Shared ownership

CindyT

Afternoon,


After reading up on shared ownership properties I can't help but wonder how they are very beneficial to those unable to purchase outright?


Despite having a great credit score and few outgoings, my job pays under £20,000 and I don't have a partner, and therefore I won't be able to purchase any housing on the general market in the near future. I could probably save about a £15000 deposit in a couple of years, but in my mid-30s I'm stating to wonder what the point of hoping for this is.


Whilst I am sick of renting and being at the mercy of rogue landlords and constant agency inspections and not ever feeling like you have a home, and wishing I could have a place to call 'my own' and be able to decorate etc. as I see fit...I initially thought shared ownership may be an option. But after reading more into it, it seems like due to its leasehold...you never really own it (even after buying more shares), you still have to pay the landlord rent which they can raise at any point (plus your own mortgage and other ground fees etc.) and ask permission to make renovations/decorations etc. and then if the lease drops below a certain amount of years - you then can't re-sell it/gets to the end of the lease and have to pay tens of thousands to extend the lease....and I don't really understand what happens if you get to the end of the lease and can't afford to extend it...do you just loose all that investment and end up with nothing?? (this is the bit that concerns me most).


Is the benefit really only to those who can afford to by out all 100% of the shares at some point? I noticed many schemes I looked at don't even allow this at all.


I think if it was freehold then I could see the benefit moreso, but when its leasehold I'm struggling a bit to see the benefits.


Does anyone have any experience in this process they'd be willing to share?


Many thanks in advance.

booksurr

as you recognise, "leaseholder" is just a fancy term for rent payer. You do not have an investment, you have merely paid for the right to live there for a fixed number of years by means of a lump sum rather than "regular" rent. So at the end of the lease you will indeed "lose" everything since you have never actually owned anything to lose.

If you cannot staircase to 100% ownership then you are right to see SO as merely a psychological exercise in making someone feel they have a "home of their own". That said, the vast majority of SO properties will be owned by "registered social landlords" and they are (in principle) a much better form of LL than you get get through "normal" renting in the private sector.

It seems that your main concerns are simply because you have been sucked into believing that you are a failure in life unless you own your own home. Utter rubbish, our parents and many people setting out in life today do not label themselves as failures just because they live in a council house or they rent privately. I agree that private renting can be a huge lottery, but that is where SO offers an alternative for those whose psychology will not accept "pure" renting ?

PasturesNew

Depending on the price and other options, for somebody like you it "could" be the right way to go.

The trouble comes when life changes.

If the rent is low/affordable - and if there's nothing hidden in there about other costs or the rent doubling every 10 years, then you could be looking at a situation where you're "paying out about the same as rent now, but it won't go up in the future and you'll know it's your home and you won't be moved on at the whim of a LL".

The alternative is to rent and, say, in 10 years' time, you'll be paying out double the rent, along with the uncertainty.

You're at that "funny age". You might never meet "the one" so life might not change..... if you're sitting in your shared ownership home in 30 years' time, with the mortgage part paid off you'll have enjoyed 30 years of secure living.

If you do meet "Mr/s wonderful" in the next 2-3 years you might find yourself stuck up the sh1tty creek with no paddle."

But you must feel that the place is the right one - and not be leaping from the frying pan into the fire.

The issue with these properties ALWAYS comes from:
- wishing to sell and finding yourself up against terms/conditions you hadn't realised at the outset.
- wishing to move for a new job and being unable to sell or rent it out.
- realising that all your neighbours are w4nkers and you're stuck there.
- not spotting that the service charges and rent parts were ridiculously high and seem to be skyrocketing due to small print you'd fluffed over in your excitement at buying.

I bought one when I was about 30, at what I now know was the peak of the market; I sold it 7 years later, 5% in negative equity, so had to pay out a cheque to leave. But, it was a nice little house (well, a studio as single people weren't allowed to buy into the 2-beds - it was only a 3-house development, with one bungalow for old people, 1 studio for singles, 1 2-bed for couples), with a little garden ... it had issues, as it was a long way from town, etc.... but nobody could move me on.

In the scheme I was in, I had the ability to sell it back to the Council, which I did, at a loss... but I had that amount of money in the bank, so just wrote out a cheque and that was it. For 6-7 years I had my own home - and it was great.

bluesnake

I do not like them, but they are not totally evil.

Often they are valued more than they are worth. Some are rented out to a niche sector, or certain members of society, so to sell you have to find similar people with the same criteria as you, which limits the market. Also if the area you are in booms, people in your situation will still be on a similar poor salary making the price unaffordable or you have to take a massive hit to get rid of it - Known some to have taken a -20K hit.

If you take a massive hit, there could be something in the clause which says the company's evaluation is final and you have to make up the difference.

Any improvements you make, the proportionate increase to the property that is generated goes to the company.

You want to make modifications/changes, then you have to call the company.

rent is their percentage of 2-5% of the companies valuation of the property.

The good bit: You are purchasing at today's price. As your salary, your position, the property, and cost of living goes up, the amount you lent is fixed and stays the same (except for the rental portion), making it over time cheaper and more affordable. Also over time since you will have more money in your pocket, you have the ability to buy more shares, and work your way out of 'not the best deal' situation. For some it is the only affordable deal, better than renting, but possible not better than renting if the area has no prospects. From what I have been told by a man living there it is cheaper to rent in the Wirral than get a mortgage. Also some one else whom has multiple properties in Liverpool said the housing rental income there is great, but when you want to sell and there is little capital growth and is hard to sell.

The other problem is if you do not buy shares, or move, and has a growing housing market. Then you are left as an oap with often a mediocre pension, paying rent on an asset that is increasing in rental payments which will force you to move or starve, and 50% of any higher price area often does not buy much in poorer surrounding areas, and you become a renter again.

Also mortgages here in the UK are very restrictive and a single person can only get a mortgage between 3-4.5 times their salary but are sometimes able to pay rent too.

When you buy your next 10%?, it will be a percentage of the current value, probably decided by the companies valuer, not the purchase price.

Most people I know have been on these schemes have done OK, but they have all gone up the work ladder, and bought extra shares. The ones that did not go up significantly in pay, and have not bought extra shares, are now oap's not knowing what to do and can't afford to retire either. when you get around 55 most mortgage evaporate.

If you do buy in a rentable area, make sure it is a 2 bed as they are ofyen not much more than a 1 bed, take in a lodger or two id your living room can accommodate this, to help with payments 5 years with lodger may not be pleasant, but it pays the bills.

caprikid1

Shared Ownership Scheme's allow someone on an income of 20K to buy a 150K property. In my opinion they are there to prop up an over inflated property market.


If everyone avoided such Scams (Scheme's) the most likely result would be falling property prices as demand would surely reduce with less people will or able to pay over inflated properties. These schemes were designed for house builders not house owners.

usefulmale

Cindy - A year ago I bought a 25% share of a new-build 3-bed terrace. I am married with 3 kids and I am in my late 40s.

The combined rent and mortgage is well below what it would cost me to rent an equivalent house. The lease we have states that the HA can only raise the rent by CPI+1%. Not whenever and how much they want.

Our lease is 125 years. I'll be long gone and the kids probably would be too by the time that runs out. I don't give that a second thought.

We don't need to ask permission for renovations or decorations (we would probably need to ask if we wanted to build an extention though). We can have pets if we want, without asking permission.

We don't envisage moving again, at least not until well after retirement maybe. To all intents and purposes, this IS our house. There is no landlord to decide to sell it from under us, no letting agents rip-off fees, no inspections.

I do appreciate that houses are generally overpriced but this was the only way that we could live somewhere we wanted, with security of tenure.

michaelfletch

Cindy - in 2007 I bought a 25% share of a £200k valued flat (ie £50k). This was done with a 10% (£5k deposit) and on a low to moderate income.
Now, ten years later I am in process of selling. My 25% is now valued at £75k, which along with the equity I have build up through making mortgage repayments has given me over a £45k deposit, large enough deposit to get a mortgage on a property that will be 100% mine. Without the shared ownership I would have been paying rent for 10 years and would still have no prospect of buying a home, so I would say it is worth it.

Newbie78

usefulmale wrote: »

Cindy - A year ago I bought a 25% share of a new-build 3-bed terrace. I am married with 3 kids and I am in my late 40s.

The combined rent and mortgage is well below what it would cost me to rent an equivalent house. The lease we have states that the HA can only raise the rent by CPI+1%. Not whenever and how much they want.

Our lease is 125 years. I'll be long gone and the kids probably would be too by the time that runs out. I don't give that a second thought.

We don't need to ask permission for renovations or decorations (we would probably need to ask if we wanted to build an extention though). We can have pets if we want, without asking permission.

We don't envisage moving again, at least not until well after retirement maybe. To all intents and purposes, this IS our house. There is no landlord to decide to sell it from under us, no letting agents rip-off fees, no inspections.

I do appreciate that houses are generally overpriced but this was the only way that we could live somewhere we wanted, with security of tenure.

Couldn't agree more with this post


We have just moved into our newly built 2 bedroom shared ownership home (35% share) in the same area we lived for the last 5 years, near our friends and family. It is a fantastic area, close to the centre of town but still away from the hustle and bustle, with a garden and huge living areas. Plus everything is new. It is more than affordable, it feels like we are ripping off the scheme


We could not have bought a home outright so this was the most suitable way for us to own a home, and yes we so feel like home owners


Like everything in life there are things that work for people and don't work for others


Several friends of ours have also bought shared ownership properties and some have moved on with more equity and larger deposits to but bigger homes


We could not be happier and I could not recommend it more, sure as hell beats renting and paying our landlords kids university fees

eddddy

Historically, buying residential property (both freehold and leasehold) has often been a much better investment than paying rent - even after paying mortgage interest, ground rent etc.

But it's an investment opportunity that's only open to people with a large deposit and high salary.

Shared ownership is intended to make that investment opportunity open to people with a smaller deposit and a lower salary.

But the shared ownership model has some flaws, which makes it less good than buying outright.


But of course, if you believe that residential property (freehold or leasehold) won't continue to be a good investment, you should probably avoid buying any - whether shared ownership or sole ownership.