Shared ownership, good or bad?

obi1974

This is my 1st post so I may have posted it on the wrong forum. We are looking at a new build townhouse 3 double bedrooms in Bucks at 265k.
"I would like some advice about shared ownership as my OH and myself is considering one. Does the rent we pay on the HA share increase whenever the value of the house goes up?and will the HA continue to undertake valuation every year as this could mean that the rent goes up if the value goes up. Is this the norm?
I am asking because the value of the house is likely to increase as it's in Bucks. We are going into SO with mixed feelings as it's the only feasible option we have as we only have little savings of 10k, joint income of 51,500 with good credit score, combined debt of 8k which we are diligently paying off.
Is SO a good option as we are trying to get on the ladder and our ages is 42/46 so time not on our side. We have 2 children so need 3 bedrooms.

Your advice and suggestions very welcome as we are in a limbo whether to go ahead or just keep renting. Renting a 3 bed not cheap in Bucks starts from 980.00 and above.

Thanks

AFF8879

Do you need a 3 bed? If it were me, I'd rather buy something smaller I.e a flat but own it outright. Especially if it's a place that needs a little refurb so you can add value. Shared ownership just doesn't stack up at all for me (I looked at some SO properties during my search), it's impossible to staircase (i.e increase your share) gradually - you have to do it in % blocks I.e requiring large capital investment - which is hard enough if prices stagnate, can be almost impossible if you're forever chasing moving goalposts. And yes, the rent is likely to increase but perhaps not as much as a privately rented house given you're paying the housing association.

Then to that you add all the restrictions with renovating / letting out the property (practically barred in all the ones I viewed) which might not seem an issue now but if circumstances change eg in an emergency situation it would worry me not to have that option in my back pocket.

Finally when / if you do come to sell, your market is going to be far, far more limited and I also believe you have to give first refusal to the local authority, or LA tenants, not 100% sure about that point but there was definitely something restrictive meaning you couldn't just place it on the open market right away.

If you have your heart set on a bigger house and will not budge then I guess it's better than renting, but I'd really advise against it myself.

Hoploz

With a joint income of 51k do you really need SO? How far short of getting a basic 3 bedder are you?

SO can be helpful but there are down sides, not least that often with modern schemes you are stuck on an estate of housing assoc stock, rather than normal homes. This in itself reduces the value going forward.

SO helped me get a foot on the ladder, it worked brilliantly for me, but my situation was very different to yours (young, single teacher) so I was able to use it to my advantage and get out after a few years. You'd be stuck there for the long term. I'd say get something smaller without SO if at all possible.

See a good mortgage adviser, perhaps get a recommendation for an independent one, and check out all your options carefully. I'd rather own a smaller property fully, even paying premium mortgage rates if best rates not available to you, than be stuck in SO paying rent on top.

Pixie5740

Is £265k the market value of the whole property or is it the value of a % share?

If I had the option I'd buy a non-SO property over a SO property because there would be less restrictions on what I could do with the property and it would be easier to sell. However, if my choice was renting long term or SO and I thought staircasing to 100% was a realistic prospect I'd take the security of SO over renting.

magicpork

I was in a similar situation and was considering options between SO and HTB-EL. I went with HTB-EL in the end mainly because I don't like the fact that SO properties are from housing association stock so builders may have cut corners here and there..Also there are a lot of restrictions when it comes to selling it.

But again, if you can't get HTB and can't afford to buy a small one outright then SO is a viable option to get on the property ladder.

Cakeguts

You could do this instead. You could rent your family home until your children leave home and then buy a smaller one for just the two of you to live in. This will work as long as you are able to be good savers and investors.

usefulmale

We are a similar age to you with 3 kids. We got our new-build shared ownership house a year ago. Best thing we ever did. We can stay here as long as we want and we can do what we want to the house (within reason, of course).

Our rent increases yearly by the rate of inflation plus a fraction of a percent. We have no plans to staircase. The estate here is mostly private with a few shared ownership. The build quality is equal to the private ownership. Our combined rent and mortgage is £500 a month.

obi1974

Thanks for your advice. The full market house price is 265k which is pretty cheap for a new build in Aylesbury although it has no garage or fantastic space however it might be more when it's valued as we have been told they will be valuing again as they do this every 3 months until it's sold.
As time is not on our side re:age as well as deposit we want to at least try to get on the housing ladder.

PasturesNew

Each agreement is different from others.

They won't revalue it annually, but you can expect your rent to increase over time, by some value set out in the agreement that you didn't read/understand until a ridiculously high increase lands on your mat.

It's always better to own outright than to own shared ownership - if you are in a position to do so. Don't get sucked into "the dream" only to find yourself losing it down the line as you realise you're stuck with an agreement you can't afford to maintain.

Also look at how you can get out of it - it's when people try to sell that they get problems. Do you have to offer it to them first? Do you have to pay their surveyor fees and accept their price? Are you restricted to only being able to sell to people that meet a particular demographic/criteria (that no longer exists when you come to sell)?

While the idea is good, the actual reality can be a shock and you end up either feeling trapped or ripped off or lied to (or all three).

obi1974

Thanks for your advice. The full market house price is 265k which is pretty cheap for a new build in Aylesbury although it has no garage or fantastic space however it might be more when it's valued as we have been told they will be valuing again as they do this every 3 months until it's sold.
As time is not on our side re:age as well as deposit we want to at least try to get on the housing ladder.

Hoploz

But you have to have an exit strategy. Otherwise you could find your hands are tied. Will you want to live there forever?