25% shared ownership purely to get on the property ladder, am I mad?

[MrsTrustice]

I’m a single mum to an 11 month old. Ex contributes financially and practically. We were renting together but after the split I had to move back in with parents. Parents are brilliant and don’t ask for a penny but I give them half of my part-time job wage and the rest is on DS, my car and basic personal care stuff for myself. I want to get on the property ladder. I have bad memories of being moved from pillar to post as a child as my parents private rented (they now own after an inheritance). My parents have 2 extra rooms so not a cat in hell’s chance of a council property.

I have a few years worth of savings, £5k. Won’t get much of a mortgage at the moment but plan to go full-time soon and would be earning around £1100 a month. My wage along with money I get for DS (ex is great and pays a lot more maintenance than he has to) with outgoings calculated make me think I’ll get a £40-60k mortgage.

I’m trying to work out if I stand a hope in hell, even with shared ownership. I’m in the NW. The properties I’m looking at are something like this:

www.sharetobuy.com/properties/162696/

People have warned me about shared ownership but I keep thinking surely it’s better than 100% rent, hence why I’m asking. I know that realistically, I’m a single mum still living with my parents on a terrible hospitality wage and I should just accept that I’m not the type of person who gets to own in this country, but I have an urge to own my own place (even if just a %) and I feel like I have to do it.

Would I be getting myself into a world of shit or is it a good means to an end?

It saved my best friend a fortune and it gave her peace of mind.

@AnnaSW1.

Don’t get me wrong, I know there absolutely are issues with it hence why I made the thread to get some perspective and I’m grateful for all of the responses.

I do think sometimes though the criticism of shared ownership comes from those who are privileged enough to not have to turn to it. Obviously buying outright is better but it’s just not possible for some.

I’d definitely do it! I know the area very well, I’d love to live there myself. Go for it!

Worth looking at the home ownership ISA, where the government will give you 25% on top of your savings, but it has to be spent on a deposit.

Re. Affordability, you can do an online agreement in principle to see how much mortgage you can get (put in the cost of the share not the whole property). Barclays have one on their website.

The Housing Association also run their own affordability checks. I found this the most stringent part! They wanted to ensure I had about 300 pounds spare in my budget p/m after mortgage, rent, essential bills, food, travel, any fixed repayments.

I really love my shared ownership. Just over £300 month for a brand new 3 bed house. I have the option to staircase to another 50% share for freehold in future.
For me, it’s the security of tenure, ability to do what I want to with the house (within reason).

Help to Buy doesn’t pay your deposit - you’d need to find at least 5% deposit and get a mortgage for 75% then you would borrow the rest through Help to Buy interest free for 5 yrs. Up front more expensive than the shared ownership option (£7k deposit on £140k property, plus all the other costs of moving) but you own the whole property from the start.

Worth doing some research on what happens when you shared own the property - there are some sharp practices from housing associations, it can be very very hard to sell and people lose money all the time. Plus you’re liable for 100% of the upkeep even though you only own 25% of the property. Not necessarily reasons not to do it but go in eyes wide open.

Shared ownership isn't ideal as you only own 25% say, but have to pay 100% of the maintenance costs. However, I think it's better than renting so in your position I would go for it. Sounds like you have thought it all through and are making a logical decision.

The big advantage over renting, IMO, is that you’re not going to have a LL who suddenly decides to sell, and wants you out, so giving you all the cost and hassle of finding somewhere else, the actual move, disputes over the deposit, having to find another deposit in the meantime, etc.

I do know someone who bought SO, albeit some years ago now - a very nice small house - it’s worked very well for him.

I would Op, not about the money here but about a secure home for your child which sounds essential for you. No landlord giving you notice, decorate it how you like. The house looks lovely too! You sound like a lovely mum with her child’s best interests at heart.

On the other hand though, do you get on with your parents and do they help out with your DS? If so, maybe consider trying to get a better paid job whilst living there until free childcare kicks in. It’s a great opportunity to try to get something about minimum wage and push yourself a bit. Also, chose your next partner very carefully and consider his financial position in the with the whole picture. It’s great to be independent but a financially solvent partner is a real bonus too.

Is it an issue when you try to sell? Does a buyer also buy it in under the shared ownership scheme? If so, does this make it difficult as you have a very limited amount of people who went to do this?

Have you considered Rent to Buy? It's usually on older properties... but maybe of interest

Many people are concerned about maintenance. One of the upsides of new builds is a warranty. In my house we had two years to get things done - even small thing. Faulty kitchen door - it's being replaced.

After that it is a 10 year warranty for structural issues on the house and my appliances have warranties.

So yes you need to keep up the decor etc but that is the joy of owning!

One hidden cost though - annual boiler service

Based on your earnings you should also be able to claim universal credit as the rent you will pay on the remaining 75% is eligible

I know it would be hard to build up much equity on shared ownership, but it’s better than building up none. If I full rented I may not be able to save up any money at all, and may be in an area not as nice for my son. As it’s just the 2 of us we’d be there long term so could hopefully ride of the value dip after we move in and take away it’s new-build status. Being kicked out of a private rent by a landlord would also be costly! And as somebody had said, I will still potentially get help with rent on the 75% due to my circumstances.

I’m hoping that when it comes time to move on, my financial circumstances will have improved enough for me to buy a 100% property. DS will be in school and I’ll hopefully be earning more, I’ll hopefully have a few thousand in equity, won’t be limited to buying schemes (meaning I’m stuck with price inflated new builds) and maybe will have a partner to buy with. The last one isn’t guaranteed of course.

Having to pay for repairs isn’t great obviously but I highly doubt I’ll need the roof redoing.

I wanted to do this but couldn't as they require a minimum annual income of 24k which I don't earn. Its in the small print at the bottom.

@nothingcanhurtmewithmyeyesshut

I’ve heard about this anecdotally but can never actually find it anywhere! Not saying I don’t believe you but it’s so ridiculous! I read all the terms and conditions etc.

Are you London? 24k is way above the average income in my area. What’s the point of having affordable housing schemes if the small print rules out those who need affordable housing. Disgraceful.

No not in London. Small town about 45 minutes away with good transport links to London though.

I'll try and find screenshot for you.

@MrsTrustice the expected household income to purchase 25% is in the link you shared in you first post!

Here...

You'll have 3 parts - mortgage, rent on the 75% and a service charge (can be as little as a few quid a month). All new build SO houses are leasehold.

You need to speak to a broker. There's no point plugging figures into an online calculator as the Housing Association will want a broker to assess your affordability on the exact property (and its exact monthly cost) that you want.