Shared ownership advice please!(19 Posts)
So were looking at shared ownership as this is the only way we will be able to buy in a very expensive area but I have several questions for anyone whose been throught the process.
1) how do repairs work, are the costs split in terms of the percentage you own and how are trades people sourced or do the renting organisation organise this? How easy is it to get problems sorted in your experience
2) what happens if you want to sell the property but dont own 100% share?
3) would you recommend the scheme? Ive heard bad things but its the only option we have really..
4) can you put in an offer lower than the asking price or is it fixed? I'm very aware that new builds lose value once they aren't 'new' anymore
5) did you find that you were only able to secure a lower mortgage once they factor the rent element into the earning calculations for a mortgage?
So many questions! Thanks for any help at all, its a bloody minefield!
Most shared ownership property is leasehold so your freeholder will organise repairs and bill you a percentage (stipulated in your lease). Bear in mind that as a leaseholder you will need to pay for repairs whether or not they impact you (e.g. For the roof or a lift if you're on ground floor). I recommend googling your housing association or freeholder beforehand to see if they are in the press for poor repairs etc. Re how easy it is to get problems fixed this will completely depend on the freeholder. I live in a leasehold flat and have found it tough to get anything done to a good enough quality.
If you want to sell you usually have to do this through the association you rent from first - only if they don't find a buyer can you put it on the open market, again this depends on the lease.
I know people who have done shared ownership and are positive, others who are negative. I think you need to weigh up the positives and negatives yourself. Some issues that may arise - if you want to staircase, i.e. Buy an extra percentage later, the legal fees payable are comparable to buying a whole property. Also you buy the next percentage at the market rate at the time you buy so if prices go up you may not be able to afford it.
Look carefully at your service charge and what it covers - they can be v High.
You can put in a lower offer.
And yes the rent portion will be classed as expenses by the mortgage lender and impact what they will lend you.
Ok so we are 3 months in from purchasing our first home as part of a shared ownership scheme so I think I can have a stab at answering your questions. One thing to bare in mind though is that the answers will vary depending on your housing association/provider - this is how it isn't going for us but you should still check the details of tournaments own scheme.
1) Repairs are 100% your responsibility and you pay for them. The exception to this is if it is a genuine defect/installation fault in which case it is the developer's responsibility. Some schemes will source or reccomend tradespeople for you but then it would be you who pays.
2) This varies quite a lot scheme to scheme. For us, the housing association must be given 12 weeks to market and sell the property as shared ownership. You will get your proportion of the sale price which will be set by valuers and non negotiable. If they fail to sell it, you can then put it on the open market with anyone you choose. When it sells you split the money based on the proportion you own.
3) we are only a few months in but so far definitely yes! Our flat is much nicer than what we could afford to afford to rent before this, and the security etc is great. The only thing I would say is you have to be prepared to jump through a hell of a lot of hoops to get onto the scheme. It's a faff, really hard work and very stressful but worth it in the end I think.
4) no, the price is the price.
5) yes, they do take the rent into account in terms of mortgage affordability. Only a limited number of providers offer shared ownership mortgages and some can be wary of new builds too. I would reccomend going through an advisor/broker experienced in shared ownership. There are good deals out there, they can just be hard to find!
I hope that helps. Feel free to ask any other questions you might have
We bought our shared ownership flat 10 years ago. It worked well for us at the time and 2.5 years ago we were able to sell our share, get out of SO and buy a house (100%) as we wanted to move area and needed a bigger property. However be warned, we did end up losing some money as the flat had dropped in value. However I honestly don't regret buying the flat as I felt it got us on to the housing ladder and we were then in a much better position for our current mortgage.
1. Yes you have to pay for all repairs on your property. If a flat the service charge covers repairs to communal areas.
We only sold our share and worked out better (as we lost money) that we only had 40%
3. As I said it worked for us but it is a bit of a gamble for the future in terms of potentially losing money but as I said you would only lose your share percentage rather than 100%.
4. Not sure. We went with the asking price. We were also v lucky to have an asking price offer when sold
4. We secured the mortgage for the share and as far as I can remember it was only based on that. However this was 10 yes ago when things were v different and having gone through the mortgage process again 3 years ago they will take the rent in to consideration I imagine.
We had Shared Equity too because we also couldn't afford to buy otherwise. It was great. We had to pay the full asking price, but it was a fair price and we were just very glad to have been the first applicants for it so went for it. I don't know about repairs, ours was a new build and never needed any.
We staircased to 100 per cent and sold for quite a good £££ increase after 5 years so it enabled us to buy this house by ourselves (with a mortgage of course). The experience was completely positive apart from two things which annoyed us, but were worth it.
Our Housing Association could 'overrule' us in terms of decisions with the neighbours who were in their other rented properties - I am thinking of one specific instance that we said we weren't happy with and they gave them permission on our behalf [shocked]. And when we came to buy the 100 per cent somehow, legally, we were still subject to their covenants which were in addition to the other 'normal' owners of houses in our new build estate. That was the case when we sold as well, luckily it didn't seem to bother our buyer. But it was things like not being allowed a pet! We did challenge this but they didn't change their minds.
Our new build went up a lot in ££ over the years too, but that might be to do with the builder/area than anything else. Good luck! I would definitely go for it and I'm encouraging friends in similar positions to explore it as an option too.
Think of it a bit like an investment with some expsoure to the property market....
You own e.g. 30% of the flat and pay:
Mortgage on your 30%
Rent on the other 70%
100% service charge
100% repairs to your flat
100% new kitchen, bathroom etc BUT when you come to sell you only benefit from 30% of the uplift in value... (this does vary between HAs though so check the terms. Some will take your improvement spend into account).
So in that sense it is a bit of a scam.
Obviously if the property looses value you only take a 30% hit on that as well so it does go both ways.
When you come to sell you don't get to sell to the best offer, the HA chooses who gets it based on points.
You will be unlikely to rent it out. This means if your circumstances change e..g get married and have two babies and want to move out and you have issues selling (e.g. if prices have crashed) you can be a bit fucked.
Careful with stair casing - keep it between 30% and 60%, or 100%. When you get to like 70% it is totally pointless and people would rather buy a 'normal' flat in a slightly worse location than have to deal with SO.
My experience agrees with most posters. Remember that it's designed to be a stepping stone. If you staircase to 100% it's still shared ownership (you can't avoid that; so their rules always stay). On selling, once the market price is decided ( by valuer) it is fixed. As it is you that wants to sell, you pay all the fees and costs. If you choose to sell below market price - again that is your decision so you take 100% of the hit (not half).
@PippaFawcett those rules are common in leasehold flats like 'no pets' and 'no drying washing outside'. This is not particular to SO.
I think different schemes operate c. differently. A lot of pp are saying the housing association have to market the property when you come to sell, however with ours they were happy for us to go ahead with our own estate agent straight away. I think it's a good idea to be clear on all of this before you go ahead.
SpringLake explains how you can be 'trapped' unable to sell if you don't get any one wanting to buy it for the official valuation.
Kokusai, I know. Ours was a freehold new build house and our rules were stricter than everyone elses in our new build estate and they refused to change them even when we staircased to 100 per cent so we were worried that it would put buyers off. Fortunately our house sold quickly.
@PippaFawcett oh really? That is annoying for a freeehold house! Glad it worked out well :-)
I have never heard of a freehold house not being able to have pets. That would put me off. That is part of the reason to have a house!
We were fortunate because we didn't want pets, but what was more annoying was that the people renting in the same group of houses from the Housing Association could have pets!
Then the usual things about washing etc and even no displaying plant pots on the window sills! I imagine if we had pursued it more perhaps they would have dropped some of them, and I'm sure they wouldn't enforce them but I was worried about what potential buyers would think.
I would look at second hand shared ownership if you can (i.e. people selling their share rather than buying new build). You can sign up for alerts on the shared ownership website. These tend to be better value as (a) they don't have the new build premium, (b) the builds tend to be better quality as things seem to have deteriorated in recent years and (c) there seems to be more of a variety in property type (not just those boxy flats but also conversions).
We were so lucky - ours is a converted school in a lovely part of London. Good HA (Peabody, not one of the commercial ones) so really reasonable rent and service charge. We staircased to 100% after a few years, a few years ago and were lucky that it's really increased in value. We wouldn't have been able to get on the ladder without it. We found that they were really conservative when they valued it for the staircasing, so we actually got it for under market value,
There is no one size fits all SO experience - depends on the HA, the price, the rent/service charge, the resale potential of the flat etc etc. Good luck!
When I was flat hunting I got far better value with 100% ownership in a less desirable area than in a shared ownership. And I've done it up over the years. Shared ownership doesn't seem good value at all, especially as you have to pay 100% of improvements but only benefit from a share in the uplift in value.
Thanks for all of the the replies, some useful information to go in with although obviously I'm aware it varies wildly!
Were looking at houses, are there likely to be service charges or mainly for flats with communal areas?
Wed much rather a 'second hand' property but there just aren't any!
Some of the rules sound crazy, will definitely check up on those as were looking.
We had a small service charge - approximately £30 per month - not sure what it covered tbh although the housing association properties all shared a drive so I wondered if it would go towards maintenance of that when required.
When I was flat hunting I got far better value with 100% ownership in a less desirable area than in a shared ownership
Lucky you. That isn't an option for everyone. 30% of a £450k flat would get you approx zero outright in London.
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