to be scared of shared ownership

[Dreambee]

We are renters and have decided to move out of London because we cannot afford larger properties in the city. Jobs have been secured in new area thankfully. However, we are really struggling to find an affordably rental that is large enough for our family in the area we would like to live. We were happier to take a slightly smaller property than we need but have been told it's frowned upon by landlords.

Anyway, as the price for available rentals gradually creeps up, I decided to look at shared ownership in the area. There does appear to be a new development with houses that are apparently comfortably affordable according to a very rough mortgage calculation and the advertised monthly rent and service charge.

We have managed so far to save around £5000 and could have access to a parental loan of a similar amount. I think this should be okay for a 5% deposit on the mortgage amount (apparently this is sufficient) and then should leave a little more for moving costs.

I worry about hidden costs and being messed around by the housing association (I know some are better than others). I know that we are totally responsible for all maintenance, which is a concern but would be same if we had a big enough deposit to buy outright. Plus I do LOVE the idea of not paying someone else's mortgage, especially when we could possibly end up with an energy efficient new build. I know there are pros and cons but to be honest I have not heard positive things about shared ownership (although this is from owners of flats not houses to be fair). Reassurance needed please!

It’s easy to end up in negative equity on a new build home even more so with shared ownership. They are very very hard to sell on if you needed to also.

Also what is the area and how much space do you need

We got onto the property ladder through a shared ownership scheme - a government one rather than a private firm if that makes a difference?

We did find ourselves in negative equity when DH was made redundant a couple of years later, and we had to move cities for his new job. We couldn't afford to sell and take the hit, and our shared ownership arrangement meant we weren't allowed to rent the property out indefinitely, and so we had to beg and borrow and remortgage in order to buy the government out of 'their' share.

For us, it was the only way we could buy in an expensive city - no wealthy parents etc. It was a good step for us overall and I'm really glad we took the opportunity.

Other side of the council here, have been in shared ownership since 2006 and no problems. They are harder to sell so make sure its somewhere you could comfortably stay at least medium term. But we did sell our 50% of 2 bed flat and bought 40% of 3 bed detached (Hampshire) .

The huge value over renting became clear when smaller semi detached 3 bed two door down was renting out at 1000 per month, we pay 400 for rent+ service charge and 250 mortgage.

Other things convenient like HA does building insurance (but obviously we pay for that really in service charge).

Usually you will get a lower spec of fixtures and fittings than other new builds in the estate but all acceptable stuff.

Thanks for replies. We would be looking at 3 beds home counties, fairly close to London. It's a very desirable area apparently so hopefully that would help with resale when we are ready. No plans to move on for a good while though if we find a property we like.

Shared ownership is a great way to get a foot on the property ladder.

I have a 50% shared ownership flat and had no issues. I would like to point out not all shared ownership is hard to sell on. Where I live they go very quickly!

@Dreambee..Congratulations on your new jobs . We have recently moved into a new build shared ownership house and have no regrets apart from the rent has gone up already £10 p/m and we've only been there a year. We applied for a house and were stunned to be accepted. We had local connections and were in an unsuitable rented house with dangerous back steps and no fence or even stair rail with a toddler. We've rented all our lives and like you, the thought that our hard-earned cash was going to a prick of a landlord who couldn't even be bothered to sort out the issues we had there, was too much to bear.
I'd just say be aware of service charges as all new-build estates have them now. Ours is £25 p/m and is not managed by a greedy external agency so we can control it in a fund held by the residents.
The rented share of our house is with a housing association and the biggest issue so far is that they can do pretty much do what they like with the rent and we're still responsible for all maintenance. But all this aside we have never looked back.

Like others have said just be sure you want to stay there a good while and you'll have no regrets
Good luck x

I had one and bought the HA out after three years. So I had no issues. Never had an issue only with insurance at one point but that was the insurance complaint and not the HA.

I have nothing but positive things to say about them. Mine sold very easily on the open market when I sold it.

I have experience on both sides. Live in a s/o property and work for a housing association. In my area there are about 5 people for every s/o property and they get snapped up really quickly. Last resale we did was o the market for less than a week. You generally have to offer it to the HA to resell for an initial period. 6 weeks with us. I love my house and would highly recommend s/o. It got me back in the property ladder after divorce/loss of family home and costs less than renting. I worked out I had paid £120000 in rent! The HA leaves me alone, I have lovely neighbours and will buy the remaining share next year. Go for it!

I have been in my shared ownership 3 bed semi for nearly a year.

I love it, perfect location & I was so far away from getting a decent deposit that I didn’t think I’d own a home in the next decade!

Granted, I haven’t looked / had to deal with re-sale / equity but so far I’m happy!

see if you can purchase resale - there should be some - you may find they are cheaper - is your area considered to be a London suburb? www.sharetobuy.com/shared-ownership-london/
I suspect there are similar websites for other areas (not sure though) remember you can Staircase to owning the whole property over time if income goes up. But check because this isn't allowed on all of the properties - you will need a solicitor who is expert on this, chances are you will be given a list of solicitors that they approve of..

We live in a shared ownership property. There's no way we could have bought outright in our village so it has meant we could live somewhere lovely. Our property has rocketed in value over 8 years (270,000 to now selling at 525,000 so with our share we have made a good profit! The only downsides are the rent on the bit we don't own going up each year and paying for maintenance we don't need (it's not much but annoying). I'd definitely do it again.

@Booseysmum The amount your rent increases by should be written into your lease. It's usually upwards only changes and will be something like September's RPI plus X%. Service charges will be estimated in the first year from when the properties are built and then based on actual costs incurred plus any management fee and sinking fund after that.

I bought a shared ownership flat and sold out 8 year's later. It was in the market for less than a week (in a small city).

We then moved to another shared ownership 3-bed with a different housing association. I've lived both properties and they've been perfect for us.

If I were you I would check:

Are there any restrictions on staircasing (buying a bigger % of the property). (often an issue in villages).

Are there any restrictions on who you could sell the property on too? (Some areas have criteria related to bring local)

What is included in the service charge?

If you staircases to 100% would you become the freeholder?

If you would be a leaseholder at 100% ownership, what are the terms of the ground rent.

Is there an estate charge and of so, what does it cover? And how many properties is it divided between? (paying for the upkeep of a play park can get expensive if there aren't very many of you).

Are the roads going to be adopted (and therefore maintained) by your local council?

Also bear in mind that as party owner of your property the housing association still had an interest in it and will probably want you to apply for permission to do any alterations.

We've been living in a shared ownership since 2007. It was a very affordable way to get us a long-term home instead of renting. Whenever any shared ownership properties in my street have been sold they've been snapped up within weeks so no issues with resale and you can increase your share or buy outright when you are ready. We're now considering selling and buying a place out right (with a mortgage) in a different area nearer my parents because of the increase in value we now have a really good deposit. I say go for it.

It’s a brilliant alternative to private renting

@Lafemmefranglaise.. i think we have spent the same on renting as you..it's terrifying and I so wish I'd never worked it out or even that I'd got on the ladder sooner but we could never afford it. It's why shared ownership is a life saver.

@Boatsexer.. Thanks for the advice re. Rent increases. We have checked our lease now and can see that it should be increased in line with the rpi. It went up so soon because the value has already increased so we have to expect these annual increases and the bigger share we can afford the lower the rent will be.

My first home was shared ownership. I was there for five years and until selling, never actually had need to contact the housing association. I was allowed to sell my share on the open market, and it sold the first day it was marketed. Looking on Right Move the others on the development also resell very quickly.

Not all So properties have a service charge, it's more likely a "new" new build will. If it's a mixed development that might be managed by an outside management company, you need to be careful with this because charges can be extortionate. If it's managed by the HA I'd expect charges to be more reasonable.

Our shared ownership was a nightmare to sell. So many restrictions put on by the council and the housing association.
We had to allow them three months to sell the property and in that time we had not one viewing! Despite knowing that there is a big shortage of affordable housing in this area (south east and easily commutable to cities). It went on the private market as a shared ownership and sold on the first day!
Lots of obstacles though. Fixed price. If we sold for less we had to take the hit. They got the 50% share that they valued at.
Rent went up as well as service charges.

Would definitely advise carefully checking all clauses and loopholes. Our rent also included house insurance but was twice the price we had been quoted privately.

@Booseysmum You're welcome. You can't do much about the rent portion (other than buy more of the property) but one thing that's definitely worth looking into is overpaying on your mortgage. Because of the way compound interest works any extra payments you make are worth more than the actual amount you pay in.

You need to check with the mortgage provider if there are any restrictions on doing this. We're on a fixed term mortgage with HSBC and we can pay up to 10% of the outstanding loan back each year without incurring any penalties.

Unfortunately we don't have much spare cash around at the moment so I tend to chuck in pennies here and there. In the past we were a lot more flush and used to overpay by £50 a month - if we'd carried in it would have halved the length of our mortgage!

There's a calculator and more info about it on the MSE website.

www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

@Boatsexer.. Thank you for the advice. We're the same as in we haven't got any spare cash to chuck in to over pay. But one thing I do wish in retrospect is that we'd bought more shares at the beginning. Maybe we weren't allowed. But at least we managed to put in a hefty (for SO anyway) deposit bringing the payments right down. So that's something