Is Shared Ownership preferable to renting?

[cuttingdownthecake]

If you're renting via social housing?

My current house doesn't meet our needs in terms of size needed for someone in the household with a disability.

We couldn't afford to just go for a mortgage but could afford a Shared Ownership (I think), if they'd accept my H's salary of £35k and my salary of £2700. I also get Carer's Allowance. I work very part time, hence the low salary.

The income for the household is around £4.5k a month but that'll include my child's DLA and severe disability premium from UC.

Might Shared Ownership be a good idea? I know you'd only own a % of the property, but you choose it and you have more options than if you rented.

Plus, it wouldn't be a house to sell, ideally. We'd probably be staying put for 40+ years or life.

Sadly, our children will be in residential care when we die so can't leave them a house or deposit to help them.

I'd also be interested to know if anyone could advise if it would be relatively easy to get a mortgage for say £120K with our income?

We'd be looking for around a 40% share priced at 120K, with a deposit of £8.5Kish

Have you looked online to see what sort of mortgage you could get? We’ve just secured a mortgage and they took DLA, child benefit and carers allowance into account the same as our earnings from work. So I would get an idea what your borrowing limit is first. Do you have much deposit saved?

As for shared ownership there are pros and cons. I lived in for my first home and it was great- far cheaper than privately renting and got us on the housing ladder, we sold it easily once we were ready to move. If you are already in HA it’s worth remembering you won’t get any of the repairs etc included once you’re SO.

I think mortgages are usually 3 x or 3.5x salary so should be OK!
Personally if l buy instead of rent l always would

Personally I think shared ownership is a con you can end up paying more in rent then you are on your mortgage and if you ever do need to sell the company who owns the other bit of your house can make it difficult.

my SIL had a shared ownership property with the council they wouldn’t allow her to put it on the market as there were too many others trying to be sold at the same time.

@pooballs I really appreciate you posting that because I was under the impression that it's really hard to find a lender who is willing to take other income such as Carer's Allowance etc into account

So if I just take his salary into account, the borrowing limit for a mortgage is about £130K (assuming it's x4 annual salary)

With our total income combined, it's about double that

Just to share my experience, I did this years ago to get onto the property ladder and it was the best decision I ever made! I bought a share for 50% which was a £60k mortgage (the total house price was £120k). At the time the deposit was only 5% so I was easily able to afford the £3k deposit, my salary was circa £24k at the time, I was 24. Five years later I sold it for £200k total so my share was now worth £100k, I made almost £50k profit and was able to put down a healthy deposit on a £250k house that I absolutely loved. I was single and 29 and I remember thinking I would never have been able to do that without starting with shared ownership!

@MaltipooMama thank you for posting. Very savvy of you too to sort that out at a young age, on your own. That's amazing! You certainly saw the rewards for it then

Have you spoken to a mortgage broker? They may well know more on who will accept all income including benefits. Betrer to make decisions knowing the full picture.

I know a few of people who did shared ownership for a while to build up a deposit and then moved to full ownership later. It can be frustrating to pay the rent part and not get decent management. Also if anything needs repairing it is all on you even though you don't own it all. But I don't think any of them actively regretted it.

I think it's a good way to get on the ladder. London and Country are good brokers (free).

Yes, it’s better than renting. But you have full responsibility on repair costs, no matter the share you own. Mortgages are now standard at 4.5 times your salary, but there are others that will loan more.

They are thinking of a house for life not any ladder right?

Yes :)

@SprigatitoYouAndIKnow I haven't, no

I was trying to get a feel for if it is vaguely possible because it seemed too good to be true (even with the awareness of owning a % and paying repair costs etc etc)

I think so. We helped one of our kids move into a shared ownership a year or so ago. They moved from private rented though rather than social.
It really makes sense in their situation. Lovely brand new house, 3 bed that will suit them forever. They could only manage 25% and we had to add a bit to the deposit. However their rent plus mortgage is less than their previous rent. The rent they pay is taken into consideration for their UC claim as well.
Best bet is to approach the scheme you are interested in. They had really good financial advisers that sorted out the mortgage for them.

Honestly,

We did shared ownership.

I would say if you have secure social housing, and your intention is to stay there for a long time, I probably wouldn't recommend it.

Every scheme is different but shared ownership would potentially expose you, and put you in a more difficult situation.

Many still require a rent in addition to a mortgage. This effectively exposed you to double the number of risks.

A old neighbour found that rent increases linked to inflation despite low interest rates on the mortgage, left her unable to continue to pay down the mortgage.

She had to switch to interest only mortgage. This means she's fine for now, but has less security than if she was in social housing.

When the 25 years of her term ends, she's liable for the repayment of the lump outstanding. She can extend the mortgage but only until she's 67. After that she's got to find the lump sum or sell up. All whilst still paying the rent too. So she's be just as good in social housing as she'd not be forced to move at the end of the mortgage. She's also at the mercy of changes to BOTH inflation and interest rates, rather than just one. That's the worst of both worlds.

Id only recommend shared ownership as a stepping stone onto full ownership, either through staircasing or selling up after a couple of years - as it allows you to build up equity. In this scenario the housing market MUST stay the same or increase in value. If house prices drop you can get really stuck for a variety of reasons.

Or if it's your only other alternative is the private rental market, and you have no chance of full ownership.

If your alternative is social rent, stick with it unless you think you can buy your way onto another house or staircase in a few years.

The thing to consider with this is that dependents as well as other things impact lending power. So if the max is 130k but he is also supporting you & 2 children then that will reduce the amount they will be willing to lend you. The fact he is also essentially the sole earner will reduce the amount a lender will be willing to give as it makes you a higher risk.

Have you checked your credit scores to know if you would pass those to get a mortgage?

I think shared ownership is great when the alternative is private renting. I had a good experience and was able to sell quickly when I wanted to move. As you are in social housing with presumably a lower rent and secure tenancy I do think it's a tricky one to weigh up though.

No. Listened to a radio programme. difficult to sell therefore do not appreciate in value.

But if you don't want to sell it, ideally ever, and it's a house you can pick and move into that'll suit your needs...

That weighed up against selling it is what I'm looking at as we wouldn't want to sell unless a very dramatic life change happened

Sadly not to. My social housing rent is £1200. My friend's who is the neighbouring village is £1400!

Private rentals around here aren't plentiful but are about £900-1000

The thing to consider with this is that dependents as well as other things impact lending power. So if the max is 130k but he is also supporting you & 2 children then that will reduce the amount they will be willing to lend you. The fact he is also essentially the sole earner will reduce the amount a lender will be willing to give as it makes you a higher risk

I thought this but it seems there are lenders who take the additional ££££ coming in other than his salary so should balance things out if that's the case

I think the rent element gets taken into account for benefits? So there is extra protection there including when you are a pensioner, if you don’t have much private pension, but I’m not an expert (I was trying to work it out for a relative recently).

Are there any service charges too? Often there are management charges for new estates even if it’s a house not a flat.

As someone who's done it, it is 100% better than private renting, works out cheaper and no worry about being evicted on a landlords whim.

I'd probably have to admit it's not better than renting from the council, you are responsible for repairing everything despite not owning 100%.

I wouldn't recommend giving up a council or housing association home for shared ownership at all however the waiting list for a council house is 10+ years where I live so I did the best thing I could.

@30percent even if your social rent was £1200 a month? Or even £1400? When strangely, private rentals are actually cheaper here

I'm not really sure why these social housing new build HA homes are classed as affordable rent because a lot of them are incredibly expensive

Council houses given out by the council themselves are less than half the cost of what I pay but they're as rare as hens teeth

Sorry commented without reading the whole thing, depending on the price of the house they may or may not give you a mortgage although we got accepted for one and our income is less than your husband's (house worth 300k if that helps) they don't take benefits into account when deciding whether to give you a mortgage though.