Shared ownership and staircasing

chawkins90

My husband and I want to buy (currently living at my parents to save). I have been looking at shared ownership as I don't think we can afford the deposit for a house. I was wondering what people's current experience and opinion of it is? Also what happens if you can't afford to purchase more of the property?

Mark_d

We bought a shared ownership flat a few years ago.  As we only needed a mortgage on 50% of the property value, the bank have us a mortgage at 50% LTV.  That gave us a really good rate on the "owned" half of the property.

On the "rented" half of the property our rent was half the cost of our  mortgage.  So altogether rent+mortgage+service change our monthly outgoings were very affordable.

Shared ownership gave us owners rights on the property, so it felt like a real home, but the monthly cost was lower than if we bought or rented an entire property.

We never purchased a larger proportion of the property because the rent was so much cheaper than the mortgage.

mashmash90

Hello! If you can't afford to buy on the open market, I would recommend it. In 2015, we purchased a 40% share (of a 2 bed flat in se5 in London ) initially, then we staircase to 75% about 4 years later. We could afford to staircase to 100% but didn't see the point as the rent payment was so minimal that the amount of extra interest we would be paying didn't outweigh the rent and we would have had to pay additional stamp duty (as you don't pay stamp duty on staircasing transactions below 80%). Owning only a percentage of the property also means we were able to unlock very low interest rates due to having a low LTV (loan to value), so we were only paying about 1% interest on our 75% share but that would have gone up to at least 3% had we owned 100% of the property as the LTV would be much higher. With crazy interest rates these days it could make a difference.

You don't have to staircase at all if you don't want to or can't afford it. You can still sell it when you are ready to move, either just your percentage share (usually sold through the housing association's resell team) or the full 100% through a normal estate agent as you can 'simultaneously staircase ' without actually needing to raise the extra funds, which is what we did in the end when we sold our flat earlier in the year 

Just be careful which housing association will be your landlord, as some are truly awful to deal with. Please read reviews on the likes of trustpilot first before you put any offers down.

fletcher1985

hi my story is in 2016 i couldn't get a big enough mortgage for owning a home so i got a myself a 50% shared ownership. but over 3 years i staircased  to 100% in, the rent went up about £30 a month each year so i would say only go shared ownership if you want to get to 100% because the rent will end up being a lot of. for me after year 2 my rent was more then the mortgage, but now i won alll of it i its great. 

katkatmachine

I’m not on shared ownership but my friend is. What I can advice from his experience is to take advantage of the scheme as much as you can. In their case they only bought 1 bedroom flat for 25% share. Now they’re regretting their decision, they wished they bought a 2-bedroom instead because they have a baby now and also when their parents are visiting they have to book an airbnb somewhere for them. If they bought a 2-bed they could have used it as room for the baby or a guest room for their parents. 

I think Shared ownership and HTB schemes are designed to get people into property ladder, to be able to buy that property that you want that you cannot afford now but hopefuly in the future when your income increases you could staircase. In the case of my friend, they were being too careful, they didn’t take advantage of the scheme. Now their worry is their share is too small so for sure when they buy their next property they will be hit with a hefty stamp duty and because their share is so small there’s hardly any equity they can get from it. So yeah buy something that you want to live in for the mid or long term. 

[Deleted User]

Be aware that there are downsides.

Because you don't own the entire property you don't have full ownership rights, in terms of modifying it or selling it. If you sell just your share then the housing association has to agree any buyer. Often they will want to handling the selling for you.

In theory you will hopefully earn more later so you can staircase, but be realistic about that. It might not happen, you might take on extra expenses like kids.

Also beware that especially new builds on shared ownership are often priced ridiculously high. If they are offering you a new build at 2x the price of a similar used house in that area, consider that you may well end up in negative equity. There are some around here on the market for £550k, when they are really only worth 280, maybe 300k at most. You think you are getting a half million pound dream home, but in reality they locked you to paying rent or staircasing because it won't be saleable at that price. Also, what is the chance of you staircasing £250-270k?

Oh, and of course with new builds they will often put rip off service charges or fleecehold on it too.

mashmash90

[Deleted User] said:

Be aware that there are downsides.

Because you don't own the entire property you don't have full ownership rights, in terms of modifying it or selling it. If you sell just your share then the housing association has to agree any buyer. Often they will want to handling the selling for you.

In theory you will hopefully earn more later so you can staircase, but be realistic about that. It might not happen, you might take on extra expenses like kids.

Also beware that especially new builds on shared ownership are often priced ridiculously high. If they are offering you a new build at 2x the price of a similar used house in that area, consider that you may well end up in negative equity. There are some around here on the market for £550k, when they are really only worth 280, maybe 300k at most. You think you are getting a half million pound dream home, but in reality they locked you to paying rent or staircasing because it won't be saleable at that price. Also, what is the chance of you staircasing £250-270k?

Oh, and of course with new builds they will often put rip off service charges or fleecehold on it too.

Do you/have you actually owned one though? Yes  you are correct that to sell you need to give the opportunity for your HA to sell it first, usually you have to give them up to 2 months to do so before you can sell it on the open market. When we put ours up, we didn't get a single viewing from the HA so you just bide your time for the 2 months and put it on the market a little earlier if you have to. I put it on Strike the week out 2 month term ended and had an offer within 2 weeks. You don't have to just sell your share, you can simultaneously staircase and sell to a 100% outright buyer. It's really not that different to selling normally.

And the valuation you are talking about is total rubbish! We bought a new build in a development which had a mix of full ownership and shared ownership flats that were identical and the full ownership ones were actually more expensive (they did have a lease longer by 25 years though so that was probably factored in). Mortgage companies will have to value the property before they lend you money, they won't lend you money on something overpriced, whether you're buying a share or not.

chawkins90

Mark_d said:

We bought a shared ownership flat a few years ago.  As we only needed a mortgage on 50% of the property value, the bank have us a mortgage at 50% LTV.  That gave us a really good rate on the "owned" half of the property.

On the "rented" half of the property our rent was half the cost of our  mortgage.  So altogether rent+mortgage+service change our monthly outgoings were very affordable.

Shared ownership gave us owners rights on the property, so it felt like a real home, but the monthly cost was lower than if we bought or rented an entire property.

We never purchased a larger proportion of the property because the rent was so much cheaper than the mortgage.

Have you experienced your rent increasing each year? 
This is my biggest concern that the rent will become hugely unaffordable compared to the mortgage due to yearly increases.

CrGlo

I know there are lots of bad reviews about Shared Ownership, but I have to say for us it has been a godsend. We were in a shared house before in London with 3 other adults ages around 30-45 and the rent kept going up - it was stressful to be in this living situation at our age. Since my partner and I got shared ownership, we have felt way more settled - got married and now have a baby and are looking to move somewhere bigger. It was almost £200 per month cheaper in our SO 1-bed flat than in our house share. We saved all this extra money and worked a lot to get a higher deposit, then managed to staircase to 100% after about 2 years. Now we pay more per month on a full mortgage than before with SO, but it's a normal leasehold so we can sell on the open market, rent it out etc. We have been doing it up so it looks much better, replaced taps, carpets, fixed windows/doors etc.

We would never have been able to get on the property ladder in London otherwise, there's too much competition and everything goes for more than it's worth on the open market. My advice for shared ownership is:

1) only buy resales, do not buy anything new as this will likely be overpriced and a money making scheme for developers. Resales means someone is usually pretty desperate to sell their share to move on, if you are in the small group that satisfies the Housing Association criteria and can also keep the bank happy for a mortgage, then the existing owner will very likely accept a lower price to sell it to you.
2) only buy if you have a plan to staircase to 100%. Use the money you're saving on open-market rent each month to save up as fast as possible to staircase, before the value of the property increases. We were lucky as there wasn't actually any increase in value in the 2 years it took us to staircase - although this probably says more about the initial survey being too high to get the previous owner/housing association a higher fee.

CrGlo

chawkins90 said:

My husband and I want to buy (currently living at my parents to save). I have been looking at shared ownership as I don't think we can afford the deposit for a house. I was wondering what people's current experience and opinion of it is? Also what happens if you can't afford to purchase more of the property?

To answer the part about what happens if you can't afford to purchase more of the property.. it is a valid option, the upside is you are paying cheaper monthly costs than a full mortgage or a full rent elsewhere - and you have somewhere stable to live long-term and call it home, unlike in the rental market where you could be evicted. The downside is you will never pay off the property, even if you pay off your mortgage share you will still have to pay rent on the rest for life. I personally think it's worth going for the lowest value SO property that allows you onto the ladder with the ability to staircase ASAP to 100%... then you have more options for future. But I know what life is like.. it takes money to get more options, and we don't all have it, so as long as you understand what you are committing to then it's ok.. basically anything is better than renting in my opinion.

Cloudx12

I had email from HMLR and said that it is not their policy to enter reference of staircasing in the title register and nor would be required.

(Note: I have my 100% Mortgage Deed Copy) as I am became the sole Proprietor of the flat I bought from A2 Dominion. My previous solicitor applied for a charge AP1 as a Whole for Title.

Has anyone or your solicitor applied for an Update of  Title Deed to enter  100% Memorandum of Staircasing.