Shared ownership is this the best move.

AliceBanned

simon_grimshaw said:

ian1246 said:

simon_grimshaw said:

Thanks for the advice. 

The house prices are to much 1500 a month for 30 years.
pretty depressing

Respectfully, I think your being shortsighted.

The way shared ownership works is the share you dont own has a value attributed to it - that value is then multiplied by X% - normally 2ish% - divide that by 12 and thats the monthly rent payment.

That means in the long run, that rent payment is only ever going to go up - potentially faster than normal inflation.

On the other hand... once you've taken out a mortgage, the capital is only going to go down. Its true the mortgage could fluctuate depending on the interest rate, but thats where fixed rates for 5 or 10 years offer security i.e. over the course of those 5 years, odds are high you'll have had a bunch of payrises, so even if coming off that fix the interest rate has jumped, you'll likely have the income to service the increased mortgage payments. There's also every possibility you'll get a lower rate (interest rates dropping or decreased loan to value rates).

The key difference, though, is other than interest rate fluctuations the mortgage amount remains fixed - whilst over the 30 or 40 years of the mortgage, your income increases with inflation.

That means your mortgage will represent an ever shrinking % of your income, whereas rent will likely keep up / exceed inflation.

Its worth remembering you can put the mortgage over very long periods (into retirement) of time to bring down contractual monthly payments, then overpay the mortgage when you have flexibility to do so to reduce the term back down to before your retirement age.

Basically, if you have the ability to buy a property where you own 100% of it (albeit mortgaged), your going to be a lot better off in the long run vs. Part-renting.

Edit: the only exception will be where you max out the mortgage for a shared ownership (buying the largest share you can) then use Universal Credit to cover the rent part whilst aggressively overpaying the mortgage, then remortgage when your fix is due - again maxing out the mortgage to buy a larger portion of the property (baring in mind if the values gone up, the cost per % will have increased). Rinse and repeat until you get to 100% ownership.

The cumulative legal costs though for multiple purchases of your shared ownership until 100% will likely be quite high.

Edit - just saw your post about £1500 mortgage vs £1150 cost for shared ownership. Presumably that £1500 reflects how much you can borrow with a mortgage company and therefore just about afford?

In which case, going the shared ownership route could work- use £1150 to cover the mortgage / rent, then chuck the left over £350 at the mortgage as an overpayment. You mentioned you'd still get £450 UC house allowance? That's another £450 income effectively, so use that to overpay also.

That would be a £800 a month overpayment to build equity - allowing you to remortgage and buy a large chunk of your property every time your fix is due to expire. Effectively staircasing to 100% whilst getting the taxpayer to cover a large portion of the cost (rent).

By overpaying, you'd be building capital in your house without worrying about declining universal credit amounts (savings over £6000 = reduced UC entitlement).

Thanks for that mate . It helped.
A just for the life of me cant bare  to pay 1500 a month till im 70 for a house whats small or one in a bad area.
If there was i would prefer this option.
I also pay quite a bit in my pension 8k a year
So a should have a decent one to help we rent when im older.

You have said several times you can’t bear to pay £1500 per month for 30 years. It sounds like you have a lot of pressure on you at this point in time, understandable. Try and see that £1500 as investment as more likely than not it will feel like it within a few years. It can lead to greater freedom and is worth the effort. I’d go as far as to say what’s the point working hard if you don’t invest in a home?!

Unfortunately you may have to consider buying and selling more than once, that’s how achieving what you ultimately want works. I’ve owned one-bed shared ownership (40%) sold it on easily as it was a good flat in a great location. Bought a two bed, sold it, renting whilst I buy the next one that I want. Each property got better and I doubt I’ll move much more. Not always easy but doable for most people and easier than staying stuck and getting left behind, as inflation won’t wait. I think you’re nervous about taking the plunge and anxious to find a secure home for your family. IMO a good shared ownership or a full purchase could each work, but when I bought shared it was because I couldn’t otherwise buy anything reasonable in the area I wanted to be. Next place I bought fully and started to see my equity increase twice as fast over that time (only four years). Not saying all property is good investment but that has been my experience, it just needs patience and a bit of research, and make sure you get good mortgage advice. I’m not familiar with UC but it sounds like it’s holding you back to some extent.  

itsthelittlethings

You sound like the kind of people shared ownership is made for. Yes service charges are a big issue.

simon_grimshaw

AliceBanned said:

simon_grimshaw said:

ian1246 said:

simon_grimshaw said:

Thanks for the advice. 

The house prices are to much 1500 a month for 30 years.
pretty depressing

Respectfully, I think your being shortsighted.

The way shared ownership works is the share you dont own has a value attributed to it - that value is then multiplied by X% - normally 2ish% - divide that by 12 and thats the monthly rent payment.

That means in the long run, that rent payment is only ever going to go up - potentially faster than normal inflation.

On the other hand... once you've taken out a mortgage, the capital is only going to go down. Its true the mortgage could fluctuate depending on the interest rate, but thats where fixed rates for 5 or 10 years offer security i.e. over the course of those 5 years, odds are high you'll have had a bunch of payrises, so even if coming off that fix the interest rate has jumped, you'll likely have the income to service the increased mortgage payments. There's also every possibility you'll get a lower rate (interest rates dropping or decreased loan to value rates).

The key difference, though, is other than interest rate fluctuations the mortgage amount remains fixed - whilst over the 30 or 40 years of the mortgage, your income increases with inflation.

That means your mortgage will represent an ever shrinking % of your income, whereas rent will likely keep up / exceed inflation.

Its worth remembering you can put the mortgage over very long periods (into retirement) of time to bring down contractual monthly payments, then overpay the mortgage when you have flexibility to do so to reduce the term back down to before your retirement age.

Basically, if you have the ability to buy a property where you own 100% of it (albeit mortgaged), your going to be a lot better off in the long run vs. Part-renting.

Edit: the only exception will be where you max out the mortgage for a shared ownership (buying the largest share you can) then use Universal Credit to cover the rent part whilst aggressively overpaying the mortgage, then remortgage when your fix is due - again maxing out the mortgage to buy a larger portion of the property (baring in mind if the values gone up, the cost per % will have increased). Rinse and repeat until you get to 100% ownership.

The cumulative legal costs though for multiple purchases of your shared ownership until 100% will likely be quite high.

Edit - just saw your post about £1500 mortgage vs £1150 cost for shared ownership. Presumably that £1500 reflects how much you can borrow with a mortgage company and therefore just about afford?

In which case, going the shared ownership route could work- use £1150 to cover the mortgage / rent, then chuck the left over £350 at the mortgage as an overpayment. You mentioned you'd still get £450 UC house allowance? That's another £450 income effectively, so use that to overpay also.

That would be a £800 a month overpayment to build equity - allowing you to remortgage and buy a large chunk of your property every time your fix is due to expire. Effectively staircasing to 100% whilst getting the taxpayer to cover a large portion of the cost (rent).

By overpaying, you'd be building capital in your house without worrying about declining universal credit amounts (savings over £6000 = reduced UC entitlement).

Thanks for that mate . It helped.
A just for the life of me cant bare  to pay 1500 a month till im 70 for a house whats small or one in a bad area.
If there was i would prefer this option.
I also pay quite a bit in my pension 8k a year
So a should have a decent one to help we rent when im older.

You have said several times you can’t bear to pay £1500 per month for 30 years. It sounds like you have a lot of pressure on you at this point in time, understandable. Try and see that £1500 as investment as more likely than not it will feel like it within a few years. It can lead to greater freedom and is worth the effort. I’d go as far as to say what’s the point working hard if you don’t invest in a home?!

Unfortunately you may have to consider buying and selling more than once, that’s how achieving what you ultimately want works. I’ve owned one-bed shared ownership (40%) sold it on easily as it was a good flat in a great location. Bought a two bed, sold it, renting whilst I buy the next one that I want. Each property got better and I doubt I’ll move much more. Not always easy but doable for most people and easier than staying stuck and getting left behind, as inflation won’t wait. I think you’re nervous about taking the plunge and anxious to find a secure home for your family. IMO a good shared ownership or a full purchase could each work, but when I bought shared it was because I couldn’t otherwise buy anything reasonable in the area I wanted to be. Next place I bought fully and started to see my equity increase twice as fast over that time (only four years). Not saying all property is good investment but that has been my experience, it just needs patience and a bit of research, and make sure you get good mortgage advice. I’m not familiar with UC but it sounds like it’s holding you back to some extent.  

Thanks for your comment. My preference is to buy. Just because of my age it doesn't help
if i was in my 20s then be so much easier.
Basically my options are buy small house for round 1500 a month. But with that i will drop 450 ish of UC.
Or shared ownership with much better new house for 1150 and dont lose any UC. 

Why we dont plan on UC for the future
Definitely wil be on for the next 3 4 year.
Still really unsure what to do tbh  we are proper torn.

ian1246

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

simon_grimshaw

ian1246 said:

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

Thanks for the reply mate.

So car wise i do 25k miles a year. I have a electric car which takes 550 out my take home pay all included insurance mateinance etc.
I save so much on fuel. But on UC its based of net pay so less you earn UC goes up by 55%
so the car is costing 250 a month.
way cheaper than owning a used car.

Same with the pension i pay 20% which reduces
my net pay by 480. But UC goes up so i am worse off  by 220. I do this because being stuck in private rent at least i could do is have a decent pension.

My plan was spend it all an enjoy life when i am older.  On shared ownership you get help around 80% of the rent in retirement .

I have no doubt future governments will tighen things up for sure. But help in retirement has always been there.

Emmia

simon_grimshaw said:

ian1246 said:

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

Thanks for the reply mate.

So car wise i do 25k miles a year. I have a electric car which takes 550 out my take home pay all included insurance mateinance etc.
I save so much on fuel. But on UC its based of net pay so less you earn UC goes up by 55%
so the car is costing 250 a month.
way cheaper than owning a used car.

Same with the pension i pay 20% which reduces
my net pay by 480. But UC goes up so i am worse off  by 220. I do this because being stuck in private rent at least i could do is have a decent pension.

My plan was spend it all an enjoy life when i am older.  On shared ownership you get help around 80% of the rent in retirement .

I have no doubt future governments will tighen things up for sure. But help in retirement has always been there.

This is probably and partly why we have a ballooning welfare bill.

I appreciate you're doing this because you can, but this is exactly the sort of thing governments could choose to crack down on - looking at gross income as the criteria for UC eligibility before pension and salary sacrifice for example.

simon_grimshaw

Yup. Id rather own a nice home right now
than claim UC. But it is what it is a supose.

Myci85

simon_grimshaw said:

ian1246 said:

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

Thanks for the reply mate.

So car wise i do 25k miles a year. I have a electric car which takes 550 out my take home pay all included insurance mateinance etc.
I save so much on fuel. But on UC its based of net pay so less you earn UC goes up by 55%
so the car is costing 250 a month.
way cheaper than owning a used car.

Same with the pension i pay 20% which reduces
my net pay by 480. But UC goes up so i am worse off  by 220. I do this because being stuck in private rent at least i could do is have a decent pension.

My plan was spend it all an enjoy life when i am older.  On shared ownership you get help around 80% of the rent in retirement .

I have no doubt future governments will tighen things up for sure. But help in retirement has always been there.

The figures you have just given, you've found the extra £450 UC that you'd lose by choosing a mortgage instead of shared ownership. 

Also, if you're paying 20% into your pension each month, are you certain that you'd qualify for help paying 80% of the shared ownership rent on retirement? My understanding is that it is still means tested, and if you've a decent private pension, you may get little or no help.

simon_grimshaw

Myci85 said:

simon_grimshaw said:

ian1246 said:

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

Thanks for the reply mate.

So car wise i do 25k miles a year. I have a electric car which takes 550 out my take home pay all included insurance mateinance etc.
I save so much on fuel. But on UC its based of net pay so less you earn UC goes up by 55%
so the car is costing 250 a month.
way cheaper than owning a used car.

Same with the pension i pay 20% which reduces
my net pay by 480. But UC goes up so i am worse off  by 220. I do this because being stuck in private rent at least i could do is have a decent pension.

My plan was spend it all an enjoy life when i am older.  On shared ownership you get help around 80% of the rent in retirement .

I have no doubt future governments will tighen things up for sure. But help in retirement has always been there.

The figures you have just given, you've found the extra £450 UC that you'd lose by choosing a mortgage instead of shared ownership. 

Also, if you're paying 20% into your pension each month, are you certain that you'd qualify for help paying 80% of the shared ownership rent on retirement? My understanding is that it is still means tested, and if you've a decent private pension, you may get little or no help.

Yeah i would cut the pension to 5% definitely, but the car is essential i do alot of miles and save alot on fuel being electric .

ian1246

simon_grimshaw said:

ian1246 said:

Op, I'd stop fixating on Universal Credit - you mentioned how you've deliberately kept your income low to keep yourself claiming it and now your talking about deciding on a house purchase based on it.

Have you ran the figures to see if you'd be better off by maximising your income? I.e. How much more income will you have if you ditch the company car & buy a 2nd hand one outright?

You also only need a future governments to change the universal credit rules to factor in deductions for employee benefits (like the car) as a form of income and your then potentially up a creek without a paddle (no UC - so no housing allowance - and contractually committed to a car on finance). Make no mistake - future governments are going to tightening up the welfare budget.

The same for your maximised pension contributions - having a good pension is fantastic- except i suspect everything your chucking into it is a false economy if your going to be renting in retirement. 

Are you even going to get help from the government in retirement? I dont know a lot about how pension credit works, but most pensions now are defined contribution - meaning a pot of money which you can either withdraw steadily from or exchange for an annuity - a guaranteed life time income.

If you keep the pot of money, I'd be staggered if your eligible for help if your sat on a pot of £100,000's. If you exchange it for an annuity, you'll probably be far worse off & poorer due to how bad those rates can be - particularly if you want an inflation linked annuity with spousal benefits.

From an objective point of view, I'd really encourage you to review everything & decide what you want in life. At age 40 your still relatively young - most people dont get their first home until 34years old and unlike them, it sounds like your nearly through the financially difficult nursery-fee's stage og having kids - once the kids hit School costs fall through the floor & you could find with your wife's income - and you maximising yourself rather than artificially lowering it - that you really could get what you want.

Please do sit down and run the figures - toy with different scenarios, including ditching the company car / reducing pension contributions etc..

Thanks for the reply mate.

So car wise i do 25k miles a year. I have a electric car which takes 550 out my take home pay all included insurance mateinance etc.
I save so much on fuel. But on UC its based of net pay so less you earn UC goes up by 55%
so the car is costing 250 a month.
way cheaper than owning a used car.

Same with the pension i pay 20% which reduces
my net pay by 480. But UC goes up so i am worse off  by 220. I do this because being stuck in private rent at least i could do is have a decent pension.

My plan was spend it all an enjoy life when i am older.  On shared ownership you get help around 80% of the rent in retirement .

I have no doubt future governments will tighen things up for sure. But help in retirement has always been there.

Based on your figures, you really do need to double check at the very least about your pension - your pension pot is likely to be in the £100,000's+ territory, which means you will not qualify for governmental support during retirement. You could probably exchange it for an Annuity, which would be a fixed income for the rest of your life - but even that may bump you past the threshold for support, at the expense of loosing £100,000's of ££ for a not very good deal. Often people are much better off drawing their pensions down rather than purchasing an Annuity, plus the remaining money can form part of your estate upon death. A Annuity dies with you.

I actually think your definitely making the wrong decision going down the shared ownership route. Cut your pension down to the minimum 5% (& let stocks and shares grow your existing pension) and that's £360 extra you've found.

In the long run, your mortgage costs will remain fixed whilst rent on the shared ownership will rise to reflect increased house value or inflation - for the sake of a couple of years of budget being tight, before pay-rises reduce the burden of the mortgage payments, isn't 100% Home Ownership worth it? That's your retirement made immeasurably safer and with the growth in equity in your property, odds are high you could afford somewhere larger / more comfortable within a few years.

Good luck either way - but please do double check about your pension. I think assuming your going to get government support is a potentially colossal mistake (if you don't get it, your retirement is going to be a lot poorer than your anticipating due to shared ownership rent).