Heres a different question!

Graham_Devon

Currently own (well mortgaged) a 25% share of my shared ownership home. This is a private shared ownership scheme, nothing to do with councils etc.

I was extremely lucky to get this house, it needed a lot of work, and I'm halfway through that and been here a year.

Plan to live here 5 years max (so long as things go to plan).

25% shares are not avaliable anymore, has to be 50% on new builds. My plan was always to buy another share (can buy up to 80%), and with house prices predicted to fall, I was thinking it would be an ideal opportunity to buy another 25-40% (i.e. at a lower price).

BUT...would it be worth it when I plan to sell in aout 4 years? It will take an 'affordable' first time home with a very low mortgage amount into a 'normal' mortgage amount, making it less affordable.

I could buy another quarter with no mortgage, and it will also save me about £70 a month in rent. BUT, will make it harder for me to sell, and I know the previous owners took over a year to sell (it's very hard to buy a SO house I found, being turned down left right and centre, only a few mortgage companies will do it....then you got the SO requirements to fill).

Currently it costs just £410 a month mortgage / rent for a 2 bedroom semi with 2 parking spaces, garden etc. Which is why I tried so hard to get in!

So, should I think about buying another share, save money myself and own more of the house (remembering there are the solicitors fee's involved again aswell as mortgage fee's) or stick with it, and sell it on as a 25% share which should make it easier to sell and keep the money in the bank making interest for the next house deposit?

Any comments!? Some people say buy it up, others say leave it, will help someone else and help me when I want to move on.

moneysavinmonkey

how does it work with buying extra shares... if you want to buy anothe 25% is that valued at today's market value or the value you originally bought the first 25% for? Your post seems to suggest that the share is priced at the present market value....

I'm just asking as it seems a strange situation where you are spending a lot of money in doing the place up when it is effectively 75% rented....the obvious outcome of doing up a place is that you are increasing its value - so it is now going to cost you more to buy further shares!?

Is the 'owner' of the other 75% of your house contributing towards the costs of the works you are undertaking?

Graham_Devon

If I buy another share, I have a survey done etc, it gets valued, and I pay the share of what I'm buying. So if it dropped by 50% in a crash, I would pay half as much for another 25% share as I did for the first. Same applies if it rushes up, i'd pay more for the next share.

As for the doing up thing. I knew this when I bought it, and it was taken into consideration. No, I don't get any help from the HA. It's all private, I work, therefore, I can pay (is the theory), the only thing they do is collect rent from you, which includes buildings insurance and community payments (for the cul-de-sac, gardening, road upkeep etc). It's all completely private, the small plot were on, is also private roads, so we pay for the lighting etc, no part of council tax.

As for doing it up, like I said, I knew this, but also knew I was never going to get the chance of a house for at the time, £360 a month...which has now risen due to interest rates). It's not structural repairs, but previous owners could not care less, everything was broken, plasterboard had holes everywhere etc.

I've put in a new kitchen for £150 (thanks to help from my dad who was a kitchen fitter and knew someone who worked for a housing company and they just chuck all rejects, so got a kitchen from rejects, but it all matches, and rejects mean the corner of an 8ft worktop has been dented....of course, you don't need all 8ft....but they throw it all away...so I got it).

Needs a new bathroom. I do tiling myself. It's mostly cosmetic. Hall for instance was painted chalk board black. Took a long time to sort it all out, but it's cost around 2k total. I've saved that in a year on rent (currently circa £650 for the same house in my area).

It's given me somewhere to live, put me on the ladder and helped me save all at the same time, so pro's and cons, plus I do own at least 25% of it.

But in 4 years (when 30) I want to be moving on, with ease. Just don't know which would be better, owning more of the house, or making it more affordable for others by owning less?

I'm only basing this on if prices fall. But if they do, I have to be ready. I would not buy another percentage now. It's well inflated, and not worth it!

As for the 'it will cost me more to buy more as I have done it up'. I know, sucks eh! Strange situation!

lindens

One idea, if you manage to have savings every month, is to over pay on your current mortgage (if you are able) and then when you do come to sell your share, you will have a bigger cash deposit to put down on your new house.

Graham_Devon

lindens wrote: »

One idea, if you manage to have savings every month, is to over pay on your current mortgage (if you are able) and then when you do come to sell your share, you will have a bigger cash deposit to put down on your new house.

Apparently it's not worth doing this now? My savings are at 6.3%, (5.1 net or something) mortgage 5.25% (currently).

If theres a crash, I have stuck my money into something thats now worth 25% less?

That's the way I see it anyway. Whereas if theres a crash and my moneys in the bank, it just keeps growing regardless?

moneysavinmonkey

just to be clear, if you buy another 25% share - say at a time when prices fall... then when you come on to sell it you will have to sell on 50% - the new owner will have to take on 50% and could not take on 25%... equally if you didn't buy another 50% the new owner would definately still hv?

if that is the case, I wouldn't bother buying any more shares, as that why you will keep it affordable for more people. Instead make sure the money is tucked away earning maximum interest ready to be used as a deposit for you next place. I also wouldn't bother spending anymore than is absolutely necessary on doing the place up - sorry if this is harsh but 25% share isn't really that much so you won't see much return on the improvements you make. I understand that initally some work was needed and that was why you got if for a low price - now just save this cash for your next place.

Also worth considering - you are talking about buying a share if/when prices fall... trouble with this is how will you know whether they are still falling? Particularly given the time scale you are talking about, you may find when you come to sell the extra share you have bought is worth less than you paid.

Graham_Devon

If I bought another 25%, the new owner would HAVE to take on 50%.

If I left it as my current 25%, they would have to take on 25% (and more if they wish).

I just have to sell my share.

Therefore 25% of say 150k is easier than 50% to find funds for.

No need to worry about being harsh. The 25% thing was just an ideal opportunity. Would have been silly not to take it, regardless of it's con's. Always thought, if my 25% that I have drops in price, yer sure, I have lost out like every other houseowner that bought in the last couple of years, but it gives me another good opporunity to buy more of it at less of a price. Now, im not so sure this is worth it!

The only thing is if I bought another 25% without a mortgage, it's £70 a month saved in dead money rent as my rental will go down. Over 4 years thats £3500+ saved in rent money. Hence why theres so many angles to look at it. However, my savings curently pay more than that in net interest per month.....catch 22!

As for the doing up thing, yer, I'm not doing anything thats not needed. New bathroom is needed, but will just be a plain white one.

It's also been a good opporunity for me to learn stuff though, and it's not all finiancial, some of it I'm doing for me

Pobby

Of course the other side of the coin is with friends of ours.Took 50% ownership{17k} in the 80s.Now would like to buy the other half but it will cost them around 80k!

Graham_Devon

Pobby wrote: »

Of course the other side of the coin is with friends of ours.Took 50% ownership{17k} in the 80s.Now would like to buy the other half but it will cost them around 80k!

Yup! And my plans may not work and I may have been better buying it up now, rather than in 5 years when for whatever reason, I can't move on!

Theres just so many if's and buts. Which is why I'm looking to others to just see what they would do!

moneysavinmonkey

Graham_Devon wrote: »

Apparently it's not worth doing this now? My savings are at 6.3%, (5.1 net or something) mortgage 5.25% (currently).

If theres a crash, I have stuck my money into something thats now worth 25% less?

That's the way I see it anyway. Whereas if theres a crash and my moneys in the bank, it just keeps growing regardless?

are you are saying here that there is no point overpaying your mortgage as if house prices go down you will loose your money?

this is wrong - say you bought your 25% share for 25k on a mortgage then you have borrowed 25k and you have to pay this money back to the bank... if the price goes down and it is only worth 15k then you still have to pay the full 25k back.... you have not saved yourself 10k by not overpaying.

lindens

Graham
If thats the case, that you can only sell the same percentage that you own i would stick at 25% as I think you probably have more chance of selling that amount in the future.
With my SO its slightly different in that we own 40% but if we sell, the new person can buy whichever percentage they wish from HA.
My OH was lucky, he bought 40% 10 years ago and its now worth treble