Shared ownership, what do you think?

Alleygator

Hi everyone,

My partner and I are first time buyers trying to size up the market at the moment. We've had an initial meeting with a mortgage advisor and have discussed the amount of money we could potentially borrow for us to buy a house which seems so far out of our reach!

I am 23 and a health care assistant at my local hospital, my partner is 24 and a mechanic and we both have a steady, reliable income.

I have found a house that would be absolutely ideal, a two bed new build in the countryside just 15 minutes away from the hospital and 3 minutes away from the garage that my partner works at.

The only issue that I've got is the fact it is shared ownership. They're asking for £80,000 which would give us a 50% share in the house and the monthly rent has been set at £183.33 for the other half. Now, to me this seems brilliant and from what the mortgage advisor has told us he would have no problems at all finding us a mortgage for 95% of the property.

However there are so many mixed reviews about SO, my partners mother has kind of scared him into thinking twice about it as her brother bought a house with shared ownership 20 years ago and got into a lot of debt (he now owns another home with no problems). I personally don't think this should affect our decision as it was 20 years ago and from what I've read the whole scheme has come along leaps and bounds. To me, this seems like the only option we have to get a foot on the property ladder without spending the next 3 years at home trying to save!

I'm really just looking for advice, do you think this could be a viable option for us? Has anyone got personal experience with S/O whether it be good or bad?

System

I'd buy 100% of a 1 bed leasehold flat before you have toddlers, as it wouldn't help you to be paying rent on more property than you currently need, because the rise in its value will work against you for the part you don't own, so you're no better off unless you really need the space

Bear in mind, shared ownership are leasehold, your lease could well be short (less than 80 years) by the time you have 100% ownership

System

What you save in rent you could either pay off the mortgage with to propel you to the next property, or better still, invest (Google Vanguard lifestrategy funds) - but generally only if your next move is more than 5 years away

Zeni

We almost went down the shared ownership road last year - similar to you FTB and wanting to get on the property market but after reading we decided it wasn't for us.
The first thing we didnt like was the leasehold and the fact that however much we paid and staircased up we would never own the freehold in the development we liked (The max we were even allowed to staircase was 75% as they needed to keep the rural affordable housing for the area so couldn't own 100% ever - I would recommend finding this out as you said it was in the countryside and rural properties can have this) Also the restrictions such as having to get permission for certain decorations and although only owning 50% being responsible for all the maintenance and issues with the house - Could put a lot into it but never really get a lot back from it.
Another concern was the ground rent and worrying about how much this may change and increase over the years.
The last thing that really got me was how hard they seem to be to sell on when you want to leave. I have seen a few properties local to me I liked the look off a year ago still up for sale now which were SO but then again it depends what the market is like for your area and if these types are houses are snapped up quickly.

It depends whats right for you! We sat reassessed and realised we needed to hold on for a bit as we were not far off having a 5% deposit for a 120-130k house and kept saving and six months later we are now buying our first freehold home.

Cakeguts

I would suggest waiting for a couple more years and saving every penny so that you can get a freehold house that isn't shared ownership. The more money that you can pay in cash as the deposit for a house the less mortgage you need.

Ways to save money. Cheap mobile phone contracts, don't buy cars on finance. What you have to do is to go through all the "it only costs x amount per month to have one of these" add them up and then get rid of all the ones you can live without. Can live without not don't want to live without.

New houses have a premium on them so a second hand shared ownership house will sell for less than a new one. New houses are like cars. New houses drop in value as soon as someone lives in them and they are then second hand like all other houses.

If you buy 50% now and house prices rise you will still have to save and save and save to get to buy anymore because the next 50% that you don't own goes up in value like the rest of housing. You don't get to buy 50% for x much and then get the next 50% for the same amount you have to pay for the increase in the value of the 50% you pay rent on.

For shared ownership you might only own 50% but you are responsible for all the maintenance as if you owned 100%.

In the long run buying through shared ownership will cost you more to get a 100% owned house than it would to save a bit more now and buy one on the open market at 2nd hand prices. Shared ownership properties never sell for as much as private houses so when you come to sell a shared ownership property you could make a huge loss.

It is better to avoid shared ownership if you can. It is an expensive way to buy a house.

wjr4

I 100% agree with the above! We also looked at SO last year and was put off by it. Paying rent (which can increase at any time) + mortgage seemed silly! I also wanted to own the freehold and not have to ask for permission when decorating (you might as well be renting!). Paying for residents maintenance etc felt pointless too!

How much are older properties selling for where you live? For example, we would have bought a shared ownership flat worth 280k (we would have up to 75% of this) but we now have a 3 bedroom house for 260k!

_ftb

Another vote against - I've looked into it recently and decided against it for all the reasons outlined above.

A friend of mine did it a few years ago and the rent has increased every year to the point that he now pays significantly more per month than if he just paid a mortgage on the whole amount.

Carl31

Shared ownership is the worst of both means of housing arrangment in my opinion

You dont own the full property, so anything you invest at your expense, you will never fully benefit from. Ie say you pay for new windows, the housing association will automatically own, and benefit from, part of that purchase. You pay rent, but the landlord has no obligation to your housing arrangement. If you 100% rent and the boiler breaks, not your problem, the LL fixes it. If you 50% rent and the boiler breaks, its 100% your problem, and the housing agent again receives the benefit of your investment

Although I see why people consider it, i think its really exploiting the obsession with owning 'something', even though the value of that something after mortgage interest and rental costs is going to be minimal at the end of it. you might own 50% of a £200k house, but what you have paid to own it will outstrip its value from a net perspective

teddysmum

Newly built properties tend to have inflated prices and many lose value for the first few years (buyers prefer to have their own new house, instead of paying the same for someone's 'partly used' ).


As you are happy with a terraced property, are their no early 20th century ones, as many of these have been nicely done up, but cost less ? (In our city you can buy a nice one for well under £100,000.) Ex-LA properties also come cheaper than private builds and aren't as difficult to sell on, as they once were.

Newbie78

Well maybe a lonely vote for the positive


Without shared ownership we would still be renting and never have gotten onto any property ladder


From someone who actually is living and paying for a shared ownership property I can tell you its truly not as bad as some people seem to think (or made up from myth) and I can tell you there are far worse situations to be in. We couldn't be happier


Just to advise we don't have to ask permission to decorate or even to have pets. In fact the HA has been fantastic checking in to make sure everything is perfect ( it's a new build) also rents often go down year on year from what I've read on this forum


We live in a very popular area in a beautiful 2 bedroom home, it's awesome


You are both young though and this doesn't seem like the only option so maybe keep looking at your options

polarization

A few things to consider and be aware of if you want to go for SO.

1) Can you stairecase to 100%? some HA won't allow 100% ownership/
2) Will you have any plan to move in the future? If yse, how long do you think you will stay in the SO property?

Points to notes
3) You have to pay all the fees (valuation and solicitors, bith yours and the HA's) if you are going to increase your shares of the property.
4) If your circumstances changed, it is not easey to seek approval to rent the place out if you do not own 100% of the the property. There are some news stores online before talking about people cannot get out the scheme when they have to move for another job or have babies. The only option would be to sell the place.