shared equity .... that's a con right ?

Prothet_of_Doom

My son is looking for his first house in an expensive part of the northwest. He works near Alderly Edge, so nearest towns are Knutsford, Macclesfield, Wilmslow and Congelton.
Obviously his budget is a bit tight, but I was looking on right move and came across a nice newish 3 bed semi, being sold at £82K for a 50% share.
So I look at what you can get for £164K within a mile and there are much nicer houses with more land and even a garage, of a similar age
So then I look at what the typical small 3 bed semi costs and within 2 miles there are loads ranging from £130K to £150K (some over 100 years old, some built recently, most somewhere inbetween)

So I'm thinking in this case you pay 70% of the REAL value but only get 50% ?

Then I saw another in a village where yes even a 2 bed terrace is £150 to £170K, so on the face of it the £73K for 50% for a 9 year old 2 bed terrace seems a bargain, except that it comes with 101 restrictions on who can own it and who can live there. His "plan" to work abroad in a few years and rent it out would not be allowed at all.
But then there is the rent for the 50%. If you borrowed that exact amount, it would be £150 a month less at current interest rates.
There is a break even where at 8% interest the rent is lower than the interest you'd pay on that 50%.
So explain how paying an extra £1800 a year is "affordable"

So I have a question. When assessing affordability how does a lender reconcile the fact that if someone paid the "full" price, they wouldn't give them a mortgage cause they can't afford it, but if they get a mortgage on half the house, they actually pay more. Seems daft to me.

bris

He can always say no. They are not sharing for nothing, it's a business to them and they want a return for their money.


The lender has no problem lending because they have a security over a 164k property with only 82k risk attached.

kingstreet

This is shared ownership, not shared equity.

You purchase a share of the property which means the resulting deposit is lower and there is a 100% mortgage option.

The property is leasehold, so permission is required for many things and repair/replace is 100% the shareholder's responsibility.

You can later staircase up to higher levels of ownership, but care should be taken with SDLT if this is intended.

Rent and service charges will be payable and these can often outweigh the savings compared with an outright freehold purchase.

Finally, the rent & service charges will reduce the affordability for a mortgage, so not really a way of purchasing a more expensive property.

Brock_and_Roll

...but yes you are absolutely right - it is generally bad value for money and restrictive so unless there are no other options available I would give it a wide berth.

marksoton

Prothet_of_Doom wrote: »

My son is looking for his first house in an expensive part of the northwest.

It really isn't.

Rain_Shadow

marksoton wrote: »

It really isn't.

Knutsford, Wilmslow and Alderley are expensive parts of the NW.


They'd be pretty expensive for here in the New Forest.

marksoton

Rain_Shadow wrote: »

Knutsford, Wilmslow and Alderley are expensive parts of the NW.


They'd be pretty expensive for here in the New Forest.

It's all relative.

Expensive for the New Forest? I hardly think so. Most properties are 200K plus.....

Rain_Shadow

marksoton wrote: »

It's all relative.

Expensive for the New Forest? I hardly think so. Most properties are 200K plus.....

I lived in Wilmslow in the late 80's. There is currently a house for sale about two doors up from where I lived which is identical with mine.


http://www.rightmove.co.uk/property-for-sale/property-58610642.html


It's on for £510k atm. I'm pretty certain it wouldn't fetch a lot more around here.

tempus_fugit

It might be expensive for the north west (I don't know to be honest), but those prices that were quoted seem tiny to me, certainly a fraction of what we would pay in most of Scotland.

marksoton

Rain_Shadow wrote: »

I lived in Wilmslow in the late 80's. There is currently a house for sale about two doors up from where I lived which is identical with mine.


http://www.rightmove.co.uk/property-for-sale/property-58610642.html


It's on for £510k atm. I'm pretty certain it wouldn't fetch a lot more around here.

6 beds,3 bathrooms?

That isn't going to go for less than 500K in Lyndhurst for example. In fact i'd say it's nearer to 750K.

I'm not arguing with you but NW prices are a fraction of those down here. The exception being a few Cheshire hotspots.

Rain_Shadow

marksoton wrote: »

6 beds,3 bathrooms?

That isn't going to go for less than 500K in Lyndhurst for example. In fact i'd say it's nearer to 750K.

I'm not arguing with you but NW prices are a fraction of those down here. The exception being a few Cheshire hotspots.

Yes NW prices are a fraction in general but the OP was talking about those very hotspots hence my comment.


And you may well be right about Lyndhurst but I am in Fordingbridge where prices are a little lower.