Shared Ownership Question. I literally am clueless.

jb1989

So a quick background on me.

I'm 25 years old and I've lived in a small family home all my life. Due to a death in the family my mother moved out and myself and girlfriend took over paying the rent. After my relationship ended my sister and her boyfriend who needed to save some money moved in. I have now lived with them for just over 1 year and due to this have only had to pay £245 per month in rent and bills. They are now getting ready to move out. I recently got a new job and am now earning 22k a year. Although its not a huge amount I have very little out goings and would like to get my own space. My current home is relatively out dated and our landlords are fairly slack. Although I would be able to pay the entire rent/bills on my own I'd much sooner move to a smaller and more modern flat in which atleast some of the money is invested in a mortgage.

I have found a 2 bedroom flat near to my current address in which I will be buying 40% (70k) of the property. I only have about £4k saved up but my father is willing to help me. My issue is I don't know whether I am making a mistake by doing this. The only other option I have is buying a place out right but I am only able to borrow up to 114k and the nearest place with in my range is in a rough area. I have looked at near by areas but the options available are not great and most of the properties require a lot of work. The idea of a modern flat is whats attracting me to this property but I don't know if I am making a mistake by enquiring about it.

Thanks in advance.

kingstreet

jb1989 wrote: »

I am only able to borrow up to 114k

Is that £114k inclusive of the rent you'll pay on the share you don't buy?

As an example, the rent on the £105k you don't own is £240 per month. That is deducted from your income to establish how much you can borrow.

On £22k basic pa, taking the £240 rent into account, the best-known shared ownership lender would lend you £63,850 over 25 years, assuming you have no other credit commitments, dependents etc.

BitterAndTwisted

Rents only ever go in one direction. Ditto service charges. Meanwhile a second-hand property and a shared ownership one may be more difficult to sell when the time comes.

I wouldn't touch shared-ownership with some else's barge-pole.

sartois

BitterAndTwisted wrote: »

Rents only ever go in one direction. Ditto service charges. Meanwhile a second-hand property and a shared ownership one may be more difficult to sell when the time comes.

I wouldn't touch shared-ownership with some else's barge-pole.

I guess that all depends on which area you live in. I am open minded about this (really just need to get foot on ladder). In London it is almost impossible to find a place to buy, and even when you do it's a bidding war. I am going to an open day to see a place on Saturday and they typically generate 5 offers from one of these so they have no trouble selling them.

Have you personally (or do you know someone) who has had a bad experience with a Shared Ownership property? Just would like to understand the basis for the negativity towards this scheme.

jb1989

kingstreet wrote: »

Is that £114k inclusive of the rent you'll pay on the share you don't buy?

As an example, the rent on the £105k you don't own is £240 per month. That is deducted from your income to establish how much you can borrow.

On £22k basic pa, taking the £240 rent into account, the best-known shared ownership lender would lend you £63,850 over 25 years, assuming you have no other credit commitments, dependents etc.

Thanks so much for all the replies. I literally am an idiot when it comes to this kinda stuff!

Basically my original idea was simply to find a property that I could buy outright with a mortgage. I used various mortgage calculators and the most I could get is 114k. I then started looking at properties around about that figure but sadly in the last 4 months I haven't been able to find a single one that is near to me nor is in a nice area. I also don't plan on doing much work to it either. The 114k is just what I know I could look at if I wasn't looking at SO.

I have now recently found that 2 properties in some modern flats built about 7 years ago have come on the market. They are both priced at 70k for 40% of the property. As I would be able to borrow this amount and they are in a nice area and finished to a pretty nice standard I thought it would be the best way to get my foot on the property ladder and invest my money but I am skeptical.

My current situation is very cheap because my bills and rent which is very cheap for the area is split between 3. I am worried that by taking on this kind of property its going to cost far more then I think. The rent on the property is about £250'ish which includes service charges.

jb1989

kingstreet wrote: »

Is that £114k inclusive of the rent you'll pay on the share you don't buy?

As an example, the rent on the £105k you don't own is £240 per month. That is deducted from your income to establish how much you can borrow.

On £22k basic pa, taking the £240 rent into account, the best-known shared ownership lender would lend you £63,850 over 25 years, assuming you have no other credit commitments, dependents etc.

I just noticed you are a mortgage adviser, would it be possible to PM you for some additional help?

kingstreet

Please keep your questions in your thread, that way others in the same position benefit from your situation too.

We only operate on a face to face basis in our area, so I can't give advice by PM anyway.

I suggest you find a good whole market broker near you. Ask friends and relatives for a recommendation. Stay away from estate agency advisors, the national chains in particular.

jb1989

kingstreet wrote: »

Please keep your questions in your thread, that way others in the same position benefit from your situation too.

We only operate on a face to face basis in our area, so I can't give advice by PM anyway.

I suggest you find a good whole market broker near you. Ask friends and relatives for a recommendation. Stay away from estate agency advisors, the national chains in particular.

Ok thanks!, any reason to stay away from the estate agency advisors? I am supposed to be speaking to one on Monday but have also asked a couple of relatives to point me towards who they used.

Thanks again

charleyroo

using an agent advisor shows all your cards for one, so they know your budget and can advise their clients how much you'll pay.

on the mortgage calculator, just ensure that you put the SO rent in your outgoings for affordability to make sure 114k is the correct figure. once upon a time, i put SE interest in (even though not due for 5 years it was the correct thing to do) and my affordability went from 155k to 112k, so it was a worthy exercise!

kingstreet

One particular chain's mortgage service;-

- has a small panel of lenders and isn't whole market
- charges clients a fee and receives commission from lenders
- uses only lenders who supply survey work to their survey arm
- pushes its expensive in-house conveyancing service
- has a single tie for life and health insurance products
- has a single tie for "general" insurances.

Others have similar characteristics. They also tend to attract the new advisors just starting out who will not have the experience to do much more than the usual easy Halifax/Nationwide kind of cases. You have nothing to gain by using them, when an experienced whole market broker may get you a lot more, for less.

kingstreet

charleyroo wrote: »

once upon a time, i put SE interest in (even though not due for 5 years it was the correct thing to do) and my affordability went from 155k to 112k, so it was a worthy exercise!

Yes. Lenders on the HTB - Equity Loan scheme factor 3% of the equity loan into affordability.