Is Shared Ownership a bad idea in my case?

P3nn

Evening All,

I've got the choice of two properties at the moment:

1 - 2 bed small old 1897 build date - £168K offer accepted - no parking - good area

2 - 3 bed massive new build - £245K 100% OMV SHARED OWNERSHIP - private parking - good area

- I'd like to go with 75% £183,750 rent per month £140.36 then eventually try to stair case up to 100% either via a second mortgage, savings or future pay rises.
-- There is a service charge of £38.75 per month
-- There is a rent of £140.36 per month to pay to the HA

29 years old

Salary @ £46K - Take home £2.6K per month ish

Savings:
£22K Instant ISA
£6.6K Help to Buy ISA (Inclsuive of bonus)
Couple grand in Crypto/Funds

1: I think for 1, it's a fairly simple one, I could have this house to myself but also rent a room but it'd be a squeeze. Currently doing mortgage calculations, any help would be great as comparison websites are giving me a plethora of offers and not all great.

2: The main appeals are not having to move in the long distant future if I have a family, I could sublet a room although it may have to be done without contracts/informal. As it's a new build i'm less likely to have to spend extra money and have the stresses of a survey finding gremlins. A bonus is missing out on future stamp duty.

I've been put in a corner as property one was taken off the market 3 months ago, they called and I accepted. Property two I viewed today and liked a lot of things about it but they want a response/holding feed ASAP understandably.

I am completely new to the market, first time buyer but have been looking for about 6 years now, I'm ready to crack on with live and start living in my own house. I currently rent which is dirt cheap and have lots of dispoable income when I'm not spending bits on my PC, Flight Sim, Car etc.

Any help and advice is welcomed. Bored of renting but hate being put in a corner so should I just sack them both off for now

princeofpounds

First of all, don't feel pressured. There are always properties around, and in your circumstances you should be relatively flexible. Making a decision just because of pressure may lead to a bad decision.

You do not state if these are houses - presumably they are? You also do not state if option #1 is freehold. Presumably it is.

In the case of shared ownership #2, if it is leasehold, how long is the proposed lease? What is ground rent, if any? Can you sublet the property or take in lodgers? What are the conditions on the lease? Will you own the parking, or merely have a right to allocated parking? How does the rent escalate?

As for the service charge - it may well rise from whatever figure they tell you. Brand new estates don't need much maintenance and it's often subsidised by the developer whilst still on site trying to sell houses, so the charges are often lower than they will be 2-3 years down the line. What services does it cover?

As for the survey - newbuilds just have different types of gremlins. Get familiar with the process of 'snagging'.

In terms of value vs. size - look at the properties in £/sqm terms.

P3nn

Hi thanks for your prompt reply,
Yes I'm starting to think maybe I should carry on looking but it's been years in the works and these two have come at once. I guess no reason to make a rash decision but both look like homes I couild live in.
These are both terraced houses, the first over 100 years old and the second a new build "eco" style terraced house.
It is leaseholds, the leasehold would be sold if I staircase up to 100% OMV. Ground rent is: £38.75 per month.
I believe they state I cannot sublet formally but they said that they wouldn't really check unless there were any complaints. Yes this is a red flag but seems fairly common for people subletting normal houses, not having tenancy agreements etc if they're friends. There are 4 parking slots for 3 houses and another 4 visitors slots but I'll check on who owns this.
The rent is caclulated on the property valuation but I believe can only change by <0.2  or 0.2> supposedly, I'll pose the question to verify.
I'll do some digging now and compare, thank you.

sammyjammy

Its a no brainer for me as I would never buy a new build.  My house was also built in 1897, no big deal if its been well maintained.

You wouldn't be subletting, you'd be renting a room out, this is almost always on an informal basis with a lodger agreement drawn up by yourself.

princeofpounds

You don't seem clear on the distinction between ground rent and service charge.
You don't know the length of the lease yet.
You don't know how the rent indexes (I bet you it is not ask you describe).
You don't know how the parking works.
Staircasing to 100% ownership of a leasehold title does not by default mean you also get the freehold for free, so you'll need to check what you've been told in the paperwork. 
You have been informally told you can breach lease conditions - that doesn't protect you if the freeholder changes their mind at any point. And tenancy rights are created even if you're letting to friends without paperwork - don't be naive and don't do this.

More questions: What are the arrangements on marketing if you want to sell before staircasing to 100%?

The property may be perfectly fine for you but yes, you have a lot of digging to do. Do not believe anything an estate agent tells you - most won't have the faintest clue and will make up details (sounds like they have already). Ask for the scheme terms and conditions and a copy of the lease ASAP. 

The key with shared ownership is that you have totally understand what you are getting yourself in for.

sammyjammy said:

You wouldn't be subletting, you'd be renting a room out, this is almost always on an informal basis with a lodger agreement drawn up by yourself.

Who knows what the OP will want to do in 5 year's time? If he can't sublet, then that restricts one option for mobility in future, to move for a new job for example.

Doodlebugs

We lived in a new build terrace, if you like hearing your neighbours toilet flush, when they walk upstairs, put their washing machine on, argue etc etc then you’ll have no problems. The walls are paper thin and unless you get considerate neighbours you might find the noise becomes tiresome. 

We also had a shared ownership, our lease stipulated we needed to offer the property back to them at market value but in reality they weren’t interested once we’d bought the freehold. If you do not staircase and own the freehold you’ll be bound by their terms for any sale of your lease and your buyer will need to fit their criteria, if any. 

But saying that I haven’t seen either property, there will be pros and cons for both. Do some more digging and get all the information you need, don’t feel pressured into buying either. 

amandacat

My first house was shared ownership new build. It was my only option. I didn’t have negative experiences overall. I lived there 11 years and the last 6 years I owned 100% and the freehold as I staircased. I didn’t come out with much equity when I sold. If  I would’ve bought a smaller non shared ownership house and upsized after a few years. I likely would’ve made more money. 
If you plan to live in the s/o house long term and to staircase to 100% then it would save you moving again in comparison to if you started with a smaller house. So no stamp duty, moving costs and the stress of moving. 
So there’s pros and cons to each.