Shared ownership. Good idea or not?

[chocolateandcocktails001]

In my area there's a lot of new estates and they seem to be doing a lot of shared ownership offers. For me, a single buyer it seems a good idea especially as the thought of a new house is nice as on my own I know I wouldn't be doing much renovating. Anyone have one? What are the pros and cons?

In a high value/ high demand area yes it’s a good idea but only if you’re committed to stair casing and working your way up to owning 100%

In an area without a housing supply issue I wouldn’t bother

We did it in a fairly expensive area- went from 30% to 60% to 10% in 8 years then sold to buy a 3 bed family house with a £150k deposit. Our deposit on the flat was £7k! So for us it was a great decision.

Don’t buy anything where ownership is capped eg at 80%

We that should read 100%! Go see a decent mortgage broker and buy as big a share as you can because the rent is more than cheap mortgage rates. Use house value rise to staircase up in future- this will be your deposit

Do a repayment mortgage- don’t opt for interest only. The idea is that it should be helping you to move forward in property ownership. Don’t do like my neighbours did and not staircase, getting stuck there because house prices have risen out of reach. Keep staircasing as often as you can and keep stretching yourself- don’t get comfortable in a SO, move up and on. That’s the whole idea of the product

Read and understand the small print. Talk through your understanding with your solicitor. It's vital you know exactly what you are buying.

Find out what ground rent is, who owns it, how much the ground rent decreases as your ownership increases, who pays for repairs, how capital gains are split and who can live in the unit (DC over the age of 21 or who have finished tertiary education). Also see what the cost of buying increments is. It should be set upfront. Not all are.

Oh god this is a lot to take in!! Quite complicated!! I'm a bit confused how people afford to staircase. Surely if people get a mortgage, this is what they can afford to pay over the mortgage term. How do people then afford to buy more, unless obviously your circumstances change significantly xx

Because the house goes up in value and you can use the increased equity to buy more. Recently interest rates are very good so when rent is reduced as you buy more, your monthly payment may stay the same or a little higher. Ours did. Also my salary rose over that period- not by much but enough to increase my borrowing power a bit.

That should be IF the house goes up in value!

Be careful not to overpay on a new build.

Thanks for that. I'm struggling to understand so probably need to go and speak to someone. I already own a hoise but have very little equity as paid a high price at the time prices were high so won't get anywhere near what I paid for it so unfortunately I'm not in as good of a position as I should be at this stage. Nice houses in decent areas for my income as a sole buyer are hard to find near me hence me considering this as an option.

It's worth checking whether you'll own the freehold when you finally own 100%, a lot of shared ownership are leasehold, which comes with ongoing lease and maintenance agreement costs. Some areas (London for example) / types of properties ( flats) leasehold is more common, be careful though if you're buying in an area where most of the properties are freehold, you don't want to be stuck with a leasehold house as it'll be less desirable and less valuable than a similar freehold house.

If you already own a house then that disqualifies you for shared ownership I’m afraid under government rules. Sorry but you have to be a first time buyer. Occasionally rules are bent for people dividing the house post divorce.

I'm sure on the ones I've read it doesn't say you have to be a first time buyer. Never mind I'll have to go in to find out a bit more x

Ah maybe it’s not funded by the government then- maybe the developer is using it as a way to widen tenure and sales. That would actually put me off- if the freehold isn’t owned by a housing association which are not for profit organisations and can be trusted.

Sorry- that should say I would only consider SO if the freehold is owned by a housing association- registered provider that falls under the social housing regulator (previously Homes and Communities Agency)

Lots of good advice above. I was in shared ownership until recently and it worked for us.

I agree about the avoiding ones that are shared ownership with private companies. They're going to be wanting to make money off you somehow. Our shared ownership was with a housing association.

Shared ownership is a great idea if you want to get out of renting. It gives you stability and a chance to build equity, instead of all your money going on rent. . But if you can afford to buy without shared ownership, then it's better not to do shared ownership as you can then put all your money into paying off your mortgage rather than some rent.

It's a difficult one for me. I do already have a house. Bought with an ex and now the mortgage is just in my name. I've lost massively on this house (probably about 17k). I don't want to stay in this house and want to move but being on my own would struggle to buy somewhere decent on my own. I'll have to speak with someone and see what they say. I'm not sure how else I can get out of this situation.

It is extremely good idea
Obviously if you're looking for shared ownership it means you can't afford to buy outright.
Even if you can't commit to 100%, it's still worth it,build enough equities and buy elsewhere.
It's freehold if it's a house which i strongly advice.
Or flat leasehold with service charge(can be an eyesore 100+ a month).
Capping only happens in rural areas.

Don't automatically assume that a house will be freehold - a lot of the shared ownership houses are leasehold, even when you "own" 100%. Likewise, non-shared ownership houses can also be leasehold.

You are right some houses can be a leasehold.
However, i advice chocolateandcocktails001 not to dwell much on leasehold/freehold,ground rent...etc.
I assume it's their first property,get into a housing ladder and then move forward,buying elsewhere or staircasing.

You are right Mondy, i see chocolateandcocktails001 already own a property.
Different set of rules for a person owns a place already , i believe they can't purchase.

Owner of shared ownership (SO) can purchase another SO elsewhere if they can prove they live in an overcrowded property.

Hi op.

Youre not automatically ruled out of shared ownership if you already own somewhere else, but you may have to sell it first. So sell the place you're in, live elsewhere then apply for shared ownership. Shared ownership is there for people who can't buy the equivalent outright. But if you can buy outright do that.

In some areas shared ownership is very desirable. Where I am (London) I applied and was unsuccessful several times before getting my place. I got this place because I lived AND worked in the borough and had a 15% deposit for my share.

Staircasing is a good idea if you can do it but it can be expensive. You have to pay valuation and legal fees each time you do it. It cost me nearly £30,000 all in to put down the deposit and pay fees on a 40per cent share of my flat. So it really depends on your circumstances and money

BUT I have a lovely large flat in a good location I like rather than wholly owning a crappy small place really far away from my job/interests/friends etc.

Shared ownership places are owned and managed by housing associations even if it's in a private development. The shared ownership places are sold/handed over to housing associations as part of planning conditions.

I recommend buying a shared ownership flat built by a housing association on one of their developments - they have a long term interest in managing those estates well. Private developers often chuck it up and fuck off. They don't care. Housing associations have a social purpose and care about the place and it's people not just profit.

Yes service charges can be expensive and most places are leasehold. It is what it is.

Rent rises are capped.

You cant be evicted.

You can't usually sublet the whole home, but you can usually take a lodger.

Shared ownership is better than no ownership.

Will do my best to answer any other questions.

That had paragraphs when I wrote it

My experience of shared ownership was awful. The rent plus the mortgage was plenty for a full mortgage elsewhere but banks won't lend

They do fuck all for you. Staircasing is expensive. Selling is a nightmare. Would never ever do shared again or recommend it.

The banks will let if you have the money. But if you're buying shared ownership you don't.

If I'd put my deposit on the whole flat it would equate to about a 5per cent deposit with mortgage at a much higher rate and my monthly mortgage payment would be twice what I currently spend on mortgage plus rent. So no, I couldn't afford to buy it outright. And who didn't do anything for you??

Oh and the stamp duty on my flat would be £9000. With shared ownership I paid about £1500.

Just to compare on my flat, on a 35 year mortgage: (all approx)

Shared ownership
15% deposit - £24,000
Stamp duty - £1500 ish
Mortgage and rent and service charge - £1350 a month

Outright
15% deposit - £60,000
Stamp duty - £9000 (think rate has changed since I bought and is now circa £5000)
Mortgage and service charge - £1400

Ok so I'd be paying around the same amount monthly but id have needed £45,000 extra in CASH upfront.

If I'd just used the £25,000 I had I'd have been left with a £15,000 deposit after stamp duty, equivalent of a 4% deposit and no one would have given me a mortgage anyway.

Anyway, I've taken up enough posts on here op, sorry!! 😁😁😁 Good luck

I think the main thing put me off is that if you need to sell a shared equity house, when not owning 100%, the other owner(s) have the rights to reject the sale. For example, they may argue it is undersold or they simply do not want to sell. This is a big risk.