Thinking of getting a Shared Ownership place...but not sure!

[beeloubee]

Hello all,

I really need some advice and opinions.

My husband and I (both 30) went to a new build open day (Aster) over a week ago. It was very last minute as we heard about it the day before on the radio. We thought we would go along just to see what was there.

It's a lovely 3 bed (we have no children but want to keep options open) end terrace in the village next to ours. It's about £200,000. We are currently getting a financial check done by their recommended company. So far this company has recommended we buy a share of 70%.

I'm not to keen on 70%, I think I would rather go 40 or 100 as I have heard that 70% shares are hard to sell on. I'm not sure if I would want to live there forever.

We are not high flyers at all, we are both degree educated but are stuck in low paying jobs. Mine is 20 hours a week - 800/month after tax and my husbands is 37 hours a week - 1400/month after tax. But I do regularly get overtime (10 plus a week) and there is a chance of a bigger contract in the next few years.

We have saved up £28,000. If we go and try to buy from the open market, we have been told (from doing agreement in principles online) that we would get a £130, 000 mortgage. So with a £20k deposit that would be a house worth £150k which is doable in the area we live in, but none of them are as nice as the SO house. My contract may go up to 30 or more hours in the next year or two, so the bank would lend me 150k instead of 130k.

Can I have some opinions on SO? and some advice as to what you think we should do?

Sorry, just seen that I wrote "to keen" instead of "too keen". I don't know how to edit my post.

Also, the mortgage/rent on the house would be £740 a month. I am not sure if that includes service charge.

Don't shared ownership have to be leasehold? So you'd be paying your mortgage, your rent for the percentage you don't own and then the service charge on top.

Have you checked that your mortgage company will provide the mortgage for a shared ownership property?

I wouldn't. I'd buy the home I could afford, and avoid leasehold if at all possible.

Could you not look to buy a new build with the help to buy scheme?

New builds typically sell for 20% more than what they're worth. Why not look for a home that's a few years old?can either of you find better paying jobs?

I would do SO over help to buy, based on family experiences. But if I could afford a house the conventional way (even if it's not such a nice house) I would. Selling a SO is a pain in the arse and staircasing isn't realistic for a lot of people.

I lived in shared ownership (housing association) for many years. It worked for us, and after 10 years we had equity from paying off some of the mortgage and house prices rising, so we were able to move into a house without shared ownership.

However, I think you're foolish to buy a 3 bed when you don't need that amount of space yet. Shared ownership is great as an alternative to private rented, but I wouldn't use it as a way to buy a bigger or nicer house if you can already afford something without shared ownership. Don't forget that you'll be losing money on rent that you wouldn't be paying without shared ownership. Better to compromise and buy something without shared ownership if you can.

I agree that you may find 70% hard to sell as less people will be able to afford it.

I'd think very carefully about SO if there is any chance you would be bale to buy the conventional way as there are a few potential downsides:

You pay service/maintenance charge on 100% of the property even if you only own 20% of it.

You are liable for all repairs even if you only own 20% of it.

You can't sub-let so if you fall on hard times then you can't move in with a friend/relative and let it out while you sort your finances out.

Equally, if you can't pay the service/maintenance charge of your rent and the HA evict you, you will lose ALL your house including any equity.

I don't mean to frighten you off, but I don't think these downsides are spelt out sufficiently to people in advance.

Shared Ownership and Help to Buy are by far inferior to traditional property purchases. There are so many pitfalls that people don't realise. For shared ownership, these are:

• You are responsible for 100% of the maintenance costs even though you only own a percentage of the property
• When selling, the new buyer has to meet the affordable housing requirements
• Your rent increases (sometimes annually), whereas with a traditional purchase your mortgage payments would stay the same (if on a fixed rate) and could decrease after a remortgage
• You have to still pay ground rent and service charges if you're in a flat on top of all other expenses, which you would have to do with a traditional purchase but again, you're bearing 100% of these charges even though you only own a percentage of the property.

DH and I looked into it and decided against it.

Just as an aside, there was a huge uproar this week because one of the leading affordable housing developers reported a £1 billion profit for this financial year. Clearly, there is a lot of profiteering and not a lot of 'helping to buy' going on:
www.bbc.co.uk/news/business-47368308

Shared ownership worked really well for us. We couldn't afford anything on the open market so bought 35% share of a new build 2 bed house. We stayed for 5 years during which time house prices went up and with what we'd paid off of our mortgage and the rise in house prices had about £40k equity which afforded the deposit on our open market 3 bed house.

However if we'd had the chance to buy on the open market the first time then we would have. We would have more than doubled our equity and had an even nicer 3 bed or maybe even 4 bed house. As it stands our 3 bed is cramped and cluttered. Don't get me wrong, we love it and are thrilled that we've made the best of it but in this day age if you have the chance to buy on the open market then do.

You can do the house up over time and have none of the worries mentioned above.

Regarding the service charges that the last 2 posters mentioned. That's not unique to shared ownership. That's what all leaseholders have to pay. In my building the people who owned their flats without shared ownership payed the same service charge as us.

Our house is shared ownership and we are intending to staircase to 100% at the end of this year - we currently own 60%.

I have found SO to be very good for us, we got a lovely house in a great area - the mortgage and rent combined is cheaper than a mortgage could be if we purchased "normally".

The service charge/rent only goes up a few pounds a year.

True you are responsible for all repairs, but with a new build repairs are usually pretty minor. We also ensured we took our insurance for things like the boiler, plumbing and electrics to ensure no massive bills if anything did need fixing.

Only thing I would say, is are you sure you can purchase a three bedroom? When we purchased ours, we were only allowed to buy a two bedroom as it was just. If we would have had a child, then we could have gone for a three bedroom. Rules might have changed though

Only thing I would say, is are you sure you can purchase a three bedroom? When we purchased ours, we were only allowed to buy a two bedroom as it was just. If we would have had a child, then we could have gone for a three bedroom. Rules might have changed though

Yes, DC1 has been looking and the "one spare room only" sizing policy seems pretty standard.

My DD bought 40% of a SO flat, and has since staircased to 50%. It has been perfect for her, but as a lone buyer in an expensive area she wasn't in a position to buy on the open market. if you are, I'd be inclined to take that option.

it's great idea if you can't afford a decent size property on open market.
i would strongly advice you to buy the highest percentage you can afford and build equity and buy the rest in the future.
once you own 100% it is easy to sell.
buying the remaining 30% isn't as hard process as buying the big chunk.
service charge only if you purchase flat or if you have communal area shared.
you are responsible maintaining your property as anyone else
you get evicted like anyone else who hasn't paid their mortgage
rent is much cheaper than you think(around £200 for 30%)
buying the rest(just ask the bank for further advance)
3 bedroom isn't big if you are planning kids(our only regret not buying a bigger place).
the list of advantages is long.
disadvantage,don't go for a flat,service charge can be high.

We did it and haven't regretted it. However, we're in a sought after area for schools etc At the time there was no way we'd be able to afford a house here on the open market.

We never staircased as we knew it wasn't our forever home and wanted someone else to have the same opportunity we did as FTBs- houses are vastly overpriced IMO here. 8 years later, we've just sold in under 24 hours at full asking price (you have to pay for an independent RICS valuation) and are moving to a big old 3 bed less than half a mile away!

I think if you are a couple you can have 3 bedrooms, and a single person can have 2 bedrooms.

At the risk of sounding like Phil and Kirsty, you need to think about what is best for your needs if you decide to start a family.

If you ABSOLUTELY love the SO house, then take the risk of buying 70%.

I would caution that it is better to buy 100% in the near future. Because new build property prices rise quickly, you don't want it go get out of reach. Of course there are fewer buyers for 70%, the most likely scenario would be that you would find a way to buy 100%. Don't go with 40%. You will make more equity on the 70%. With 40% you pay more rent.

A few other things in the mix

Be careful you can afford it, don't be sucked in by how nice the house is
Stair-casing can be stressful (all the fun of mortgages - twice). You have to pay solicitor fees again.
Find out the service charge. Mine is extortionate. It increases annually, (depending on works, unpredictable) as does the rent (in line with inflation).
It's very hard to get out of SO when you are in it, because you can't afford anywhere else as nice, unless you move to a different area as I have seen friends do.
In case of illness etc. some HA's would allow you to sub-let
Some do not allow pets
Energy efficient - lower heating / electric costs

I bought 45% and then 70% and made around 30k in 4 years.

Those who discount it tend to be the ones who could just about afford to go open market. If I had been able to afford anything other than a shoe box, I would have gone open market.

Could you take on a another part time job to make up your hours to full time so that you can borrow more now and then when your current job extended its hours drop the part time job.

IMO in your circumstances a 3 bed SO house is not a good idea.

You are young and child-free. You don't 'need' 3-beds. You don't 'need' a secure tenancy (which essentially is what SO is) as you have no children in schools etc.

OS works amazingly if 1) you have children and don't want to be in insecure private renter or 2) you are single and living somewhere expensive e.g. London where you can't afford to buy even a 1 bed flat on the open market with only one income.

Can you look at upping your hours at all, and looking for a 'pre-owned' 2 bed house?