shared ownership now or wait (an extra long time)!

missyp123

So...we have an appointment this week with a local housing assosiation.

The new build shared ownership we registered an interest in are ready to have reservation fees taken on them. There are only a few available.

We have been saving and have enough deposit to buy a small 25% share + fees.

Im just not sure if its the best way forward in the long run, BUT this could be the only way we get on the property ladder for a good while.
This is all of corse assuming we get a mtg offer

iv made a list of pro's and cons...but some pro's out weigh the cons...:mad:

so this is them...
PRO'S
*In our area AND right next to our childrens school
*Less to borrow initially - (may help chances of mtg offer?)
*Low deposit needed so we can move now
*Brand new house

CON'S
*Could loose a bigger % of equity in a new build if market values take a nose dive
*Added fees when stair-casing
*Holding deposit not refundable after 7 days (£250)
*Permission needed for alterations (such as conservatory etc)
*Service charges
*Smaller propery overall and much less storage cupboards in already smaller bedrooms etc.
*House valuation has gone up by almost £20k (now £182k) since initial valuation (even though its a new build this is allot for the area which average at £140-150 for a 3 bed).
*We would be using ALL our savings...nothing left for carpets etc


I have a huge list of questions for them on wednesday.
Would prefer to go onto the site to actually see how big rooms are etc but the apt is across the other side of town so cant see that happening

The houses are all built windows in etc...just looks like they are doing all the iternal works now.


Any help/advise/thoughts would be greatly recieved!

csgohan4

Don't forget repair costs will be 100% responsibility of you regardless of your share. So any maintenance issues, no LL to sort it out or if the whole block need new roof or repainting e.t.c you have to share the costs

poppy10_2

Shared ownership is a scam, OP.
Read the sticky
https://forums.moneysavingexpert.com/discussion/3177256

tiger_eyes

It's not a scam. Like any other property purchase, it may or may not be the right option depending on your circumstances. I'm perfectly happy with my shared ownership purchase.

NOVAMET21

Agreed with Tiger eyes. Shared Ownership may or may not be the right option depending on your circumstances. Obviously, owning the fully mortgage house is the best option and then there are help to buy scheme and shared ownership scheme which helps people to get into property ladder.


I own shared ownership house in one of the most expensive place (Cambridge). The price tag for new build 2 bedroom house in my area is £450K+ and for 3 bedrooms is £550K+. In order to buy a fully mortgage house you either need a big deposit or highly paid job in Cambridge nowadays. Even if you have £45k as a deposit, you need at least £90k as your income. I bought my shared ownership property at the beginning of 2015 and since then the house price has gone up by £100K+. Yes, I made a good profit but if I wanted to staircase then I need to borrow more. However, the rent will decrease according to the percentage bought.


Before, people had only 3 choices, either buy a house, rent privately or rent in council house but now there are more options. Council rent is very cheap whereas private rent is very expensive. Also it is very hard to get council house if you are working as you are not classed as venerable. So council house is out of the question. Then comes private rent which is £1,400 pm for 2 bedroom house around my area. I'm paying less than £900 for my shared ownership property which includes both mortgage, rent and service charge. Buying a fully mortgage house is almost impossible for young family around our area. All the houses near by which has been bought outright or fully mortgage are mainly doctors, surgeons and company directors.


If buying a house fully mortgage is not possible then I would suggest shared ownership scheme as it is better than renting as you are investing in your house and you are allowed to do thing you wouldn't be able to do in private rent such as painting the wall, hanging tv on the wall, etc. Like you mentioned structured improvements need to be passed through the housing association but they are likely to accept it if it has beneficial. The rent goes up each year by a small percentage but the profit we are making, I really don't mind paying few quid a month more. My next door neighbour who moved at the same time as me made £65,000 on top of his £20,500 deposit and he has sold this shared ownership property and buying a fully mortgage house. I could do the same but I love the location and my job is nearby. However, in the future some time, when we have made enough profit then we will look into fully mortgage house.


Enough of my property. Back to yours and like you said the value has gone up by £20k. So if you had own let say 50% then you would have made £10k profit. The only stair casing fees are the valuation fees (about £200) and solicitor fees (£400 - £750). Usually shared ownership prices are 5-10% less than the market value. So, don't think it is going to take a nose dive. You also mentioned that if you won't have any money left over for carpets then that gives me impression that you can't afford a fully mortgage house. This is my second shared ownership property I have bought where I have sold the first one and bought my second one. So ask me anything you want to know about it and like you I was a bit concerned about this scheme but had no problem selling my first shared ownership house. Sold within few weeks actually and made £8,000 profit in 2 years and I don't think I would be able to save £8,000 in 24 months if I lived in private rent with children to look after.


Like I said, if you private rent, it is very difficult to save and the only other way is to live with one of your family and save but then you will lose your privacy. I say let you house make your profit than having to save hard cash each month.

kingstreet

Remember, shared ownership rent & service charges reduce your mortgage borrowing power, do don't assume if you can borrow £x for a standard purchase it will be the same for SO. It won't!

Newbuild SO sees a very sparse lending market place with only a small handful of lenders at 90%+. The main players apply their newbuild max LTVs, so you would need a 15% deposit for Nationwide, 20% for Halifax etc.

I would not try and do a high LTV newbuild shared ownership mortgage without a broker.

NOVAMET21

Very true kingstreet. You have to take into account that your monthly rent and service charge are covered within your monthly commitment outgoings. Hence, you can borrow less money.


Usually, the lender asks at least 15% deposit for a new build which is what I paid for my second property. However, for my 1st shared ownership property, I only had to put 5% which was a relief but had almost 6% interest rate so not great.


Both the times I consulted with a broker and they manage to find me a mortgage but there was always a concern at the back of my mind lol.

missyp123

Thank you all for your replies
Lots to ponder over and yes a broker will def be in th eplans but i am now a bit concered as we only have a 10% deposit (to buy 25% share) +fees.
Is this a no go straight away?
The HA said we had sufficient deposit, so i assumed a lender would be okay with that...weve been looking at leeds as an option for application.

NOVAMET21

I have realised that there are only few lenders that accepts shared ownership properties. The lender for my first shared ownership property was leeds and they accepted me with only 5% deposit even if the property was new build. Whereas my current mortgage Santander wanted 15% deposit.


Your HA knows what they are saying (hopefully). I mean Leeds accepted my mortgage 4 years ago but not sure if that has changed. Also, do you have spare money for the solicitor fees, mortgage advisors fee?


HA normally have an sale incentive where they give you an option of carpeting your house throughout or give you cash (£750 - £1000). Ask this as I got my house carpeted throughout for my 1st house and got £750 cash with my second house.


25% for £182,000 house is £45,500. 10% deposit would be £4,550. Other expense such as solicitor fees and mortgage brokers fees cost can vary (lets say £1,250 for both). So minimum money needed without the furniture which can come later (maybe in another pay check) is £5,800.

kingstreet

kingstreet wrote: »

Newbuild SO sees a very sparse lending market place with only a small handful of lenders at 90%+

Like I said, there are a few but none of the high street major players.

tiger_eyes

kingstreet wrote: »

Newbuild SO sees a very sparse lending market place with only a small handful of lenders at 90%+. The main players apply their newbuild max LTVs, so you would need a 15% deposit for Nationwide, 20% for Halifax etc.

Out of curiosity, is the lenders' perception that new builds may be overpriced and the value will fall, and that's why they want a greater deposit, to protect against negative equity?