Property options - what would you do?

[Icandothisthing]

Our private landlord is selling our rental property. We have a few months to decide what to do. We are saving for a house deposit but it is slow going. Our options are:

(1) find a new rental property. Rent has risen significantly since we took this house a few years ago. We could afford somewhere suitable (with 2+ bedrooms that we ideally need as both of our jobs are mainly home based). However we would not able to save much at all on a monthly basis (far less than we do in our current rental).

(2) look at shared ownership properties. We have been told we have affordability for 2 bedroomed houses in our area. The monthly outgoing would be a couple of hundred a month less than private rent which we could save.

(3) look to buy the most we could afford on the open market with just a 5% deposit; this would be a 1 bed flat, or possibly at a push a grotty 2 bed flat. The deposit and fees would completely wipe out our savings and we wouldn’t be able to save a great deal going forwards (for emergency funds etc).

What would you do? I would be particularly interested to hear pro’s and con’s of shared ownership if anyone has experience. Many thanks.

The shared ownership does sound like an interesting option to explore - no personal experience but friends have. It can be a great way to get onto the ladder and live in a much nicer property than you would get for the same rental (plus much more secure obviously). I think the thing you need to do is really understand and consider the T&Cs properly - often shared ownership properties are leasehold flats in blocks with a service charge and management fee - you need to understand what your liability is in this regard and how/when the charges can be increased. With blocks of flats or leasehold in general you'd always be concerned about a possible big maintenance bill for something like non compliant cladding landing on you, and also on the new blocks the service charge can be quite high if it's paying for lifts and communal facilities and so on.

The other big issue can be 'laddering' i.e. do you have the right to gradually purchase more 'chunks' of your flat from the housing trust/owner or are you stuck only ever being a fixed % owner forever, and also what the resale conditions are, this is where friends of mine did have a sticky experience, obviously when you aren't sole owner it's never going to be as straight forward (and selling a house is often very difficult at the best of times) but sometimes there are very restrictive conditions or co-owners that are very difficult to deal with which can make it a nightmare...

You'd also want to check whether shared ownership makes a difference to your mortgage rate and ability to remortgage further down the line (not sure on that one but worth checking with a mortgage broker)...

How close to being affordable is it to buy the place you're currently renting? Do you know what price the landlord is hoping to get?

Shared ownership is really only for the desperate, in my view. There's too many cons, as a PP has detailed. And the properties are always overpriced.

Even if it means going onto rent a one bedroom flat so you could build up your savings for a year or so, I would go for the two bedroom flat for the extra space and the option of having a lodger (I appreciate you both probably won't want one, but one day you may have to have that extra income).

Get on the ladder and buy a nice one bedroom flat or 2 bedroom doer upper. It won’t be long before you can potentially sell/ scale up to someone that you really want to live.

I have friends who have done shared ownership and it’s been awful for them. So many additional costs to fork out for with the constant valuations and laddering + they are notoriously overpriced and difficult to sell. It took my friend two years to sell her SO house. Don’t be lured in by being able to live someone nice under SO, put up with somewhere a bit smaller/ less finished now which you can fully own whilst you don’t have kids (assuming they might be in your future) and reap the long term gains.

@typhon about double what we can afford sadly!

@westisbest1982 thanks. We already have a lodger so are used to it!