Shared Ownership stair casing to 100% unaffordable

ebngy

Sparing a thought for those that can’t even afford a home I am sorry, I know how you feel as we were there once. I really wish it was different. Perhaps shared ownership may be for you but please bear in mind our experiences.

I am wondering if anyone else is in a similar situation to us? We are shared ownership owners/tenants, 50% of our house is mortgaged 50% owned by a housing association. Years ago, we were planning to have children and with that in mind knew that we couldn’t afford to buy a house outright so shared ownership seemed to be a happy medium.

10 years later both kids at school, both of us working, we thought we were in a position to afford to buy the final 50%. Unfortunately, the housing market has rocketed unbelievably over the last few years. Our house was valued at £220k back then and now estimates are around £400k. Should interest rates rise to the BoE target of 2% our repayment amount would be around £1600 per month. We could probably stretch to that but if one of us lost our job then it would be completely unaffordable.

I believe it would be irresponsible of us to take on such a debt especially in view of how low interest rates are. But it is also our home and we want to ensure it will be our kids home too.We have at least 12 more years of school so have no wish to move plus our girls have made good friends where we are. Not that anything within miles would be affordable anyway.

Researching I found out that housing association tenants receive a discount to buy their home under the new voluntary right to buy scheme, but we are classed as owner occupiers so ineligible. We can’t afford to buy the second 50%. We can’t move anywhere nearby as all the other properties are unaffordable. I thought the idea of stair casing was to help you to afford full home ownership but this clearly isn’t working.

I feel saddened by the whole shared ownership process. I certainly wouldn’t recommend it to anyone. We pay rent to the housing association but we are not classed as tenants. They own the land; they own the second 50% of the house. Yet if there are any problems with the house or garden we sort them out. We have zero contact with them.

We have spent tens of thousands of pounds re-plastering, redecorating, we replaced the bathroom, installed a new kitchen, dug up the bricked patio garden and replaced it with a lawn, plants etc. We have looked after the house, improved it in fact (it is our home after all). But because of the market rate valuation it puts it out of our affordability and there is very little we can do to remedy this.

We are left as quasi owners/tenants, not really owning, not really not owning. Not being able to afford to buy the rest of the property nor being able to move. I feel stuck and all the while the lease runs down (think there was around 70 years on it when we mortgaged). Buying a further 25% seems fairly useless, you still do not own the property, and still have the lease issue.

Are there any other people in this predicament? What are you planning to do about it? I can’t find any answers at the moment short of a property crash, but properties keep on rising and I just can’t see a crash happening anytime soon.

Any thoughts gratefully received.

Thank you

AdrianC

ebngy wrote: »

I thought the idea of stair casing was to help you to afford full home ownership but this clearly isn’t working.

It is, and it does.

But "help to" does not necessarily give you some kind of right to, regardless of affordability.

You bought 50%. You receive the benefit of the increase in value of that 50%.
You did not buy the other 50%. Why would the owner on that not receive the same benefit?

Kynthia

You are a part owner with security and the ability to make the place your home. You are not much different from any owner of a leasehold property. You could have been in rented accommodation for all these years, think about what that could have been like:
1. Being forced to move everytime a landlord wanted to sell or didn't like you, needing to find somewhere at short notice, risking having to change your children's schools, paying moving expenses and new credit checks and deposits each time to the letting agents, etc. Offering your children less security.
2. Not able to decorate and make the place your home. The children's rooms having to remain magnolia and living with whatever kitchen and bathroom are in place whether it's old or not to your taste.
3. Being reliant on a landlord to do repairs and perhaps they only do the minimum or take ages.
4. Paid rent for years and have nothing to show for it.

Instead as I've said you've had the security of your own home and you've built equity as I bet your 50% is worth more than it was and your mortgage payments have been paying down your mortgage balance instead of all going to a landlord.

Just because you can no longer afford to staircase to full ownership doesn't mean the scheme has failed. It gave you more security and equity than renting in the area would have done. You would need to extend your lease even if you owned a non-shared ownership leasehold property so it's a normal expense of ownership.

If you could have afforded a non-shared ownership property then you should have bought one as this scheme is usually best for those who can't and need to stay in that area rather than move somewhere cheaper. So I fail to see how you've lost out in any way. You still have the option of selling and using the equity you've gained as a deposit for somewhere else.

usefulmale

We are in the same position as you. We bought our shared ownership house (25%) just over a year ago and it was the best move we have made.

We have security of tenure, we can do what we want to the house (within reason) and we can have as many pets as we want.

The kids have five or six years more of school, plus one is autistic, so the security of not having to move on a landlords whim is priceless.

Our combined mortgage and rent is way below either a full mortgage or full rent on an equivalent property. Another benefit is, should I lose my job, the rent part would be covered by housing benefit and the mortgage part would be doable from JSA and Tax Credits.

All this means that we can treat ourselves and the kids far more often than if we had a full mortgage or rent to pay.

You have said yourself that you don't want to move and that the new payments would be 'a stretch'. Why bother? When your girls move on and you need to downsize, you should be showing a decent profit in the part you own to pass onto your girls for a decent deposit for thier own places.

Bonniepurple

Kynthia wrote: »

You are a part owner with security and the ability to make the place your home. You are not much different from any owner of a leasehold property. You could have been in rented accommodation for all these years, think about what that could have been like:
1. Being forced to move everytime a landlord wanted to sell or didn't like you, needing to find somewhere at short notice, risking having to change your children's schools, paying moving expenses and new credit checks and deposits each time to the letting agents, etc. Offering your children less security.
2. Not able to decorate and make the place your home. The children's rooms having to remain magnolia and living with whatever kitchen and bathroom are in place whether it's old or not to your taste.
3. Being reliant on a landlord to do repairs and perhaps they only do the minimum or take ages.
4. Paid rent for years and have nothing to show for it.

Instead as I've said you've had the security of your own home and you've built equity as I bet your 50% is worth more than it was and your mortgage payments have been paying down your mortgage balance instead of all going to a landlord.

Just because you can no longer afford to staircase to full ownership doesn't mean the scheme has failed. It gave you more security and equity than renting in the area would have done. You would need to extend your lease even if you owned a non-shared ownership leasehold property so it's a normal expense of ownership.

If you could have afforded a non-shared ownership property then you should have bought one as this scheme is usually best for those who can't and need to stay in that area rather than move somewhere cheaper. So I fail to see how you've lost out in any way. You still have the option of selling and using the equity you've gained as a deposit for somewhere else.

Exactly this. We bought a 25% share nearly 11 years ago. It's given us security, and several options- for me to work part time, for DH to go self employed, to have a second child- which we wouldn't have had if we were renting privately. The rent is half of the open market value (next door rents).

We are now in a position where we can afford to buy a bigger house (due to an inheritance), and so our 25% share is being bought by another couple who have a baby due soon. Hopefully, the low rent will give them the chances which we had when we needed them.

ebngy

Thanks for the replies. I was rather cheesed off when writing it so perhaps not being totally rational with my writing. But what I am getting is to relax about it and look at the positives it has brought us?

By the way I know what renting is like I lived in 9 different places in 10 years. Sometimes my choice sometimes not.

kingstreet

Staircase to 75%, so you no longer have rent to pay on the share you don't own?

Hoploz

How interesting to read these positive stories.

My first buy was shared ownership but in 1999 so a lot has changed since then. It worked brilliantly for me as a young key-worker. I could afford 70% and was able to staircase within a few years as my teaching salary increased year on year with experience for the first few years.

However, I am always concerned when people say they want to buy 25% or even 50% as I always think they must think very carefully about their exit strategy. For the exact reasons that the OP has found.

So I am heartened to hear that there are still benefits to owning only a small % and it does work for some people.

carefullycautious

The only red flag is you letting the lease run down. If you did decide to sell you would have problems with a short lease. That would be my priority

Kynthia

carefullycautious wrote: »

The only red flag is you letting the lease run down. If you did decide to sell you would have problems with a short lease. That would be my priority

Agreed. To be honest not many people would have bought a property with 70 years left on the lease. It's definitely an issue, but not a shared ownership issue. That would be my priority before staircasing.

I can see an argument for not staircasing and using shared ownership to help build a decent deposit on a non-shared ownership property as staircasing is expensive. However if someone still is unable to afford somewhere else anytime soon and buying more of the property will allow them to benefit from more equity gains then perhaps it's worth it. After a lease extension though.

ebngy

Thanks for all the contributions I'm hoping this will help others who are in the same boat too.

I need to dig out the paperwork on the lease I was not worried at the time as the mortgage company nor solicitor said anything. But it isniggling me somewhat. And I intend to renew now.

I guess what is my frustration is more the housing market. We are now able to afford a home just 2 years too late. Prices have increased by £120k in those two years.

One of my gripes with shared ownership are the housing associations I suppose. We never hear from them. They have shown no interest in the property. When we called them for advice about staircasing they sent us a leaflet and told us to get a valuation survey and that was it!