Renting vs shared ownership

Juliette28

Hi All,

I’m new to the forum and after some opinions.

As a bit of background... I had debts to clear from my early 20s, it took me years but I did it! Now in my early 30s I have a good credit rating and a small deposit together. I have seen a couple independent financial advisors who both advised me that due to a smaller income, small deposit (£9,000) and having a dependant (toddler), buying outright and the help to buy equity loan are quite far off for me (a starter home in my county is at least £200k). Ive been advised I would need another £10k at least which will take me an eternity to save with rent of around £1k every month plus all other outgoings...

After paying off my debt I should be over the moon but it feels disheartening after years of doing that and also saving money, no holiday for 7 years, no new car for a decade! etc that I still can’t buy outright as I just don’t have enough... but that is how it is!!

So I come to my two, current, options. Rent or shared ownership. The thought of not investing in mine and my daughter’s future terrifies me but so does shared ownership as I don’t know much about it and whether there will be any “traps”. I’m already jumping though hoops of having to get together millions of paperwork and offers in principle every time I like a house, just to find out someone else has beat me to it 🙈

Anyone with any opinions of rent vs shared ownership or any experiences??

Thanks so much!

Cakeguts

I don't know anything about the shared ownership except that it is a very very expensive way to buy a house. The main problem being that you only own a small percentage but you are liable for all maintenance and repairs as if you owned the whole lot. You also have to pay rent on top of the mortgage repayments for your share so it can be expensive.


Have you thought of camping holidays?

ruby2sday

Shared ownership only seems to help people who can't get the mortgage/deposit together for the size of house they want but have a lot of income to be able to afford the mortgage payments PLUS rent. If you could say only afford a one bed flat but you wanted a 3 bed house, you get can get the three bed house for same price as the one bed flat but you have to also pay rent on top of it, so it works out a very expensive way of buying.

HanPop

I don’t agree with the other posts about it being a more expensive option. The rent portion is at a reduced rate. I wouldn’t buy if it was too low a percentage but if you could afford 50% I think it is a good idea. You may be responsible for the property but you cannot be asked to leave like you can a rented property so it provides more security for you and your child. We owned 75% of our property before we staircased to 100% and the scheme was really good for us to get on the housing ladder. We have just sold our property after living here for 5 years and made £33,000 which we would not have been able to save in that time. My advice is to do your research on the housing association associated with the property you are looking at and understand the rent calculations. Also make sure that you are able to staircase to 100% and obtain the freehold if you do so that it is always an option in the future. It’s was through Bromford Homes and I have no complaints.

eddddy

People's concerns with shared ownership seem to include:

• New shared ownership properties tend to be overpriced.

e.g. You buy 50% of a property for £100k, but similar 'full ownership' properties cost less than £200k.

• It's difficult to resell a shared ownership property (you should check the procedure that you have to follow)

However, the selling difficulty goes away, if you staircase to 100% (as Hanpop did). Maybe it's a better option if you intend staircasing to 100% eventually.

Cakeguts

HanPop wrote: »

I don’t agree with the other posts about it being a more expensive option. The rent portion is at a reduced rate. I wouldn’t buy if it was too low a percentage but if you could afford 50% I think it is a good idea. You may be responsible for the property but you cannot be asked to leave like you can a rented property so it provides more security for you and your child. We owned 75% of our property before we staircased to 100% and the scheme was really good for us to get on the housing ladder. We have just sold our property after living here for 5 years and made £33,000 which we would not have been able to save in that time. My advice is to do your research on the housing association associated with the property you are looking at and understand the rent calculations. Also make sure that you are able to staircase to 100% and obtain the freehold if you do so that it is always an option in the future. It’s was through Bromford Homes and I have no complaints.

You were lucky in the fact that you sold at a time when prices were rising. Anyone buying 100% of a house at the time you did and then selling at the time you did would have got a price rise of the same amount this is not down to shared ownership it is down to price rises. In fact if you had bought a non new house you would probably have "made" a lot more than you did because you would have bought the 100% at the same time as you bought your first share and so would not have had to pay extra in a rising market for the extra shares. Which basically means that you did all of this the more expensive way. You would have done better if you had bought a similar house in one go 5 years ago.

HanPop

Cakeguts - 5 years ago there were two reasons I bought a shared ownership property. The first because there were no new build properties of this size (3 bed semi) available outright (we could not afford an older property that needed work doing to it), the second because we did not quite have the deposit for the full amount of the house (£140,000). Of course it would have been better for me to buy 100% of a property but I couldn’t at the time. The OP wants to know if it is better financially renting or shared ownership, not shared ownership and buying 100% of a house which is not a viable option for them at the moment.

MovingForwards

Can you not look a little further out for a cheaper property?

SO properties do have their benefits so you can get on the ladder, but sometimes do take a while to sell and there are rules to be complied with to enable you to sell.

If you could find a SO property you can buy chunks of as your circumstances change that would work out better for you, as would trying to find a property you would want to live in as your 'forever home', it may not be viable if it's a starter home.

There are plenty of threads about SO and Google also have many links about the pro's and cons of them.

Have a think about how much extra money you could get together between now and when you kid is at school and you do not have the, assumed, cost of nursery.

Is it possible your parents could gift you some money to make up the deposit?

I also assume you are looking to buy on your own and not with a partner?

The broker you saw, was he an independent whole of market broker or part of an estate agent/bank/building society?

For the brokers here if you could give a little more info eg salary / nursery fees and how long you are looking to have the mortgage running they may be able to give you a few figures.

Don't be discouraged, you may not get your property this year, but will know what you can work towards over the next couple of years.

Takmon

It's worth pointing out that not all shared ownership properties require you to pay rent on the part you don't own. I know of quite a few estates in my part of the country that all the shared ownership properties are sold at around 50% ownership and no rent is charged on the other half ever.

So this makes them a lot cheaper than renting and offers the security of owning a home so they get bought up quite quickly when they come on the market. Yes you are liable for 100% of the maintenance but the same applies if you own all of it anyway. There really is no difference in owning half than owning it all in the day to day life of living in a property. The only real negative is if your planning on buying the property to make improvements then sell for a profit which really isn't their target market anyway.

If you compare it to car ownership lots of people are happy to lease a car which makes you liable for all repair, maintenance and servicing costs but you give it back at the end and are left with nothing so that's a far worse deal. But lots of people think it's great.

Leggitte

The posts about paying rent on top of your mortgage are a bit misleading. If you own a 25% share, you pay mortgage over that 25% share (minus deposit) and rent over the 75% you do not own. As previously mentioned, the rent is at a reduced rate. I just moved into a shared ownership, and pay £15 more per month than when I was renting. I rented a 1 bedroom house and now live in a 2 bedroom shared ownership. I have roughly 75% more house than before, maybe even twice the size. It is a new build, where I plan to stay for as long as I like.


Selling a shared ownership is more difficult as the new buyer has to fit the Housings Association's criteria and they have first refusal. If you sell a high percentage ownership (but less than 100%) than it will be extra difficult to find a buyer as the people who can afford it probably also can afford to buy a non-shared ownership.


Shared ownership is often a more long-term deal. My vote is for shared ownership.

sharhar

+ 1 Leggitte

I pay around the same for 2 bed SO property(including mortgage, rent and service charge) that I used to pay for a 1 bed rental. It's great in that way.

The main disadvantage is when it comes around to selling the property. So you need to commit for it to a long time. Any short term arrangement with SO will put you in negative equity considering you have to pay full amount for any maintenance and legal costs for buying and selling.