Shared ownership - is it worth it?

QuestionTime1404

Hello. I am 25 years old living in the South East. In April I will have £25000 in savings (including LISA bonus) and my annual gross salary will be around £22625.

I am looking to move out of my family home and it will cost roughly £750 on a one bedroom flat to rent somewhere. I have found a 2 bedroom shared ownership apartment that will cost £404 rent, £215 service charge and the mortgage on top of this, for a 25% share worth just under £59000. So I would need a mortgage for around £34000. Their calculator says my mortgage repayments should be around £130, which would make it the same price as it would be for me to just rent somewhere (of course there would be solicitor fees, maintenance costs etc).

I have never looked in SO before so wondered if anyone could share their experiences or advice regarding this?

Many thanks

tracytown

If you google the pitfalls of shared ownership you will see an answer. I'd say do not do it. Most people regret it and the bottom line is the rent will keep going up. It's an appalling scheme in my opinion, I nearly did it as had no other choice. Another issue is almost all shared ownership never ever buy the whole property. It just doesn't work.

The reality is the rent ends up going up too much until you've just put a huge deposit down on a place to rent. They are also extremely difficult to sell, plus the valuation is yet another issue that you cannot control when trying to sell.

If you have a wage of £22k can you not get a 1 bed flat with a mortgage or is it too pricey down there? Or even a large studio, sometimes have separate kitchens etc.

rexmedorum

I certainly would much rather rent at least it's flexible.

Owleyes00

SO is just a way of ensuring renters are liable for repairs and maintenance on their home. Do it if you want to get stuck in a property you can’t sell with ever increasing rent/service charge preventing you from being able to save to buy somewhere properly

Leggitte

This thread needs some input from people who do have a positive SO experience. I live in a SO and am very happy here. I have not made an attempt to sell it so can't say much about that. But it is true that selling an SO is harder than selling a full ownership house. 

I suggest when buying an SO to buy a new build which gives you a limited time warranty so you can test everything properly. I also suggest, given your age, to not buy more than 25%. The higher percentage you own, the harder to sell it becomes. Lastly, SO is not a short term game. If you plan to stay there 2 or 3 years, go and find a place to rent. If you plan to stay for up to 10 years, SO can be a very healthy step on the property ladder, for which is was intended.

There are plenty of stories of young people/couples who started in a SO and now own a house outright.

london21

I do not personally like shared ownership.

One of the main reason is if you buy a flat you are responsible for 100% of the service charge and works even though you might only own 25%.

I will say give it some time, save some more, and widen your area search.

This has more details https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/shared-ownership-what-to-watch-out-for/ 

TBagpuss

I think Shared Ownership can be positive - it gives you much more security than renting privately,  however, it does also mean you have more responsibility (for repairs etc) and less flexibility than if you own more conventionally.

It has the disadvantages of home ownership together with some of the disadvantages of renting. BUT it does give you more security

In your position, I would suggest that you think about your likely plans - do you expect to stay long term? How much more would you need to save to be able to buy without using shared ownership, and how realistic is it that you will be able to do so in a reasonable time frame? 
 
It looks as though on the figures you've given, the costs will be broadly similar whichever you chose, with the SO property you will have maintenance costs but will also have some equity and be in a position to increase that by paying down the mortgage, and you might if you wish be able to think about renting out the second bedroom. You will have fairly hefty service charges and need to think about how those may increase.

I personally would on;y go down the SO route if I was fairly confident that I was going to want to continue to live there for a longish period and if I felt that I wasn't realistically going to be able to buy except through that scheme for the foreseeable future.

newsgroupmonkey_

tracytown said:

If you have a wage of £22k can you not get a 1 bed flat with a mortgage or is it too pricey down there? Or even a large studio, sometimes have separate kitchens etc.

I was so tempted to say "You're not from round 'ere, are ya", but I'll refrain

A quick mortgage calculator tells me that they can borrow ~£75k (although could be up to £94k). With £25k down, that's a whopping £100k.

Even looking in really, really dodgy areas, I couldn't actually find a 1 bed flat for that in the South East, although I didn't look too hard - Surrey, Bucks and Herts.

getmore4less

QuestionTime1404 said:

Hello. I am 25 years old living in the South East. In April I will have £25000 in savings (including LISA bonus) and my annual gross salary will be around £22625.

I am looking to move out of my family home and it will cost roughly £750 on a one bedroom flat to rent somewhere. I have found a 2 bedroom shared ownership apartment that will cost £404 rent, £215 service charge and the mortgage on top of this, for a 25% share worth just under £59000. So I would need a mortgage for around £34000. Their calculator says my mortgage repayments should be around £130, which would make it the same price as it would be for me to just rent somewhere (of course there would be solicitor fees, maintenance costs etc).

I have never looked in SO before so wondered if anyone could share their experiences or advice regarding this?

Many thanks

The key will be how does the full price stack up for the area  is it overpriced for a 2bed flat
 
Doing the numbers

rent is £750 so that's a base line to work form. 

£404 rent for the 75%(£177k)  2.75% not that bad higher than borrowing but less than most rentals

£215 for service that is also high this one similar price 25% SO service its £80

https://www.rightmove.co.uk/properties/118690493

not sure how they get rent of £404 when they say this.

The monthly service charge is £80 approx. Minimum share from 25% and the rent is based on 2.75%

£620 for rent and service leaving £130 for a mortgage

£59k for 25%  £25k deposit £34k mortgage

lets go with 2% for now
to get that down to £130pm  needs to be over 28y8m, interest starts at £57pm the rest is paying of debt saving

in 5y

amount	rate	payment	owing
£34,000.00	2.000%	£129.94	£29,380.10

You would have created a further £4,600 equity  but that is offset by the maintenance 

What can you get using H2B that can work out better than shared ownership.

what can you get for around £125k. with £100k mortgage.

Do they do bigger shares in the one you are looking at the rent is 2.75% mortgage should be under 2% you create more for your money getting a bigger share

tracytown

newsgroupmonkey_ said:

tracytown said:

If you have a wage of £22k can you not get a 1 bed flat with a mortgage or is it too pricey down there? Or even a large studio, sometimes have separate kitchens etc.

I was so tempted to say "You're not from round 'ere, are ya", but I'll refrain

A quick mortgage calculator tells me that they can borrow ~£75k (although could be up to £94k). With £25k down, that's a whopping £100k.

Even looking in really, really dodgy areas, I couldn't actually find a 1 bed flat for that in the South East, although I didn't look too hard - Surrey, Bucks and Herts.

Yes I thought £125k, but probably not enough for the south even for a studio. Which is diabolical really isn't it.

getmore4less

They can probably get £100k mortgage  giving £125k  not sure how much more they could go with a H2B with a 20% deposit.

At 25 a house share may be a better way to go for a while.

If there is any chance of income growth and more savings it might help in a couple of years

The other option is go for the 2 bed shared get a lodger for a while and create more equity

That Basingstoke one is also available at 40% SO so the numbers improve  on the 25% and a lodger would cut the costs considerably.

That would leave resale so a bit of research on the second hand market needs to be done.