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Would it be a big mistake to buy a house on a part ownership scheme?

(32 Posts)
MoomieAndFreddie Wed 19-Sep-12 12:18:31

Me, DH and our 2 dc are Currently in housing association in a dreadful area. Really dreadful. I am really unhappy and worry about the long term prospects both with being in rented and also the bad area affecting the DC as they get bigger. they are only 3 and 6 at the moment. On the plus side though, as the rent is very cheap (well, compared to market rates anyway) we have a reasonable standard of living. and because we are in a secure tenancy we have decorated the place really nicely and it is a really nice house.

I would dearly love to buy, but the only option I can see that would be affordable to us would be one of those part ownership schemes. We will have to make a decision soon as DH is getting on a bit tbh (in terms of house buying) - he is 41. I am only 33 but it would probably have to be just in his name as I am not working and haven't really since DC1 blush

I know a lot of people are very sceptical about these, but wondered if anyone has any advice for us, maybe have done it themselves or know someone who has. or equally, any horror stories welcome as well

I am not working at the moment but DH is. we haven't got great credit histories and next to no savings, well, we have a couple of grand. but on the plus side we have no debts. DH earns 25k roughly. I am also wondering if buying is the be all and end all anyway, tbh I feel under pressure from my parents, family and friends who are a bit sniffy as we "haven't bought yet" hmm and also feel like people judge us for the area we live in.

anyway I have rambled but any words of wisdom will be greatly received.

pinkdelight Wed 19-Sep-12 12:49:57

Do you not need a deposit for part-ownership? If you do, you'll have to save a fair bit more as the 2k would get swallowed up by fees I'd have thought. Assuming you could get a mortgage, what kind of property would you be able to get? Would it be big enough and in a nicer area than your current rental? Would the difference be significant enough to take on the financial burden? I totally understand the urge to buy, but that urge is usually about security and it sounds like you might be more secure where you are, financially. Hopefully someone will come along with some positive stories of part-ownership tho...

xSHORTxSTUFFx Wed 19-Sep-12 12:58:13

I haven't personally...but my friend has...and sadly fell flat on their backsides :-(

They bought 1/4 of their property and rented the other 3/4.. after 12 months they bough another 1/4 so had a mortgage for half the house and rented half...They ended up paying double what thye were paying in the 1st instance and when they went to move and sell back the "owned" part to the housing association so they could move the prices dropped and they got no money back, the mortgage part was double what their rent was ... a very costly move for them...so please be careful

You do have another option tho, as housing asso properties are pretty much yours for life.... is an exchange every association has their own list of people wanting to exchange .. you can also advertise privately yourselves etc...that would be the option I would personally look into ...

I hope you get somewhere nice and be happy

MoreBeta Wed 19-Sep-12 12:58:40

Be very very careful indeed.

One scheme I looked at worked something like this.

A house was on sale from a developer for £250k. You bought 75% of the house and rented the other 25% for a 'market rent'.

Problem was that the buyer was still liable for the entire £50k loss if the house was subsequently sold for say only £200k if house prices fell. Worse still, if house prices went up to say £300k and was sold you only got 75% of the gain (ie £37.5k) and the developer got the other 25% of the profit (i.e £12.5k).

The entire thing was loaded against the buyer regardless of whether house prices went up or down. I could not believe how brazen the scheme was.

PrincessOfChina Wed 19-Sep-12 12:59:50

It sounds like you can't really afford to buy. It's hard when everyone else around you seems to be but £2k savings will barely get you through legal fees and moving expenses, let alone deposit.

Perhaps focus on making a plan for when your youngest is in nursery/school if they're not already. Could you get a job to bring in extra money that could just go towards savings rather than the household pot?

Novia Wed 19-Sep-12 13:06:37

Hiya MoomieAndFreddie - I have a part-ownership property and believe it's a very good scheme, but with some notable pros and cons. I own 30% of a flat in London and wouldn't have got a foot on the ladder without it. It worked out cheaper per month than renting and meant that I didn't have to flat-share.

The best thing is that you do feel that the place is yours, you can decorate, hang pictures, etc. Rent/service charge tend to be relatively low from the housing association and the majority of your expense will be the mortgage/bills.

On the negative side - you are responsible for anything that goes wrong. So if the washing machine breaks or the shower leaks it is your responsibility to fix it. Another negative is that the housing association standard of service can be pretty poor if you part-own. The people who get their time and attention are the ones in council housing and this can seem very unfair, especially as often they don't take proper care of communal areas, etc. Fly-tipping and dirty bin-rooms can drive you crazy after a while!

We are currently selling our flat as it's one-bed and we have a baby on the way. This raises certain issues as you are not allowed to sub-let your property. You need to either step-up (ie: buy the remainder of the flat) and then sell it all; or just sell your percentage. If you just sell your percentage then the buyer has to meet the requirements of the housing association (ie: earn under a certain wage, be a first-time buyer, etc). This means that moving on can be very laborious and time-consuming (as well as stressful!)

Just one other thing to be aware of. You will still need a deposit, even if you just buy a percentage. In order to borrow 30% of the value of the flat my bank wanted a 15% deposit. So, a lot less than a full mortgage deposit, but still several thousand pounds. You also need to be aware that your solicitor fees are likely to be around £1,000.

I advise that you really think carefully about the pros and cons before committing. And most importantly, do some sums and see how much it's likely to cost you. Good luck!

Principality Wed 19-Sep-12 13:09:45

We bought 25% shared ownership house 4 years ago.

Would I prefer to have bought outright- yes. But it wasn't possible. It cost us 315k and recently had the house valued as 300k.

I still think it was the right decision tho. It has cost us less per month in mortgage and rent than it would to have rented it, by about 100 per month.

The thing is tho, you do need to earn a fair wack to be accepted onto the scheme. It was dependent on incomes and deposit. Ie bigger deposit meant smaller minimum income. But I think the min income was approx 37k.

Principality Wed 19-Sep-12 13:12:26

Ps we are now subletting our house so it can be done. But we were only allowed to do it as the value had dropped 15k. We had to sign a lot of paperwork and there was about 200 admin fees.

fedupofnamechanging Wed 19-Sep-12 13:12:52

I did this a few year ago. I bought 70% of the house and the HA bought 30%. This meant that I didn't need a deposit, because the 30% went straight to the developer and acted as the deposit. When I sold the house I paid back 30% of the sale value to the HA.

It worked for me because the HA did not charge rent on their 30%. The scheme was designed to truly help people buy a home. The HA did make a profit from the sale, but being a HA this was reinvested back into providing housing.

I think you would need to look at the small print and find out what happens if the value of the house goes down instead of up.

I would also strongly advise you not to buy a house solely in your husband/partner's name - you will be giving up a secure tenancy for something that gives you no security. I was a sahm when we bought our house, but the mortgage is still in joint names. It just meant that the amount we could borrow was calculated on dh's earnings rather than on two incomes.

Our HA was Gwerin (in South Wales), if you wanted further info from them.

Feminine Wed 19-Sep-12 13:27:07

We did it 10 years ago --can't believe its been that long--anyway....for us it worked out well and we made around 30k on our share.

Since this was back in 02 it hit good fortune on the property ladder.

After that we lost all of it in the US....very long story.

If I were you, I'd look in to swapping. You have security and no threat of private landlords whims. Shared ownership can work sometimes but it sounds like for you, in your situation $$ wise it would be a bad move.

When we took out the loan from the bank , my DH was nearly 44 ...so you still have sometime. Good Luck smile

MoomieAndFreddie Wed 19-Sep-12 13:37:22

Yeah, if I am honest the thought scares me moving away from HA into a house owned by DH....while we are happy at the moment, what if we split up for any reason? I would have sod all....that happened to his ex wife, they owned a house but it was in his name, she didn't work as she was bringing up dcs and when they split she was left with nothing after a couple of grand profit from the house and is now 40 odd and single in private rented, I would hate that. I was "lucky" enough to get the house when I was a single mum with DC1 (dc1 is from a previous relationship) so I kind of see it as "mine" a bit, its my bit of security. have tried homeswapping websites but no bugger wants to swap with me cos of the area i am in dont blame them

Anyway, thanks for the stories, shared ownership sounds quite dodgy TBH - I suspected as much...

My parents are like a broken record though, everytime I bloody see them they give me helpful hmm advice about buying a house. and they go on about how my area isnt very nice and how they worry about their GDCs (yeah thanks for that, like I don't feel bad enough!) ...and I have a smug friend who is buying at the moment and she keeps rubbing my nose in it a bit sad

Plumpcious Wed 19-Sep-12 13:40:27

I looked into shared ownership a few years ago (mostly because I wanted to have a look inside a new block of flats that had been built nearby!).

I'm a bit sceptical about it, if you're in a job where your salary is not going to increase significantly. Bear the following in mind:

- minimum income: each development will state the minimum income required to buy a property (I assume the stated amount is a joint income if a couple are buying). An example of a development in my London borough is minimum £27,000 income to buy a 1-bedroom flat, and minimum £34,000 to buy a 2-bedroom. So you would have to be on an OK-ish salary to buy there.

- monthly service charge (this might only apply to flats) was over £80 a month for the 1-bedroom flat I looked at a few years ago (London zone 3). The charge is based on the size of the flat, so a 2- or 3-bedroom flat would be even more. And you have to pay it every month for as long as you live there, and it's only ever going to increase in price. And that's on top of the monthly rental and mortgage payments.

- buying additional shares of the property: yeah right! Firstly, if your initial income isn't enough to cover a mortgage for the full cost (£180,000 plus for the 1-bedroom flats I've seen) then you're not going to be able to afford to pay more unless your salary increases a lot. Fine for people on a professional career path but not for people who just have a 'job' and have reached a life-long plateau in their salary.

Secondly, if you do buy an additional share you have to go through the full legal process of buying (conveyancing, valuation of current market price, and paying the housing association's costs) which will cost a few thousand in itself. So you can't just save up a few thousand and hand it over.

The best thing to do would be to check out some part-ownership developments that you like and see if buying would be feasible in your financial situation, and then decide whether to proceed.

Desiren Wed 19-Sep-12 13:50:37

As someone who works for a HA as shared ownership property only "works" if you buy cheap sell expensive and within a short time frame. Mixed tenure (leaseholders/HA tennts) blocks are a no go in my opinion as you end up paying through the nose.

bradbourne Wed 19-Sep-12 13:58:14

Some very good friends of mine bought a flat on a 50:50 basis. They now own it 100% - they found the rent part of the payment was rising more quickly than their mortgage payments, so they "bought" the other half. The sheme worked very well for them.

Just from this short thread, it seems to me that all of these schemes work slightly differently - maybe you should check out what exactly is available in your area.

Feminine Wed 19-Sep-12 14:01:26

Don't feel bad op you have security with your HA home.

Your friend might be a little envy that although the area that you live in is a bit suspect, your home will always be yours.

Not many people can say that smile

Viviennemary Wed 19-Sep-12 14:17:06

I don't think I would go for the shared ownership option OP. Could you not ask the Housing Asociation for a transfer to another area. I know there will be a waiting list probably but it is worth a try. Or would it be possible to wait a few years and then get a job when the children are a bit older and that would give you more money. Also from your other post it looks as if you should wait a bit before thinking of buying a house if you're not sure.

Viviennemary Wed 19-Sep-12 14:18:49

Sorry just read it is a really nice house and you have decorated it. Why not stay put for the time being.

fedupofnamechanging Wed 19-Sep-12 14:42:28

Sorry to harp on about this but regarding having a house solely in your partner's name. It's not only splitting up that you need to worry about - if he died, you could potentially find yourself in financial difficulty.

Bossybritches22 Wed 19-Sep-12 14:47:46

TBH I think the market being what it is & you not working, why not save up a bit more of a cushion & move to a long term let in a nicer area.

It's only in the UK that renting long term is seen as a bad thing. In Europe families routinely rent for years.

Don't let your family bug you, but I get what you mean about moving to a nicer area before the DC's get older.

You sound like the sort of tenants a landlord would love as you'll look after the house!

ticklemyboobsofsteel Wed 19-Sep-12 14:48:22

Oh thanks for starting this thread OP. DH, my son and I are currently living with my father. The plan was to save up enough for a deposit as quickly as possible but the shared ownership thing looks rather alluring. Not so sure now though. I suppose it would make much more sense to save as much as possible and buy in the future. We so crave our own space though...

KatMumsnet (MNHQ) Wed 19-Sep-12 14:55:39

Hi there, we've moved this thread into Property/DIY. Thanks.

TroublesomeEx Wed 19-Sep-12 14:57:41

I looked at SO once.

If the value rose - you split the difference equally with the HA/LL

If the value fell - you bore the brunt of it 100%

I only know a couple of people who have bought SO and they have both regretted it.

MoomieAndFreddie Wed 19-Sep-12 16:16:40

Hi there, we've moved this thread into Property/DIY. Thanks

thanks hmm

i put it in aibu as theres more traffic ffs. mn is getting well -big brother-- strict atm and i know for a fact its pissing a lot of posters off smile

Bossybritches22 Thu 20-Sep-12 09:18:11

moomie I think they move threads at request of the AIBU mafia a lot of the time!

ANYWAY- back to the subject!

tickle Why not consider long term rent? All costs of maintaining the property are born by the landlord. I know the rent is dead money but you can still save for a deposit & have your space. It is difficult living with family!

SO nearly crippled a friend of mine financially when the market crashed in the late 80's wouldn't touch it with a bargepole unless there were built in safeguards!

BlazerOfGlory Thu 20-Sep-12 09:22:47

You can't just stick whatever you want into aibu, for the traffic. This is the right topic for it.
And if you don't like the way the owners of a site run it, there are plenty of others you can try. hmm

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