Shared Ownership - why is it a rip off?

Poppycat

I dont think its good value and not always right for everyone but thats life.

They are pitfalls like

Pay rent on the percentage of the property if value of house goes up the HA gain too as indeed you do, but you still pay rent

Also they have a say to whom buys the house rather than going on open market.

We looked at shared ownership last year but in ended opted for a repayment mortgage even though our incomes aren't great we did have a large deposit due to sale of old house, had to move because need a bigger house for kids

I also found many houses on shared ownership rather small, we managed to get a key worker type shared thing

Bargain_Rzl

You might have seen some of my posts on this subject.

I think you really have to do your homework and see if the numbers add up. You've said that for you, your outgoings renting would be very similar to your outgoings as a shared owner. (Not sure if you have factored in maintenance costs or not.) (Edited to say: that was lucy_w86 that said that, not the OP) My personal view is that this is not a good enough reason to go SO, as effectively you'd be limiting your options - SO has the disadvantages of being an owner AND the disadvantages of being a tenant. If you were renting, at least you'd have your maintenance costs covered, and would have the flexibility to move at a month's notice if you wished.

If the numbers had been equal, as yours are, I don't think I would have gone for my SO flat. As it is, with a saving of £200 a month over either buying or renting in my area (numbers which I've explained in some detail in earlier posts, which you will find if you search) it has so far been a decision I have not regretted. Additionally, my flat was marketed at a value that is very difficult to beat in my area.

I think that a lot of new SO properties are terribly overpriced (mine wasn't) and I think that the local market is very important (I'm in Inner London; I would never ever buy a shared ownership flat in, for example, Cardiff, where there is a huge oversupply of newbuild flats which look set to depreciate massively in a slow or falling property market). I think you need to look into it very very carefully, but if the numbers work for you in a variety of projected scenarios, you may be encouraged to go for it.

Alan_M_2

Also check the small print, a point that has not really been relevant over the last decade is what happens if there is a drop in value.

Some agreements will guarantee the value of the Govt owned proportion of the property leaving you and you alone to take any drop on the chin.

Say you buy a 50% share in £100,000 property, entirely feasible today.

You pay £50,000 you pay rent on the other half.

If the property increases in value by 10% - your half is worth £55,000 the other also £55,000 should you sell.

However, if the property falls in value, by 10%, the govt proportion retains it's value of original purchase price minimum of £50,000 and your share is now only worth £40,000.

This is a serious consideration in the current climate.

Of course not all will have a clause like this, but some may...just be aware of what you're agreeing to.

jambosaver

I bought my shared ownership flat back in 1995. I originally bought 40% but about 5 years later my income had increased and I was able to buy the full 100%. Its been the best investment I've ever made. There's no way I could have got on the housing ladder without this scheme.

brit1234

jambosaver wrote: »

I bought my shared ownership flat back in 1995. I originally bought 40% but about 5 years later my income had increased and I was able to buy the full 100%. Its been the best investment I've ever made. There's no way I could have got on the housing ladder without this scheme.

The question is can you sell it in the same way as a normal property or are there restrictions on who you can sell to and its value?

seven-day-weekend

Does anyone know if there would be any restrictions upon us providing the money for the bought share of the house for our son and him paying the rent? (It would be in his name). He can't afford to rent on his own or buy on the open market.

Lovella

brit1234 wrote: »

The question is can you sell it in the same way as a normal property or are there restrictions on who you can sell to and its value?

Once you have a mortgage on the whole property then you're free to sell it on the open market and it's unlikely that it would be valued any lower than 'normal' properties.

brit1234

Lovella wrote: »

Once you have a mortgage on the whole property then you're free to sell it on the open market and it's unlikely that it would be valued any lower than 'normal' properties.

But some shared ownership schemes I have seen don't allow you to get full ownership. I think because there are so many schemes offered by many different companies there are varying conditions.