Can you let me know your thoughts

Swifty_3

Our daughter has decided she wants to move out into a place of her own. She has looked at a new flat for sale at £142,500. She is going to buy this on a shared ownership basis of 50/50. She has been to see an independent financial advisor tonight about a mortgage and he seemed a bit concerned about the amount of rent she has to pay on the other half and the service charge.
rent per cal month £178
service charge per cal month £65.58 which doesn't include ground rent of £100 per year
The flat is two bedrooms 70 sqm and one of 16 of various sizes over 3 floors which are served by a lift.
Do these charges look ok, we haven't brought or sold a house for many years now so are completely out of touch and even more so when it comes to buying a flat.
If there is anything else that anyone would like to know that may affect these charges then please ask.

Thanks

PasturesNew

Who is the SO with?

I've seen rents a lot higher. What does the agreement say about how/when the rent can increase?

Service charges are the ones most likely to increase over time, landing tenants with a sudden unexpected bill.

Look at the total cost per month: mortgage, rent, service charge, ground rent.

Assuming she's putting down £7,250 as a 10% deposit, her mortgage would be £64k. Which on a repayment over 25 years at 6% would be about £417/month.

So total cost is: £417 + £178 + £66 + 8= £669/month

Swifty_3

Thanks for the quick reply, the SO is with Genesis Homes, haven't seen any details yet regarding the how or when rent can be raised I will have to ask her that question, something I hadn't thought about which is quite important.
Thanks again

Doozergirl

I have trouble with new build flats. They are, in general, heavily overpriced.

I have trouble with private companies offering shared ownership; your daughter may find that a the whole mortgage on a more modestly priced flat, not new build, costs the same. She will almost certainly find that to rent a similar property outright is less than her mortgage and rent and service charge combined.

Unless the shared ownership is with a housing association, I suspect that they simply offered shared ownership because they have had trouble selling it any other way. 50% of a SO property in my area seems to be valued at more than 50% of 100% ownership of the same type of flat. What is 'affordable' is actually more expensive :wall:

Advice is to research prices of flats which aren't brand new build - even second hand ones on the same development - and to research rental values in the local area and compare all three before making any decisions. But if her broker is worried, I would put the potential flat very much in the category I'm worried about and I would not buy at all.

Zammo

http://news.bbc.co.uk/1/hi/business/7214777.stm



I'd talk her out of it if I were you. Could be the biggest mistake of her life. Right now is probably the worst time to buy in the last decade.
[EMAIL="http://newsimg.bbc.co.uk/media/images/44388000/gif/_44388615_house_price_dec07_203gr.gif"][/EMAIL]

PasturesNew

Here is a link to a SO scheme. Every scheme/rent is different.

But this link does say how much properties cost and how much for the rent part. http://www.longhurst-group.org.uk/longhurst_homes/homes_for_sale/so_schemes.php

It might just show you the rents on others. Although every area is different as I said.

As has been said above, yes, it is the worst time ever to think of buying a house. But everybody looking should be aware of that by now ... and have decided that theirs won't bomb

I try to answer the questions asked as often as I can .... until it turns into a bun fight, then I join in.

PasturesNew

One thing I saw in the last crash was where builders sold 85% of property on a SO, with the people signing that they'd buy the remaining 15% within 5-10 years. Which of course they couldn't do as prices had dropped etc etc. and they had assumed the property would be worth more and they'd be earning more.

I remember there being a lot of trouble with this back then (88-92)

Swifty_3

Thanks to all for your thoughts. We have tried to persuade her to wait for six months or so before buying but she has her heart set on a certain flat. Things may be on hold for her for a bit though as she was suprised at the actual costs of buying, stamp duty, legal fees etc and now neeeds to get back to saving for this.
Thanks again