Difficult to sell larger % in shared ownership? 31 August 2016 at 6:55AM in Mortgages & Endowments 14 replies 2K views

Thomas79

We've currently got a 40% stake in a shared ownership 1 bed property, and thinking of ways to progress to a 2 bed to start a family. One way of doing this would be to staircase where we are now then sell in future. Buying 100% of where we are would incur large stamp duty charges and still means under scheme we're in we'd have to sell back to Housing Association within the first 21 years of any sell (only been in for 4 years).

If we staircased to say 75% and then sold in a year or so, is it more difficult to sell a larger share in a shared ownership than a smaller share?... Ie because the housing association wants to sell it to someone who can buy at least as much % share as we have?

TrickyDicky101

What would be the point of staircasing now if you intend to sell in the near future?

Thomas79

Just scoping out that as an option in the hope that prices appreciate over a year or two so we'd have some deposit for a freehold somewhere from the possible equity of where we are currently.

TrickyDicky101

Ah OK. Are there other costs involved in staircasing though - such as legal costs, mortgage fees etc? These will reduce any future equity gains. Unless you are in a locale with a vertical upward trajectory in house prices (say London) then the eventual benefit may be insignificant. You then have to factor that against the chance that house prices actually fall.

Also, when observing house price rises in a location, that may not be replicated in the shared ownership space because it is shared ownership and the HA may/will be involved to some extent.

AnotherJoe

I think TrickyDicky outlines the issues with staircasing especially for such a short period. I'd keep saving and just put the money into the next house when you buy it. You are gambling on house prices rises vs making your house more difficult to sell. Indeed if house prices do rise, it would become much less affordable at 75% compared to 40%.

Thomas79

That may well be true and potentially not worth the gamble as you say.

Was just wondering if anyone had had any experiences with staircasing and then found that when they went to sell their share, it was too much for the next person to buy? Or alternatively, if the housing association bought their share off then if they felt the offer they received was not that good (compared to what the open market would pay)?

getmore4less

At 100% what other property is available in that price range.

If the HA have control over the sale at 100% people will look elsewhere.

Stick at low % and get out of the shared ownership trap ASAP.
Appreciation does not achieve that higher income or cash injection is the only option.
This place is not a keeper so don't throw anymore costs at it.

Thomas79

All good points!

If we sell, then the options are wait until next year when the fixed rate mortgage expires and then sell or move now and incur the an early repayment fee on the mortgage.

We could avoid paying this if we sell and buy at the same time, but the valuation timeframes the housing association give us I just do t think this is possible. I think we'd end up having to sell, rent and then buy.

Selling now, absorbing the hit on the early repayment fee and then renting temporarily, using rest of equity is an option.

Or could wait until mortgage expires next year.

getmore4less

The lenders often give a window between sell and buy with a port to aid sell->buy without etc.

Sugarraybaz

Just sold our shared ownership property within the last couple of months.

We had no trouble at all selling up as we only had a 30% share, however you are quite right in assuming that not many people are in the market for a 75% share. I think we had 12 viewings or so and nobody was interested in going above 50% if I remember correctly.

Whilst shared ownership does attract a lot of criticism (quite rightly in some circumstances) on these boards, for certain people they serve a useful purpose-so good luck.:T

Thomas79

Thanks both for your responses.

I'll speak to my lender about their terms on porting the mortgage over and how long they'd give me.

Think you're right, that if you avoid the pitfalls, shared ownership can be quite useful and can understand why they want to avoid people making huge profits / selling to private landlords, hence all the regulation to restrict it.

In your experience, were the housing association strict in when you had to move out after sell or was there some flexibility... Ie if you can't move out immediately but take a month or so to find a new place?