Cold Feet: Shared-ownership with Sovereign Living

JayRitchie

Could we run through some numbers?

- How much is the rental element for the 60% you would lease?
- how much would a non newbuild one bedroom flat in the same area cost?
- have you looked at second hand shared ownership flats? How do the prices compare?
- how old are you and how much do you expect your salary to rise by?

llewells

JayRitchie wrote: »

Could we run through some numbers?

- How much is the rental element for the 60% you would lease?

£142 pm rent + £72 service charge
Calculation work out to about £778pm including mortgage repayment around 4%APR

- how much would a non newbuild one bedroom flat in the same area cost?

A new build you would be looking between £200k-250k. The one I am looking at is a 2 bed 2 bathroom flat.

have you looked at second hand shared ownership flats? How do the prices compare?

There doesn't appear to be much in the same area for shared ownership. There are other about 3-5 miles away. Where a 2 bed under shared-ownership for 54% is £130k.

- how old are you and how much do you expect your salary to rise by?

I am 33. I went from a low paying job where I was earning just enough to live OK and pay rent to going back to Uni as a mature student - I kinda restarted my life in that sense. I graduated last year and my job could become lucrative if things go well (currently locked into £30k till at least Sept 2020) I started saving when I began my new job saving about £500-£800 a month (though there have been a few slips every now and then).

JayRitchie

llewells wrote: »

£142 pm rent + £72 service charge
Calculation work out to about £778pm including mortgage repayment around 4%APR

That seems like a really decent rate compared with a quick look at rental prices on Rightmove. I can see the temptation!

llewells wrote: »

A new build you would be looking between £200k-250k. The one I am looking at is a 2 bed 2 bathroom flat.

So you are paying a bit of a premium for the capital element (but subsidised rental portion)? If you want to staircase do you know how the valuation is conducted? Some people have been caught out on this.

llewells wrote: »

There doesn't appear to be much in the same area for shared ownership. There are other about 3-5 miles away. Where a 2 bed under shared-ownership for 54% is £130k.

Thats a pity. I think its often worth looking at second hand ones - you don't pay the newbuild premium, you get to see what the completed block is like and see 'steady state' service charges. Is it worth considering the ones further away? Are they near to decent transport? You'd sacrifice some quality of life but its a huge saving. Plus you could move to full ownership a lot more quickly.

llewells wrote: »

I am 33. I went from a low paying job where I was earning just enough to live OK and pay rent to going back to Uni as a mature student - I kinda restarted my life in that sense. I graduated last year and my job could become lucrative if things go well (currently locked into £30k till at least Sept 2020) I started saving when I began my new job saving about £500-£800 a month (though there have been a few slips every now and then).

Wow - well done! Great to see someone succeed in a career change, and to be able to save so much. I think you are the sort of person shared ownership can work for despite general reservations. I'd at least want to consider cheaper ones - a £280k property on a £30k salary is huge should you aspire to full ownership.

llewells

JayRitchie wrote: »

That seems like a really decent rate compared with a quick look at rental prices on Rightmove. I can see the temptation!

Yes, this is why I have been all over this, kinda did the act first think later.

So you are paying a bit of a premium for the capital element (but subsidised rental portion)? If you want to staircase do you know how the valuation is conducted? Some people have been caught out on this.

My estimate was for the cost of a 1 bed flat in the area as requested.
I have to plead ignorance on what you mean by " premium for the capital element (but subsidised rental portion)". thought if you are addressing the rate of the rent I have been told that the reason the rent is cheaper is due to 'Government Section 106' which I believe the gist is that the association can only charge are certain percentage of the value of the rent (something that I was going to talk to a solicitor about. There is actually two blocks of being developed and while my block is governed by 'Section 106' the other is not. Looking at the rent in that block for a 1 bed flat is being charged around £240pm.
Regarding staircasing I can tell you that if I wanted to buy more I have to:
- have a survey conducted by a member of the Royal Institute of Chartered Surveyors
- if authorised improvements were made have 2 surveys completed (one price with improvements, other without).
- a minimum of 10% must be purchased.
- all cost involved e.g. valuation and solicitors are paid by myself.

Thats a pity. I think its often worth looking at second hand ones - you don't pay the newbuild premium, you get to see what the completed block is like and see 'steady state' service charges. Is it worth considering the ones further away? Are they near to decent transport? You'd sacrifice some quality of life but its a huge saving. Plus you could move to full ownership a lot more quickly.

I agree that the it would be nice to view and see what I'm getting myself into and for ease of mind. However, as stated the spot is ideal for my needs to option further away are not really viable options in terms of transport as I am heavily reliant on public transport as I do not drive.
I was saving for intention to buy in the future and wasn't in the market for anything until these properties were released as they tick every box I have.

Wow - well done! Great to see someone succeed in a career change, and to be able to save so much. I think you are the sort of person shared ownership can work for despite general reservations. I'd at least want to consider cheaper ones - a £280k property on a £30k salary is huge should you aspire to full ownership.

Thank you very much! It was a struggle I'm not going to lie but very happy I made the commitment. Again, I agree that 100% ownership would be the best way forward but being older and living in shared renting accommodation for so long (one of the ways I have been able to save as much as I have) I NEED my own space, this is especially true when it comes to working from home; having a space where I can separate work from the rest of my life would be a god send. There is also the part of me that is fed up of paying someone else's mortgage.

Thanks for you're advice I think I was having a sort of "crisis of conscience" and needed to vent on here and after spotting the reviews of the associations did freak me out a little.The more I am writing about it the more confident I am with my initial plan but will always value thoughts from any with an outside perspective.

Cakeguts

One of the things that you do need to check is the length of the lease. There have been some posts on here recently about shared ownership properties where the length of the lease made the property difficult to sell a few years later.



If the lease is 99 years and you live in the property for 10 years when you come to sell the lease will only have 89 years left on it. That could be a problem for buyers getting a mortgage. If you need to extend the lease in order to sell you will have to pay for that. A 125 year lease after 10 years is still 115 so still quite long.



The other thing you need to check is if you can staircase up to 100% ownership of the lease. Some shared ownership doesn't allow you to do this.

llewells

Cakeguts wrote: »

One of the things that you do need to check is the length of the lease. There have been some posts on here recently about shared ownership properties where the length of the lease made the property difficult to sell a few years later.

I assumed the leasehold would always be a factor when dealing with a property that is based within a block of flats.

The other thing you need to check is if you can staircase up to 100% ownership of the lease. Some shared ownership doesn't allow you to do this.

I haven't read anything about not being able to buy 100% of the property on their website. I'm assuming that these details will become apparent further down the line when contract and solicitors are involved. However, i will keep an eye out for this details in the future as I could see it affecting a future sell of the property.

As mentioned previously, I'm expecting my circumstances to change in the future and this is now going to be my 'forever home', its just a way for me to get on the ladder easier, but the fact that the location is ideal for me is really what has really driven me to apply.

strawb_shortcake

I work with a lady that is in the process of selling her SO sovereign 2 bed flat. Now she is the type of person that complains a lot but her biggest gripe has been that the increase to rent and service charge over the 4 years or so she has owned it. So far it's been on the market for almost a year and a sale seems to be progressing but it hasn't been easy. More central Bristol places may not have the same issues on selling in future

JayRitchie

llewells wrote: »

My estimate was for the cost of a 1 bed flat in the area as requested.
I have to plead ignorance on what you mean by " premium for the capital element (but subsidised rental portion)". thought if you are addressing the rate of the rent I have been told that the reason the rent is cheaper is due to 'Government Section 106' which I believe the gist is that the association can only charge are certain percentage of the value of the rent (something that I was going to talk to a solicitor about. There is actually two blocks of being developed and while my block is governed by 'Section 106' the other is not. Looking at the rent in that block for a 1 bed flat is being charged around £240pm.

Apologies - my post was very unclear - but you did interpret correctly. For my (and I'm not generally a fan of shared ownership) the two big benefits are:

- the rental element tends to be a lot cheaper than a market rent, and increases are generally fixed at RPI (something to check)
- you are not at the whim of a landlord.

So you get a great place to live at a more affordable price.

llewells

annabanana82 wrote: »

t the increase to rent and service charge over the 4 years or so she has owned it. So far it's been on the market for almost a year and a sale seems to be progressing but it hasn't been easy. More central Bristol places may not have the same issues on selling in future

It is in a very desirable place. i know that I contacted Sovereign straight away when these became available and completed the steps they requested with a day or two, and bu the time they got through to me several of the flats had already been reserved. So, i think selling in the future wouldn't be an issue.

However, the part about the increasing of the rent is interesting. As I prevouly mention that there are two building in the developments Noth and South and the agent at Sovereign told me that South was protected by some law; my understanding of it minimal but I believe its where they can only charge a percentage of the cost of the 60%. Maybe the increase is wouldn't affect the property I am looking at. I will find out more in the week.

llewells

JayRitchie wrote: »

Apologies - my post was very unclear - but you did interpret correctly. For my (and I'm not generally a fan of shared ownership) the two big benefits are:

- the rental element tends to be a lot cheaper than a market rent, and increases are generally fixed at RPI (something to check)
- you are not at the whim of a landlord.

So you get a great place to live at a more affordable price.

I have been thinking about it over the past 24 hours, and i thought I was convinced yesterday that it was a good idea...but I woke up this morning and still had reservation. I crunched some number and figured out maybe...I might be best staying put where I am and letting this one go.

With the rent I pay now and the fact I have been able to save so much why not extend it till the new year and see what I can do. Currently, if I go for this property I will be resetting my savings to £0 and this kinda scares me as I will not have a fall back.

I thin the best move forward is to start committing to the saving - maybe open a Lifetime-ISA (all may saving have just been stored in a basic savings account). This way it will force me a deadline of when I can start looking for a new place.

Thanks for the help, buy asking question and talking it through it has really cleared my mind and helped me decide what I need to do.