage for your 33% (or whatever they deem you can afford) than you would if you had a normal mortgage out on 100% of the property. So, not only is it not making housing more affordable, its providing a bad deal on the biggest financial transaction of your life?

When we were looking to buy what we noticed was that shared ownership properties invariably sold for more than the proportion of the property you were buying was worth. For example if you were buying 60% of a house worth £100k then the shared equity price for that 60% would be more like £70-75k.

To be fair shared equity is going to cost more than buying outright, otherwise no one would sell that way. The question is: If you can't afford to buy any other way, would shared equity work out better than renting?

Graham_Devon

N1AK wrote: »

When we were looking to buy what we noticed was that shared ownership properties invariably sold for more than the proportion of the property you were buying was worth. For example if you were buying 60% of a house worth £100k then the shared equity price for that 60% would be more like £70-75k.

To be fair shared equity is going to cost more than buying outright, otherwise no one would sell that way. The question is: If you can't afford to buy any other way, would shared equity work out better than renting?

It may well do.

BUT the calculations can only ever been undertaken with hindsight. Going forward its not quite so easy to figure out, especially with the loans starting to attract interest after 5 years is hard to factor in.

You may well have paid the loan off by then. You may be in negative equity by then. You may have seen house prices surge by then. Who knows, and thats the problem.

Basically it's taking a larger risk to get the house if you are looking at it in terms of renting vs buying. A risk that can only ever be calculatated in hindsight.

N1AK

Graham_Devon wrote: »

It may well do.

BUT the calculations can only ever been undertaken with hindsight. Going forward its not quite so easy to figure out, especially with the loans starting to attract interest after 5 years is hard to factor in.

All true. I wasn't stating an opinion one way or the other. For the record I probably wouldn't have bought if the only way I could was shared ownership. If I was however intending to stay in an area for a long time, was unlikely to be able to buy without shared ownership and could afford a place I liked via shared ownership THEN after carefully checking the terms I'd consider it.

What you need to remember when considering risk is that by deciding not to buy under shared ownership you are taking a risk as well:
> What it property does boom and you aren't able to afford in future?
> What if rents increase considerably?
and so forth.

Again, I was a pragmatic buyer when I bought a couple of years ago. I don't expect to massive large house price or rent inflation, but that doesn't mean they won't happen.

wotsthat

hughgallagher wrote: »

But even if you stay in the property long term its still bad. Say you stay for the 25 year mortgage term (without staircasing which apparently hardly anyone is doing). You have effectively paid the same as if you had been paying for 100% of the property for the 25 years, and at the end of it you end up with your x% and you are still paying rent!

It's a racing certainty that if you could save a full deposit yourself you'd get a better deal. However, if that is unfeasible then the only sensible comparison is continuing to rent vs. buying on the scheme.

As Graham points out it will be some time after the event that you'll know whether it was worth it financially but that doesn't stop you running a few scenarios. You can never avoid risk but you shouldn't let fear of risk overly influence your decision.

I'd set up a spreadsheet and work it out properly but probably if I was facing the choice between renting and this scheme I'd be jumping aboard and then doing my best to increase my equity position from day one.