Shared Ownership ‘Share Maximisation’

SOQuery

I’m trying to get a shared ownership house, it is nicely within my budget with some to spare at 25% share. 

I was asked to do an affordability check with a mortgage company, and the company is saying that it is government policy that I should be encouraged to maximise my share, to 35%.

Long story short, is this a bit scammy? Do I have to do this, or can I just stick to my guns and say I’m only interested in 25%?

I can’t find anywhere online that it is the law or anything.

amnblog

Scammy? If you want to buy your own home it makes sense to buy as much as you can as soon as you can. Why give away rent on 75% if you can afford to buy a larger share.

DE_612183

amnblog said:

Scammy? If you want to buy your own home it makes sense to buy as much as you can as soon as you can. Why give away rent on 75% if you can afford to buy a larger share.

I guess it depends on how much the extra mortgage payment is compared to the extra rent.

Your rent will go up each year probably at a fixed rate (RPI?) and you will know what that is, but your mortgage once your intro rate runs out could go up by more.

As far as legally concerned - no they can't force you to by a bigger chunk - but I guess a mortgage company would prefer you to pay them rather than the Housing Assoc.

Is it a scam - no, but I think they are just trying to maximise their revenue from you.

kingstreet

Every 1% more you are able to buy is 1% more that someone else can benefit from. Shared Ownership uses Government money which is finite, so you will be required to purchase the largest share you can afford. This will be based on both shared ownership and lender affordability calculators.

housebuyer143

Some shared ownership providers have a minimum you must purchase, my sister's was 40%. Apart from that I don't believe there is anything that will force you to buy more legally.

lrnstcy1988

When I purchased my Shared Ownership at the end of 2019, I had to buy the maximum share I could afford. And I couldn't track back down...
It felt scammy at the time in that the rent was (and probably still is!) at a lower %age than my mortgage interest rate is, but ultimately I'm much happier I own a bigger share of my home.
And every time to staircase to purchase more, there is a minimum percentage to buy (and a cost to do so) - so I was happier I was as high up the ladder as I could get at that point in time.

Altior

Yes, the extremely low cost of the rental element of Shared Ownership makes it very tempting to minimize the purchase percentage. As the rent is based on social pricing, miles below the general market rate. And as there is a premium on the mortgage interest rate for SO, I would imagine rates are very expensive currently. If you anticipated a reduction of borrowing rates in the short to medium term, there is some logic.

I was actually pretty tempted to keep the SO going and not staircase ever. 

It's one of those things that creeps up exponentially, so the rental increases were not steep at all to begin with, hardly noticeable. But you get a double whammy after a few years, if the valuation of the property significantly increases, and exponential increases on the rent element (esp with high inflation). I effectively paid the original full purchase price again when staircasing due to the increase in valuation. Like many things in life, a lower initial share is exchanging short term gain for long term pain.