Is shared ownership a safe way to get on the ladder, or a risky pitfall?

[GhoulsFold]

We're due to receive a sizable lump sum of money (approx £40k) which we intend to use for a deposit on a home. We've rented for too long now, suffered bad landlord after bad landlord, and this is our chance to FINALLY get on the property ladder.

We live in an area where the cheapest 3-bed family home (what we will require) is around £250k. Properties at this price will usually need a fair amount of updating and work doing to it, or it will be very small. A property that's considered 'ready to move in to' or decently sized is moving towards the £300 - £350k range.

We'd struggle to maintain a comfortable standard of living if we bought a house at the £300 - £350k end. But we don't have any other back up savings set aside to renovate and update an older property at the £200 - £250k end.

So we've been considering shared-ownership / part rent part buy schemes. But having read up on these options I've discovered some concerning reviews from other shared-ownership buyers who say they wish they'd never bought via this scheme, that its all a big con etc etc.

Are there any other shared ownership buyers here, or mortgage advisers, who can give me some honest opinions / advice before we throw thousands at something we could possibly regret. The money is inheritance, we'd be devastated if we wasted this money on a silly scheme.

Hopefully, it's a case of helping DH realise that it's a 'wish list for a dream home' and not 'must haves' for this purchase. Not many people ever get everything they'd like in a house.

When we bought our house nearly 3 years ago (open market) we didn't get everything we wanted in a house. I looked extensively online and quickly realised we'd have to move too far away to get everything. DH and I had to decide on what was the most important to us. The house we bought was nowhere near as big as I'd wanted but it had a lovely sized garden. We knew it would be big enough for us and DD for a few years and it had the potential for us to extend later on.

To be fair, your DH might struggle to get everything on his wishlist even if you bought new build. Or at least you wouldn't get all that for 300k in my area (South east)

New builds do not automatically decrease after you've bought it new, they aren't cars!! Anyone know of houses cheaper today than 10 years ago except in very bad areas maybe? I've found that houses in any half decent area go up including sn almost especially new build as the maintenance costs are so low and they are covered by a guarantee. Also the technology and methods used for foundations etc are very good and they are subject to rigorous building standards. Maybe you should look at new builds in the area from 5-10years and see what they were new and what they sell for now, for reassurance.

We bought a 2 bed shared ownership resale back in 2011/12 (found on rightmove). Absolutely the best thing we ever did. It was 50/50 and the rent only increased marginally.
In 2014 we staircased and purchased the rest. Because the value of the property (and therefore the value of our 50% share) had increased, along with the payments we had made, we could purchase the other 50% without having to make another deposit. The mortgage company required 15% equity overall, and this was covered by the increased value of the property. Only had to pay legal costs etc. Once we owned 100%, the cost of the mortgage was the same as what we were paying when it was 50/50.
We sold last year as a typical property. The fact that it was once shared ownership was irrelevant for the sale.

Tell us the areas you're interested in and let us find you a house!

@MyBrilliantDisguise ha, that would be amazing!

We're in Kent. Maidstone to be precise.

We ideally wanted to get out of the centre of the town, to a small village on the outskirts of Maidstone town. There are some beautiful country-esque villages in the outer areas of the borough / neighbouring borough, some of which are having new housing developments built in.

But having realised we could only purchase one of these village-y development houses through a shared ownership scheme I think we're going to have to wave goodbye to that little dream and stay in the town where it will be cheaper

Aw, I've only been to Maidstone once, but it struck me as a lovely place that had a feeling of being on the up. Why would you want to live in the arse end of nowhere anyway?!

£300K

Modern, £300K

Four beds in Sutton Heights for £300K

I like this one for £285K

£270K and it's 3 miles from the centre of town

There's so much choice in that area!

Agree on new builds not necessarily decreasing in value. I scoffed at some selling for £350k near me about six years ago - the same flats are now selling for more than double that

Anyone know of houses cheaper today than 10 years ago except in very bad areas maybe?

Well.... 2007 was pretty much the peak of the bubble so yes actually there are vast swathes of the north where properties sell now for less than they did in 2007!

MyBrilliantDisguise has posted some good links!

Definitely the type of property we'd be thrilled to own MyBrilliantDisguise. Thanks for your help But sadly I think £300k would probably leave us with monthly mortgage payments that would be a struggle for us, especially on top of all the usual bills and insurances, general cost of living etc

I think we're going to have to look more at £250k or under and compromise on something like a garage, or size, or having to refurb it over time. A tad disheartening really

5rivers- which areas in the north exactly? Can you back that up? Genuine question. I did say except for very bad areas (historically deprived).

Here's an example starheart

Brand new houses at the peak in 2007/2008 selling for less than they were bought for.

This is a lovely conservation village near me.

If you look at older houses in the same village they they don't suffer to the same extent. I would never buy a newbuild house as certainly round here they seem to be sold at a premium and you lose money instantly. I'm aware that in London and other areas of the south thing will be different.

Have you looked into help to buy if youre a first time buyer?

My main concern would be who you pay the rent to! (And service charges)
Also pretty sure that even if you buy the property outright it will still be leasehold (even a house) but check.
If you are dealing with a housing association, be prepared for excessive service charges with no evidence to back up any work done or required. Practically no chance of getting a refund if charges are proven to be incorrect and any correspondence or complaints being totally ignored!
I would avoid like the plague but that's from bitter experience of having a HA as a freeholder!

@Alittlepotofrosie - I've just been looking into Help To Buy and I think it could be an option. From the Help To Buy website I THINK we may qualify. Its only available on new builds though, which as others have already mentioned, will be subject to a premium simply for being a new build.

I'll do some further in depth research into this potential option though...

Trixy - I guess it depends where you live. I live in a large city with great transport links, facilities, schools etc (its densely populated) so when a new build scheme comes up they fly off the shelves and go up a lot in value in their first year,

I agree it might be different if the area is "good" but not in the suburbs of a major city with excellent transport links, facilities, job opportunities etc literally on the doorstep.

We're just about to buy a S/O. The lease is pretty horrendous, but if we manage to buy it outright it becomes a freehold. Not all S/Os are like that though so you'll need to check. We had a similar deposit but with only one income we wouldn't have been able to buy in this area. Because of the lease, we're seeing it as a 5/10 year plan instead of a potentially forever home, and we are aware house prices might go down, because of brexit and new landlord tax rules. If we could afford a "normal " property, we wouldn't even consider this, but we can't so it's slightly better than renting (as long as the prices don't crash when we want to sell!)

Starheart, those properties I showed you are in a desirable part of the Glasgow city area.

I would say that was a pretty major city!!!

@StarHeartDiamond

I can indeed back it up.

This chart shows the 'norther power house' (so Leeds, Manchester, Sheffield, Newcastle, Liverpool) having average lower house prices in 2015 than in 2007.

I sold my lovely house (period not new build) in one of the best areas in a norther city for less in 2016 than I bought it for in 2007.

Appreciate that chart in 2015 and we are now in 2017 but it illustrates to you there was a structural issue 'in vast parts of the north' rather than only 'very bad areas'.

@Letmesleepalready - I hadn't even considered leasehold v freehold... having never bought a property before I'm unaware of a lot of the in's-&-out's & legal stuff. This thread has thrown lots of new things at me to consider and research. Really grateful for everyone's input.

Yes, as it's a new build, the lease is quite long so we've got time to decide if we're staying put or selling, without hopefully damaging our sale options. But the terms of the lease are heavily weighted to the landlord's advantage. I see it as all the responsibility of a homeowner and hardly any more rights than a tenant.

I would probably stay away from SO flats as you will never own the freehold and the service charge can go up and up.

With our house, we have a service charge type payment which covers the upkeep of the “communal areas” which is pretty much a communal car park and some planting areas. In the three years we have lived here, the monthly cost has gone up by about 50p. I know people in SO flats were they payments have gone up FAR more.

As for our rent, we purchased the max amount of shares so our rent is low, but again in the three years we have lived here the rent has gone up no more than a few pounds.

If you know the ins and outs, SO is a good option. For us, we intend to stay here long term. It doesn’t really work if you are only looking at short term.