Shared Ownership - should I buy more shares?

JasminYoung

My 2 year fixed rate is due to run out in June and I need to re-mortgage. I had planned to buy my final 20% share of my property at the same time. This would mean adding 70 grand to my existing 160 grand mortgage with a property value of 335 grand. Would I be a fool to do this at this time?

At present there is 100 grand equity (except it is all imaginary as I can't think anyone would want my 80% share for that price, now).

The valuer said that central London prices are unlikely to lose value - do I believe this or do I wait for a further fall, and then buy the remaining 20%?

Either way, I have to remortgage next month, and don't really want to pay fees twice (now and for later when I do buy the remaining share), and of course, if I wait, the value could have gone up next year...

What would you do in my situation? !!

Oliveru

I think you would be a fool to buy anymore into this property market, can you afford your house to halve in value and your interest rate to double at the same time? If the answer is yes and you also don't mind throwing lots of money into a bottomless pit then go for it.

In your situation I would sell up and rent but then I'm far more knowledgable about the UK housing market than the average punter so my opinion is likely to be unpopular on this forum and in general.

If you really honestly have to stay then at least don't buy more shares as that would just be kicking yourself while your down!

JasminYoung

Actually, we don't want to stay.....we want to keep it and rent it out, while renting somewhere else, as it is in a prime rental location; but we can't legally rent until we own 100%...

PasturesNew

I had a SO property, about 1990ish to 1997.
My deal was I could sell it back to the Council, so I did.
And it was still valued 5% cheaper than when I bought it.
So in my case if I'd been buying more shares I bet they'd have been cheaper if I'd bought more in about 1993-4.

JasminYoung

The thing is - the best time for me to buy the remaining share is when the property is cheapest, which could be now? I don't want to miss the boat and find that in a years time I can no longer afford the remaining share. The extra mortgage payments (calculated at 6%) would equal what I have been overpaying already, but there would be no room for leeway...

Oliveru

So you are looking at turning it into a cash machine?

Go for it, after all property only goes up, and you know what they always say- time to raise the rents! :rotfl::T :cool:

brit1234

Shared ownership and buy to let represent everything that is bad in the property market. :mad: At least prices are crashing.:j

JasminYoung

Thanks Oliveru! I much prefer it now you say 'yes' than before when you say 'no'!!

Anyone else have a constructive opinion? I don't need comments on the politics of shared ownership - I didn't invent the schemes, but it got me on the property ladder and out of council - and now I want out of shared ownership, hence wanting to buy the final share; but shall I buy it now.....or wait....?!

Mac_Sami

It's really up to you - hardly a conclusive answer I know.

If you want to rent out the property, and you're confident that you can do this, then buy the final 20%. How are you set for SDLT on that final 20% by the way? Another cost to consider.

If you can wait a while longer, you take a gamble in hoping house prices fall. If they do, your share becomes more affordable - but of course in the meantime you've not had any rent coming in, and you're paying rent on that final 20%.

I wouldn't listen to the valuer, and even if they're right about prices at the moment, it's no indication in the current market that prices can't change in the short or long term future. Plus the HA or whoever you're buying the final share from will want to get the highest possible price.

Another route is to buy the final 20% but haggle on the price. It can be done, and please don't listen to people who say it can't be done on SO (I'm speaking from experience here).

I guess it's down to a question of affordability. If renting out the property is a must to gain income, then buy the final share now. If it's not a must, hang on a while. The rent you're paying on that final 20% is probably quite small in comparison to a possible price drop.

JasminYoung

Thanks Mac, that is useful info. I also read your thread about haggling your price - not sure if my haggling skills are that honed really! Also, what is SDLT?

We are not thinking of moving out for another 6 months anyway, it is just that our 4.4% interest turns into 6.5% next month so it is imperative to remortgage and I don't want to have to keep paying remortgaging fees. Staying with my existing provider will increase my mortagage by about £220, buying more share and remortgaging will increase it by £500, but minus £150 worth of rent - only £150 more to own my very first property in full !!!

Mac_Sami

JasminYoung wrote: »

Thanks Mac, that is useful info. I also read your thread about haggling your price - not sure if my haggling skills are that honed really! Also, what is SDLT?

We are not thinking of moving out for another 6 months anyway, it is just that our 4.4% interest turns into 6.5% next month so it is imperative to remortgage and I don't want to have to keep paying remortgaging fees. Staying with my existing provider will increase my mortagage by about £220, buying more share and remortgaging will increase it by £500, but minus £150 worth of rent - only £150 more to own my very first property in full !!!

SDLT is Stamp Duty Land Tax. There are new rules about it now relating to SO properties and how SDLT is calculated. I am not sure if these apply to you, but your solicitor will be able to advise.

It sounds like you've done some maths, and if it's only costing you £150 a month more at a 6.5% mortgage, plus the one off cost of the final 20% share + any legal fees, SDLT etc, then I'd say go for it.

Nobody really knows what will happen to the mortgage market at the moment - have you considered looking around for a mortgage, as there are some deals better than 6.5%, and you may well qualify for an 'ordinary' mortgage i.e. you don't need to go to someone who will deal with SO's, as you'll be the outright owner of the property (and so there are fewer leasehold requirements). I'm not 100% sure about this, but I see no reason why most of the high street banks would not be available for you to consider. Of course, working out costs, affordability and multiples may be your sticking point in the current market - but research thoroughly for your mortgage options before offering to buy the final 20% share.

You can haggle. I've done it, and lots of people (me included) didn't think it was possible. It took a few weeks, even going into months, before I got an answer, but we got to a lower price than the valuation. I understand your lease will go along the lines of shares are to be sold at market value deemed by a valuer etc etc, but you can hard sell to the HA. Point out that a lump sum of money for 20% of the property is better than a small amount of monthly rent for them, but also be laid back in your approach - you don't want to seem desperate to buy the final 20%.

Also point out that we're in a falling market, and you're saving them the potential of coming back in a year's time and offering 20% less for that share i.e. the market value of the share in a year's time (of course we don't 100% know what the value will be in a year's time, but given everything that's going on, there are few who are saying prices will go up now!). It's probably tantamount to bullying them to sell it to you at the price you want, but it can be done - politely and fairly.

If they say they won't budge from the asking price, then keep asking if there's nothing they can do - usually they will try to do something. If they absolutely can't move from the asking price, then walk away and just keep paying rent. Remember, prices aren't sky rocketing at the moment, so you're not losing much.