Buy a flat or shared ownership house?

Lmm08

I’d love some help as I’m only just learning about property now.

I’m giving myself around a year to save before I can find my own place. I’m doing this completely on my own and according to online mortgage calculators, I’m likely to borrow £113,000 max. I’m hoping to have saved around £20,000 by next year so can only afford a property that’s £133,000 as the absolute max. 

This past year has reinforced how I really need an outdoor space. Whether that’s a small garden or a small balcony, it really doesn’t matter how big it is. It’s highly unlikely that I could afford a house as 1-2 bed houses around here start at least £180k-£190k.
 It looks like I can only afford a flat, but is it worth buying a flat? The services charges and ground rent will add up. Would it be worth looking into getting a house with shared ownership? I don’t fully understand how it works. I’d love to know people’s thoughts. 

NinjaTune

There's pitfalls with both to be honest.  Personally I'd hesitate to recommend shared ownership but if think you'll be able to staircase up to full ownership then it might be the better option.  Bear in mind that each time you staircase it will cost you in legal fees though.

What area are you looking at?

NameUnavailable

Don't forget solicitors fees, surveys, mortgage fees etc., as well as furniture and other things you may need for the new place, as well as possibly having to fit new flooring and redecorate.

You're right to think about the additional costs of a flat - ground rent and service charges. At least ground rent is set out in the lease so you know exactly what it will be now and in the future. Service charges can be anything - if an annual charge is quoted bear in mind that that won't cover major works and you can be landed with a bill of any amount at any time for those!

[Deleted User]

I would not touch shared ownership with a barge pole. The majority of them have stupudly high salary requirements, and then the fees they charge you in rent. Cases down here where they have double or tripled. 

Norman_Castle

I'd prefer a flat to a shared ownership house. There will be service and maintenance charges but you won't be paying for the sole maintenance of a single property as you would with shared ownership. It all depends on how reasanable the service charges are and what control you have over them.

HanPop

I think there’s a lot of bad press for shared ownership but it worked out for us. They assess how much of a percentage you can afford and you would be able to purchase a house with a garden and can staircase down the line. When we staircased ours there was an offer on where the housing association paid all legal fees too. If you were to look at shared ownership I’d only go for a new build so that you don’t have to spend money doing the place up when it’s not 100% yours. Maybe the best thing to do is register with your local shared ownership agent to see what is available now and in the future. 

BTW our service charge on our estate was only £10 a month so nothing major and the rent portion is subsidised. Personally I’d pick that over a flat any day.

Doodlebugs

Agree with @HanPop, our shared ownership was a positive experience. We wanted a 3 bed house and couldn’t afford to buy outright. We started with a 35% share and staircased to 100% freehold. Our rent and mortgage was cheaper than our rent on the 3 bed we were moving from, so it was a no brainer. 

You’re responsible for the house, all maintenance and have to pay rent on the remaining share you do not own. You only have a leasehold interest unless you staircase and by the freehold but some housing associations have restrictions on how many shares you can buy. Definitely look into it, just read reviews on the housing association as some are not as scrupulous as others with ground rent. 

Lmm08

Really interesting to get everyone’s experiences. How do you staircase to owning a higher percentage/all?

Doodlebugs

There was a clause in our lease that meant we could staircase to 100%. We notified the HA we wanted to staircase, some have a set policy on how much you can staircase by but ours didn’t. We had to pay for a RICS valuation and there was no negotiating on the price. Our house had gained value so the equity we had accrued was used to get a decent LTV, we just needed enough for stamp duty and legal fees. 

HanPop

We were also able to staircase to 100% and then obtain the freehold, make sure that you can do this with any shared ownership property that you are considering. Like doodlebugs said you pay for a valuation of the house and they take off the costs of any improvements that you have made before letting you know how much the share you would want to buy is. Then you fund with either savings or a bigger mortgage if you can afford to do so.

[Deleted User]

Id defo say shared ownership house. Those are like absolute gold dust around here and snapped up the second they come onto the market.
i dont understand the argument that you own a % but are responsible for all the maintenance being a bad thing. When you get a mortgage the lender effectively “owns” 80% of the house but you still have to pay the interest to them and do all the maintenance.
Rents on SO are fixed and only increase by usually RPI/CPI each year.