shared ownership, good or bad??

Legacy_user

I can not borrow enough money from the bank to get a full mortgage.
They advised me to look at share ownership.

What do i need to know regarding this and what are the pros/cons:think:

Ive goggled it and it makes no sense to me

kingstreet

You pay rent and service charges on the portion you don't own.

The rent is 2.75% of the value and the service charges vary widely. As a result, shared ownership is not as cheap as you might think, as you are simply replacing mortgage cost with rent cost.

A typical shared ownership mortgage is also more expensive as many of the good rates aren't available because some lenders don't lend on such property.

I suggest you have an experienced broker show you the difference in costs and take into account the non-mortgage related downsides of shared ownership you'll find on HBR&S by a simple search.

stator

There are many reasons why shared ownership is less than ideal, but if it's your only choice you may prefer shared ownership to renting
*You can't do anything to the house without permission
*You can't keep pets without permission
*You are responsible for all the repairs
*You have to pay annual service charge for common areas
*If you want to sell you have to let the HA try to sell it for months first, only if they can't sell it are you allowed to sell it on the open market
*If you want to buy additional shares or you want to sell the house you have to pay the HA fees for valuation and paperwork. These can be significant
*They will put your rent up every year above inflation
*Any increase in the price of the house makes the additional shares you don't own more expensive.
*It's harder to remortgage, not many lenders do shared ownership

But it's entirely up to you. If you don't have any other options there's no reason not to, as long as you are aware of the limitations.

gazfocus

My first house was a pre-owned shared ownership house which I bought because I thought, like you, I couldn't get enough to buy a full house on my own so to speak. I have generally had a positive experience with the shared ownership house but it comes down 100% to the housing association that own the other share of the house.

The housing association that own the other half of my house have been good. Everything I've asked for permission for (new kitchen, conservatory, stud wall, etc) has been given the go ahead, however, when it came time to move to somewhere bigger, I didn't want to sell the house because of the amount I'd spent on it and it took a lot of doing getting the housing association to agree to a providing consent to let which they will only do for 6 months at a time. The mortgage lender however had no problem with offering consent to let, but this is dependent on retaining consent to let from the housing association.

When we were looking for our next house (our current home), we were looking at everything that was available and we could have bought a smaller but still adequate house for not much more than I paid for 50% of the shared ownership house.

After much thinking about it, I came to realise that the reason I went down the shared ownership route was because I wanted the nice 3 bedroom semi-detached house rather than a 2-3 bed mid-terraced house, however, looking back, I would have much preferred to own 100% of a mid-terraced house rather than 50% of a semi-detached.

What size mortgage are you able to get from the bank and what deposit do you have?

gazfocus

To put more perspective into the mix, my shared ownership house mortgage costs me £383 per month and the rent is £245 per month, so the house costs me £628 per month in total. My current house is a 4 bed detached and costs me £611 per month.

This is solely down to the difference in interest rates available. As kingstreet says, shared ownership mortgages are more expensive. My shared ownership mortgage interest rate is in the region of 5.75% whereas my current mortgage interest rate is 2.69%.

Elfbert

But for the other side of the argument, both my mortgages on my shared ownership property have been under 3% - one with HSBC, now with Nationwide. I pay about £850 per month for my flat, whereas identical flats in my block rent for £1200 per month. Never had any issues, but do be aware lots of people say they're harder to sell on! (Obviously I'm still living in mine, but you need to go into it with your eyes open about the possible issues, such as selling-on.)

Service charges etc. are the same as any flats/places with communal upkeep needed, SO or not.

I think it very much depends on where you live as to if it's a good idea. Here in London there always seems to be plenty of demand, and I think it is a cheaper way of living whilst you save up - that is, in contrast to renting, not in contrast to buying 100%.