Shared ownership

[Tee20x]

Hi guys,

Wondering if anyone could give me some pointers in relation to shared ownership. I am a first time buyer and will be buying solo.

Atm my salary limits my options mortgage wise as I am on 35k p/a. I have a decent amount saved deposit wise so it is really the mortgage issue that is stopping me from buying on the open market.

The plan with shared ownership would be to buy and either staircase, gaining equity and then sell up and purchase on the open market once I have progressed in my career.

I would be grateful for any advice (pros and cons) in relation to shared ownership and anything I should look out for as well as any lived in experiences.

Should probably mention that I am based in London at the moment hence the issues with housing prices etc.

Thanks!

Shared Ownership can work in specific circumstances but there are lots of people that it doesn't work out for. Be cautious.

Scenario where it worked - some friends of mine who had a fluctuating income due to a variable bonus scheme could only get approval for a very small mortgage. Got a 1 bedroom appartment in an excellent location via a shared ownership scheme. Stayed there for 5 years, pouring every spare penny from bonuses into overpaying the mortgage as much as was allowed. When they sold, they weren't allowed to do so "on the open market" but had to get an independent valuation and sell at that price to someone on the Shared Ownership Scheme waiting list. Because of having overpaid the mortgage for 5 years and because house prices rose over that 5 years the amount of equity they were able to put into their next purchase was significantly higher and as they had also had some career success in the interim and were now on a higher salary, they were able to afford 100% ownership of a cheaper place (in a less good location). So that was a happy ending.

Pitfalls are many though. If you can't overpay, if you buy and the market is stagnant or falling, if your career isn't on the upward tragectory and you are still likely to be earning at about the same kind of level (bar inflation-linked pay rises) for many years, then Shared Ownership can be a trap. The rent and service fees on the segment of home you don't own can be steep, the terms and conditions and restrictions on what you can do can be difficult, and you can find yourself in need of moving to somewhere else (either needing a different location or needing more space) but being unable to move on.

The risks of this may be greater in London at the moment. I would be cautious about taking on a shared ownership on a small flat in London because the world is somewhat in flux at the moment, as we restructure to a post-covid world, and it is impossible to predict what the demand and supply balance will be like for small flats in London in a few years time when you are ready to upgrade.

It worked well for me personally in London a few years ago and the Shared Ownership model changed last month making it significantly easier to sell your property on the open market whether you own it outright or not.
its also ensuring very long leases over 900 yrs and £500 claimable a year for defect rectification so gets around a lot of the previous concerns.
Google the new model for shared ownership :)

I was told not to staircase too high if you don’t plan on staying, it’s easier to resell a smaller %. Some of the rents and service charges are astronomical. But they can get a great stepping stone to buying another property on the open market, and better than renting usually.

I agree with the responses given - I just keep swinging between the concept of shared ownership or buying something small and pokey outright.

Thanks @Bigwave I will have a search of the recent changes that have been made :)