Shared ownership, H2B, no property? Need advice.

greensalad

Although I am still a little way off, myself and my partner are keen to start saving towards buying a property in the next few years.

The main reasons we want to buy our own property instead of renting is:

- Put money towards something that is ours rather than passing it to a LL
- Be able to do with our space what we please (at a basic level. e.g small home improvements)
- Step towards owning our own property outright

We have perm jobs but we cannot save the required deposit for an appropriate sized property. We have worked out our savings-per-month amount and have discovered that house price increases grow faster than our savings will meaning by the time we have got the amount we set out to save, it will no longer be enough

We have looked into H2B but the more I have looked the more it seems that the interest rates skyrocket after only a few years and essentially negate any advantage of investing in the property.

I'm now looking into shared ownership and it seems like a good option, but I'm aware it's controversial.

My thoughts are:

- Shared ownership gives us a property that we can make reasonable changes to
- We will be paying a mortgage+rent lower than our current rent, but a large majority will be going to investment in property not straight to a LL.
- I'm aware of service charges and rental increases, however we're already subject to rental increases in private property so I don't think that comes into the equation
- It would still be more sensible to pay a monthly service charge (I've seen some around £50-£70) but be putting £800 into property investment than putting £1300 into LL's back pocket as we currently are

So, what are your thoughts? What are the major cons of shared ownership?

I'm hoping that shared ownership will allow us to pay off our part of the property quickly, but I'm not sure what the exit strategy is. If we were able to pay off our share within, say, 20 years could we then reapply for a new mortgage for the remaining part of the property and start the process again until we eventually own outright?

RichardTheComic

I bought my first home under Shared ownership in 2002. It was £41,000 at 50%. This was on a large wimpey development where 18 of the properties were allocated to a housing association for sale under shared ownership. This was a great buy for me. The 100% value £82,000 was significantly less than the purchase price wimpey sold identical properties. I staircased to full ownership 18 months later (as I'd progressed quickly in my career), and bought the remaining 50% for £53,000 in 2004. I'd spent significant sums of money on improvements whilst still being a shared owner, and Waterloo Homes allowed a fair valuation for my improvements, and deducted it off the amount I was expeceted to pay. I sold the house for £130,000 in 2006. It was a great leg-up for me and where I was in my life at that point.

It does have serious drawbacks. These are, absolute inflexibility if your circumstances change, and you need to temporarily leave your home - e.g. work movements etc. Selling is particularly challenging if you don't own 100% and will nearly always cost more than selling a non SO property. The housing association takes rent, but in reality does nothing in return. Flats in particular seem like worse buys in my humble opinion. Also I've seen several shared ownership 're-sale' properties where the rent charged on the unowned share exceeds a market rent.

RichardTheComic

As an example look at this. All the literature say its a subsidised rent - but is that really the case? Rent + sesrvice charge exceeds what privately rented flats in this street achieve and you've got mortgage repayments to make ontop. http://www.hellohomes.org.uk/main.cf...6&pcode=NN15NJ

libf

greensalad wrote: »

We have looked into H2B but the more I have looked the more it seems that the interest rates skyrocket after only a few years and essentially negate any advantage of investing in the property.

This assumes that you need to pay interest on the loan. If you would be able to save enough during the first 5 years to pay off the loan, perhaps in conjunction with a remortgage, then you would not need to pay any interest.

Obviously no one has a crystal ball, but I'm hoping that with some diligent saving and a small increase in market value, I'll never need to pay interest on the HTB loan that I'm going to take out.

greensalad

RichardTheComic wrote: »

Rent + service charge exceeds what privately rented flats in this street achieve and you've got mortgage repayments to make on top.[/URL]

The mortgage payments you're making are directly paying off towards an asset. Looking at the maths we could get a property of equal size to our current, but at less than our current rent (service charge included) with a small and achievable deposit. Rent is likely to go up on a shared ownership AND a private let too, so I'm not sure if it's an issue?

Not sure where you live but comparing the rent+mortgage on a property in our town to the rent alone on a property it's less or the same, not more.

RichardTheComic

Hi libf - private rents will go up according to market conditions. SO rents will go up each year regardless of demand. What's affordable now, may not be affordable in future, or give you much scope to save / reduce your mortgage. Service charges are likely to increase too. What scheme in particular have you looked at?

greensalad

Sigh, no worries. All a pipe dream as we are £2k over the household income band to be considered for shared ownership.

Stuck between a rock and a hard place. Earn too much to be able to join a scheme, earn too little (and pay too much rent) to save enough to keep up with the house price increases.

libf

greensalad wrote: »

So, what are your thoughts? What are the major cons of shared ownership?

I'm hoping that shared ownership will allow us to pay off our part of the property quickly, but I'm not sure what the exit strategy is. If we were able to pay off our share within, say, 20 years could we then reapply for a new mortgage for the remaining part of the property and start the process again until we eventually own outright?

Do you really think you'll still be living in the same place in 20 years? But most shared ownerships allow for staircasing to 100% ownership, yes. (Some require the property to be kept in the local community and so you may not be able to attain 100% ownership with these.) My current shared ownership limits you to 3 attempts at staircasing, and each must be for at least 10%, as well.

If you don't intend for the property to be a long term home then it makes sense not to staircase at all, as it's far easier to sell a smaller share.

libf

greensalad wrote: »

Sigh, no worries. All a pipe dream as we are £2k over the household income band to be considered for shared ownership.

Stuck between a rock and a hard place. Earn too much to be able to join a scheme, earn too little (and pay too much rent) to save enough to keep up with the house price increases.

There will be different criteria in different areas and with different housing associations.

greensalad

libf wrote: »

But most shared ownerships allow for staircasing to 100% ownership, yes.

Doesn't matter we are not eligible for shared ownership

Thanks for your advice.

greensalad

libf wrote: »

There will be different criteria in different areas and with different housing associations.

This site says it's a cap for the whole of England, bar London?

https://www.sharetobuy.com/faqs/shared-ownership-am-i-eligible-