Shared Ownership - Pro’s & Con’s

James131994

We are young first time buyers, we have found a fantastic shared ownership new build house. We would be buying a 50% share with a view to staircase to 100% when my wife goes back to work (have 2 kids). We would not be able to afford this house outright currently. Currently live in a housing association home that I am not happy in, do not like the neighbourhood at all.
The house has a 125 year lease, we will become the freeholders at no extra cost when stair casing to 100% (apart from legal fee’s). The lease says rent can only increase with inflation.
I would like to hear from anyone currently in shared ownership or anyone that knows about it and get your general thoughts on if there is anything I need to look out for.

I know everyone is skeptical about SO so have tried to do my homework. I know legally the housing association that will own the other 50% have to comply to certain policies so cannot set out to ‘rip us off’ and of course they are non profit.

jonnygee2

I've seen both sides of this coin - both people who have come out of shared ownership very well, and people who have come out of it very badly.

The appeal is clear. Shared ownership house are often new or fairly new, the rent is cheap and you can get a much bigger place.

There are a lot of disadvantages though, I think really they come in when you want to sell, but have not yet become 100% owners. In this case selling becomes very difficult and expensive, with huge potential losses if you need to sell fast. Basically, 'shared ownership' means a loss of control on the asset, you cannot easily sell on your own terms, and you cannot easily let it out or make structural changes. And a loss of control means an increase in risk.

Where it has not worked out well is generally where people have bought a property and then been unable to staircase. Especially if they then want to move (which eventually they always will do).

In your case, I'd say that you seem to have a plan to get to 100%. Also, you have a housing need you probably can't meet on the open market. So you meet the conditions for someone that might benefit from temporary shared ownership and I've seen it work for people like you.

But you still need to make sure that your plan to staircase to 100% is realistic (remembering the price can rice substantially!), and also that you are unlikely to incur any sudden change of circumstances that would mean that you have to sell before the stair-casing can happen.

For a lot of people, they just basically found themselves living in, and part owning, a house they will never be able to own outright.

James131994

Thanks for your reply jonnygee.

I agree with your points and I have found similar comments when looking online.

As for my current situation, if we move into this house we will Be about £100 per month worse off when both rent and mortgage are factored in so for £100 per month we get all the extra room we need, a secure home in which we will be aiming to own 100% in a nice area for my kids to grow up in which make me feel these are risks worth taking. Obviously I know there is all the extra pressure that comes with a mortgage and the possibility of going into negative equity but I do feel this is a long term home. So I can’t see too many downsides to it. We are in the Oxfordshire so 100% ownership is so expensive here.

poppy10_2

https://forums.moneysavingexpert.com/discussion/3177256/shared-ownership-equity-is-a-scam

Bossypants

When is your wife going back to work, how certain are you of her future salary, and how long would it take you to staircase to 100% once she is earning it?

I might consider it if I had real, concrete plans for how to staicase within a reasonable amount of time (less than 10 years for me), but only you can make the call.

Cakeguts

The fact that you are at the moment living in an housing association property makes me think that buying anything is for you an enormous risk. The problem is that you are only secure in a housing association property that you rent. Once you buy you are at risk of becoming homeless if you can't pay the mortgage.



There aren't any benefits that will pay a mortgage so if you lose your job or you become ill and you no longer have the money for the mortgage your lender could repossess the property. If this happens you may not be rehoused because not paying a mortgage is like not paying your rent. As a homeowner you are expected to have enough in savings to pay the mortgage if for one reason or another either of you or both of you are not working so that would be enough savings to cover the mortgage for 6 months if you or your wife to do not have a job.



So you are going to need in savings at least 6 months of mortgage payments plus any other living expensed you might need for that time. Home owners do not have the safety net that renters have. If you own a home you are expected to be able to save and budget for if something goes wrong in your life.



You also will be responsible for 100% of the repairs to the property even though you will only own 50%. If something breaks you will not be able to phone the houseing association and have someone come out and repair it. You will have to phone up to get it repaired and you will have to pay for it. An example of this might be that the fence blows down in your garden. If this happens and it is your responsibility to pay for it to be repaired that is what you will have to do. You have to have the money in savings to do this.



It is one thing not liking the area that your current home is in but it is quite another risking making your children homeless if something goes wrong when you buy.



The fact that as a homeowner you need to have a large amount of money in savings is going to be another reason why you may not be able to staircase to 100% as quickly as you think you can. Renting is much much less hassle and can be a lot cheaper than buying.



To staircase to 100% will probably also mean taking on a bigger mortgage which will mean having even more in savings to pay it if you can't work so you will be even more short of disposable income.


It is really really important to be still able to pay the mortgage even if neither of you are working because selling 50% of a shared ownership property can take time and if you don't get enough back to cover the mortgage and the interest you will be left with a big debt and no house.

James131994

Cakeguts wrote: »

The fact that you are at the moment living in an housing association property makes me think that buying anything is for you an enormous risk. The problem is that you are only secure in a housing association property that you rent. Once you buy you are at risk of becoming homeless if you can't pay the mortgage.



There aren't any benefits that will pay a mortgage so if you lose your job or you become ill and you no longer have the money for the mortgage your lender could repossess the property. If this happens you may not be rehoused because not paying a mortgage is like not paying your rent. As a homeowner you are expected to have enough in savings to pay the mortgage if for one reason or another either of you or both of you are not working so that would be enough savings to cover the mortgage for 6 months if you or your wife to do not have a job.



So you are going to need in savings at least 6 months of mortgage payments plus any other living expensed you might need for that time. Home owners do not have the safety net that renters have. If you own a home you are expected to be able to save and budget for if something goes wrong in your life.



You also will be responsible for 100% of the repairs to the property even though you will only own 50%. If something breaks you will not be able to phone the houseing association and have someone come out and repair it. You will have to phone up to get it repaired and you will have to pay for it. An example of this might be that the fence blows down in your garden. If this happens and it is your responsibility to pay for it to be repaired that is what you will have to do. You have to have the money in savings to do this.



It is one thing not liking the area that your current home is in but it is quite another risking making your children homeless if something goes wrong when you buy.



The fact that as a homeowner you need to have a large amount of money in savings is going to be another reason why you may not be able to staircase to 100% as quickly as you think you can. Renting is much much less hassle and can be a lot cheaper than buying.



To staircase to 100% will probably also mean taking on a bigger mortgage which will mean having even more in savings to pay it if you can't work so you will be even more short of disposable income.


It is really really important to be still able to pay the mortgage even if neither of you are working because selling 50% of a shared ownership property can take time and if you don't get enough back to cover the mortgage and the interest you will be left with a big debt and no house.

Thanks for your response. From day 1 of moving into the property we will have 6 months of mortgage payments in savings. When we move out, our outgoings are only set to increase by £100 per month as our HA property at the moment is quite an expensive one due to it being a new build.

I do understand what you’re saying about it being a big risk. It is something we are going to take on at some point and have been saving for years to be able to do it and I think it just feels like a good time now.

As for benefits, my salary is quite good meaning we don’t qualify for anything as it is anyway, the only thing we get is child benefit and that won’t change when we move into this property.

I would aim to staircase in around 5 years which should allow us some time to build some equity in the property and also allow us good time to build more savings and of course, my wife would be back working at this point.

Thanks for your comments, it’s nice to hear other people’s opinions on what could potentially cause issues.

Ashtonlawns

James131994 said:

Cakeguts wrote: »

The fact that you are at the moment living in an housing association property makes me think that buying anything is for you an enormous risk. The problem is that you are only secure in a housing association property that you rent. Once you buy you are at risk of becoming homeless if you can't pay the mortgage.



There aren't any benefits that will pay a mortgage so if you lose your job or you become ill and you no longer have the money for the mortgage your lender could repossess the property. If this happens you may not be rehoused because not paying a mortgage is like not paying your rent. As a homeowner you are expected to have enough in savings to pay the mortgage if for one reason or another either of you or both of you are not working so that would be enough savings to cover the mortgage for 6 months if you or your wife to do not have a job.



So you are going to need in savings at least 6 months of mortgage payments plus any other living expensed you might need for that time. Home owners do not have the safety net that renters have. If you own a home you are expected to be able to save and budget for if something goes wrong in your life.



You also will be responsible for 100% of the repairs to the property even though you will only own 50%. If something breaks you will not be able to phone the houseing association and have someone come out and repair it. You will have to phone up to get it repaired and you will have to pay for it. An example of this might be that the fence blows down in your garden. If this happens and it is your responsibility to pay for it to be repaired that is what you will have to do. You have to have the money in savings to do this.



It is one thing not liking the area that your current home is in but it is quite another risking making your children homeless if something goes wrong when you buy.



The fact that as a homeowner you need to have a large amount of money in savings is going to be another reason why you may not be able to staircase to 100% as quickly as you think you can. Renting is much much less hassle and can be a lot cheaper than buying.



To staircase to 100% will probably also mean taking on a bigger mortgage which will mean having even more in savings to pay it if you can't work so you will be even more short of disposable income.


It is really really important to be still able to pay the mortgage even if neither of you are working because selling 50% of a shared ownership property can take time and if you don't get enough back to cover the mortgage and the interest you will be left with a big debt and no house.

Thanks for your response. From day 1 of moving into the property we will have 6 months of mortgage payments in savings. When we move out, our outgoings are only set to increase by £100 per month as our HA property at the moment is quite an expensive one due to it being a new build.

I do understand what you’re saying about it being a big risk. It is something we are going to take on at some point and have been saving for years to be able to do it and I think it just feels like a good time now.

As for benefits, my salary is quite good meaning we don’t qualify for anything as it is anyway, the only thing we get is child benefit and that won’t change when we move into this property.

I would aim to staircase in around 5 years which should allow us some time to build some equity in the property and also allow us good time to build more savings and of course, my wife would be back working at this point.

Thanks for your comments, it’s nice to hear other people’s opinions on what could potentially cause issues.

Is there a minimum time that you have to wait before you can staircase the remainder of the property?

saajan_12

You're essentially half renting / half owning. Generally, the benefits of renting are:

• flexibility in being able to move with just a month's notice
• rents staying competitive (as otherwise you could move)
• LL takes care of repairs
• No need for large deposit (or you can invest your money elsewhere)

Benefits of owning are: 

• Freedom to decorate / change property as you wish (do you still have to ask permission here)
• Potential increase in value (if you have HA first refusal clauses, the time delay could make your property less attractive meaning less demand, and hence lower sale price compared to a normal house)
• Eventually pay down mortgage so you own outright (though you could invest your money elsewhere and use the growth as a larger lump sum deposit when you're ready to own  100%)

All in, doesn't sound like you get the benefits of either side really. My recommendation would generally be to wait until you're ready to buy 100%, and invest the deposit money you have at the moment so it can grow similar to how your equity would if you'd bought part of a house. 

stampystamp

We were in exactly your position. In a housing association flat, we are in the process of buying a shared ownership house. It’s all very well for others to say if you’re in housing association housing you are secure but you also are very limited on where and when you can move. Trying to do a mutual exchange is a damn near nightmare and going back on the list will take forever. So if you are in a property that isn’t suited to your needs, you really are stuck. More stuck than if you are in private renting! 

I am not saying shared ownership is perfect cos it most certainly isn’t. But if you KNOW staircasing to 100% is a sure thing in the future, there’s no reason not going for it. 

Also I don’t know one single person who owns their house who has a huge pot of savings to fall back on if they can’t meet their mortgage payments. Saving up for a deposit is a mean feat these days and most people will use their savings for their deposit and have to start all
over again once they are in the house.

ryangildchrist

The advantages of renting are you are not responsible for ongoing maintenance 

it seems shared ownership is not shared maintenance, they put in the small print one party is responsible for 100% maintenance 

so to answer the question is shared ownership a good deal? It depends are you the side getting shafted or are you the did taking very little risk?

the only way I would invest in shared ownership is if I was the side who could take half the rent and zero maintenance costs for only half the initial investment, yes then I would invest. Plus the supposedly half rent is always higher than 50% anyway