Shared ownership versus renting

Lucy1956

I am currently a HAssoc tenant with a 5 year tenancy payable at £695 per cal month.

Locally in the next month a shared ownership 25% of a 3 bed 3 story town house is coming up for sale, ( I have first offer)house valued at £180k and this style of house currently selling between £185/190k.

I can leave this flat with 4 weeks notice, if I stay here for 5 years @ 695 per cal month that equates to £41.700 money paid to HAssoc and the rent would increase each year during this 5 years too.

I have the £45k and the money to pay the searches, legal fees etc my thinking is, I have just got a job part time that would pay the rent share of the shared ownership currently £304 per cal month and if I banked the money I save by not paying the rent in present place I would be in a position to buy the rest of the ownership in manageable steps..
When I say I have just got a job I mean gone back to work after taking early retirement.

I have a good Army Disablement Pension and BT pension plus State Pension in 5 yearsso even if not working can save a fair amount to buy good shares each couple years till finally owning 100%

Paying this £45k seems better than giving the HAssoc virtually the equivalent in rent and seeing nothing for it...

I will still have a good Small but comfortable nest egg in bank if I did this.

I have no debts, credit card debt and credit record is good...does this sound a good idea.

csgohan4

you are responsible for 100% of the maintenance of your flat/house,


also your income may not cover the share needed, not enough information.


When you come to sell, the market is much narrower


Note HA are notorious for giving large bills for repairs e.t.c, think 5+ figures and more

Norman_Castle

csgohan4 wrote: »

Note HA are notorious for giving large bills for repairs e.t.c, think 5+ figures and more

I might be wrong but I believe councils are more likely to overpay for large repairs and this is more likely on blocks of flats rather than houses.

Norman_Castle

Lucy1956 wrote: »

I can leave this flat with 4 weeks notice, if I stay here for5 years @ 695 per cal month that equates to £41.700 money paid to HAssoc and the rent would increase each year during this 5 years too.

I have the £45k and the money to pay the searches, legal fees etc my thinking is, I have just got a job part time that would pay the rent share of the shared ownership currently £304 per cal month

This could be viewed as investing £45k for 5 years with a return of £391per month minus maintenance costs.

Your rent should decrease over the next four years.

http://www.socialhousing.co.uk/has-ordered-to-cut-social-housing-rents-by-1-per-year-for-four-years/7010692.article

Cakeguts

Why does the flat cost £695 pcm and the house rented bit only cost £304 pcm? Are you actually sure that the £304 pcm is the rent on the rented bit and not an estimate of the mortgage cost for buying the 25% share?

suecoo66

csgohan4 wrote: »

you are responsible for 100% of the maintenance of your flat/house,


also your income may not cover the share needed, not enough information.


When you come to sell, the market is much narrower


Note HA are notorious for giving large bills for repairs e.t.c, think 5+ figures and more

Shared ownership property is very popular as lots of 1st time buyers want them and they often sell for a premium .
My 1st property was shared ownership

suecoo66

Cakeguts wrote: »

Why does the flat cost £695 pcm and the house rented bit only cost £304 pcm? Are you actually sure that the £304 pcm is the rent on the rented bit and not an estimate of the mortgage cost for buying the 25% share?

The rent is always low because you get nothing for it. As an owner of shared ownership you are responsible for all maintenance rtf
The other party owns the lease.
I think it's a great way of getting on the property ladder and did it myself

Cakeguts

suecoo66 wrote: »

The rent is always low because you get nothing for it. As an owner of shared ownership you are responsible for all maintenance rtf
The other party owns the lease.
I think it's a great way of getting on the property ladder and did it myself

You do get something for the rent. You get to live in a property that you only own a small percentage of. However I think what you mean is that you don't get any repairs done or the building insurance paid for out of the rent which you would get if you just straight rented.

Sounds like an expensive way to get onto the housing ladder to me. You own only a very small amount but you have to pay for all of the repairs and other property costs as if you owned 100%. It seems to me that you would get better value if you owned the 100% to start with. Generally it would seem that paying the mortgage for the small percentage and the rent would actually cost more than just straight renting because of being responsible for all the repairs. Would probably work out considerably cheaper to just save a larger deposit and buy a whole house.

Leo2020

Cakeguts wrote: »

You do get something for the rent. You get to live in a property that you only own a small percentage of. However I think what you mean is that you don't get any repairs done or the building insurance paid for out of the rent which you would get if you just straight rented.

Sounds like an expensive way to get onto the housing ladder to me. You own only a very small amount but you have to pay for all of the repairs and other property costs as if you owned 100%. It seems to me that you would get better value if you owned the 100% to start with. Generally it would seem that paying the mortgage for the small percentage and the rent would actually cost more than just straight renting because of being responsible for all the repairs. Would probably work out considerably cheaper to just save a larger deposit and buy a whole house.

Reasons I could think if is that if someone was worried that prices would go up quicker than what they could save (get on ladder now before they lose their chance) or if maybe they had been gifted a deposit and knew they could never save up for their own deposit.

But I agree that it seems an expensive option if you can afford to buy out right.

csgohan4

don't forget they are usually leasehold, so you need to renew the lease at some point if you want to stay long term

Cakeguts

Leo2020 wrote: »

Reasons I could think if is that if someone was worried that prices would go up quicker than what they could save (get on ladder now before they lose their chance) or if maybe they had been gifted a deposit and knew they could never save up for their own deposit.

But I agree that it seems an expensive option if you can afford to buy out right.

I think to some people it looks like a good idea of getting onto the housing ladder but if you think the plan right through it probably isn't the best and cheapest way to get to own a whole house. The point is that if house prices go up and you only own 25% you will have to save more to get the next 25% because the value of that will have gone up and you still have to pay the rent. Unless you are good at saving you will never own 100% because the cost of getting the next small percentage will always be too much and if you sell your 25% you will have paid so little off the mortgage you probably still won't have got enough for a deposit on a house on the open market. I would think that there are a lot of people stuck in shared ownership because they can't save enough to buy 100% because of the cost of the rent and the mortgage combined and the cost of all the repairs etc.