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Shared Ownership Rent Query

Willem-de-Blois
Posts: 128 Forumite
I am looking at two shared ownership properties to part-buy in the same city and I am wondering how the rent of the share that the Housing Association retains is calculated.
I'll explain why I am asking because the difference of rent associated with the two properties does not make sense to me.
Property A
Full market value £265,000
40% share for sale so the rent on the unsold 60% is £186.20 pcm.
Property B
Full market value £180,000
50% share for sale and the rent on the unsold rent is ££336.10 pcm.
Therefore the rent on Property A's 60% unsold is 55% of the unsold 50% of the Property B which has a significantly lower market value.
I hope I have explained why this does not make any sense to me.
The reason why I have not proceeded with Property A is because its higher market value and its HUGE service and sinking fund charges makes it unaffordable. So it is with some frustration that Property B comes with a higher rent despite being £85000 cheaper.
I'll explain why I am asking because the difference of rent associated with the two properties does not make sense to me.
Property A
Full market value £265,000
40% share for sale so the rent on the unsold 60% is £186.20 pcm.
Property B
Full market value £180,000
50% share for sale and the rent on the unsold rent is ££336.10 pcm.
Therefore the rent on Property A's 60% unsold is 55% of the unsold 50% of the Property B which has a significantly lower market value.
I hope I have explained why this does not make any sense to me.
The reason why I have not proceeded with Property A is because its higher market value and its HUGE service and sinking fund charges makes it unaffordable. So it is with some frustration that Property B comes with a higher rent despite being £85000 cheaper.
0
Comments
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Apparently it is 3% of the unsold part of the property's equity.0
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And don't forget to add in service charges as well when calculating your total outgoings.0
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deannatrois wrote: »And don't forget to add in service charges as well when calculating your total outgoings.
Tell me about it!
The service charges and sinking funds on Property A are approaching £200 pcm.
This is what forced me to look at Property B but even though its service charge and sinking fund is £106.38, the unsold part's rent is a huge £336.10.
To sum up the monthly non-mortgage costs:
Property A - £378.16
Property B - £442.48
This really doesn't make sense to me.0 -
Rent on the shared ownership part of your mortgage is based on rental prices in the area, but provided at a discount - I don't think the 3% figure is always true (did you find it at lease-advice dot org?) - ours when we moved in was around £120, it would have been well over £400 using the 3% rule.
The exact calculations aren't made easily available because that would require the Housing Association to be somewhat transparent - that's not generally their game. Is property B in a 'nicer' area? Or, does it have more 'serviceable' parts, i.e. a lift, a swimming pool, gardens, anything that will require management of any kind?
It should be made clear in the lease how it is calculated, but you obviously wouldn't want to get that far to find out the terms aren't favourable. It is worth contacting the HA to ask. Also, on top of the service charge, bear in mind that the charge will go up each year, by RPI and a bit more, and after several years the increase can be staggering, even if it seems quite low at the moment.0 -
Thanks for your reply hobrucker. Yes I got the 3% advice came from lease-advice.
I have since discovered that with the HA in question, there is no rhyme nor reason behind the rent calculation.
Property A is in a more desirable location than Property B - in fact, Property A is in a hotspot. The Freeholder is the same HA, yet property A's rent on 60% is 55% of Property B's rent based on 50%.
In another city but with the same HA, I have seen 50% rent based on a property with the total value of £150,000 carry a rent of £27 per month and a service charge of 48p per month!
I have emailed the HA in question to ask why the rent is higher on Property B. I am still awaiting a reply.0 -
Newbuilds typically start at 2.75% which is Government controlled.
Older properties being resold may have no rent at all, or a higher charge than above.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
All this uncertainty and possible unaffordability for a leasehold AND a part-tenancy is off putting0
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