Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Flip

Original poster

Shared ownership deals

12 replies

Apple23 · 25/06/2019 20:55

Which option would you take?

In the fortunate position of having a lump sum to put towards buying a house. Looking in a particular area, and need to purchase on shared ownership scheme. Buying elsewhere not a realistic option, nor is remaining in rented house, as it's going to chip away at the lump sum.

Assuming same area of town, full price exactly the same, no pluses or minuses to pick between them, except the shared ownership deals:

Option 1 - 50% ownership, paying rent on the other 50%, opportunity to buy increasing shares up to 100%. Affordable without a mortgage.

Option 2 - 75% ownership, no rent on the other 25%, no opportunity to buy increasing shares. Would need a small mortgage to finance, but over 10 years so as to finish before retirement.

No issue with affordability of mortgage or qualifying for the shared ownership scheme. Mortgage payments and rent would be virtually the same.

Which shared ownership deal would you choose?

OP posts:

BlueSkiesLies · 25/06/2019 21:06

Would need the numbers to assess but two key things would be - is the 10 year mortgage interest repayments more or less than 10 years of 50% rent? I expect the 75% one with mortgage is better value.

Would there be a problem selling the 75% one (i..e is it too expensive for most people looking at SO as opposed to the 50% one?)

Are both suitable for the long term through retirement?

Why is there no rent to pay on the 25%?

JoJoSM2 · 25/06/2019 21:21

I'd prefer the option to eventually buy outright. That way, I need retirement, you have a chance of being mortgage and rent free. With the other option, paying the rent even in retirement might become a financial burden.

Original poster

Apple23 · 25/06/2019 22:38

Thanks for responses.

Would need the numbers to assess but two key things would be - is the 10 year mortgage interest repayments more or less than 10 years of 50% rent? I expect the 75% one with mortgage is better value.

Mortgage payments very similar to rent (hence looking at 10 years rather than 5 for making the comparison), but obviously mortgage would have an end point, whereas rent continues unless the extra shares are purchased.

Would there be a problem selling the 75% one (i..e is it too expensive for most people looking at SO as opposed to the 50% one?)
Good point, I don't actually know.

Are both suitable for the long term through retirement?
Yes. Currently dealing with elderly relatives, so very mindful of this.

Why is there no rent to pay on the 25%?
That’s the terms of the scheme. Apparently (according to EA so may need a pinch of salt), in that area, it's the norm for these schemes.

The 75% option would mean no rent or mortgage once mortgage is paid off. If I can't buy outright for any reason, I'm looking at paying for rent forever.

This is helping me a lot. Anyone else?

OP posts:

Scholesfan · 25/06/2019 22:53

I think you'll find that with the 75% option, that you'll be paying rent on the remaining 25%. That is the industry 'norm'.

The housing association is not gifting you 25%.

Original poster

Apple23 · 25/06/2019 23:13

Thank you. I generally work on the principle that if it seems too good to be true..., but I have in writing that this is not the case for this property, and know other people on the scheme for whom it is not the case.

The HA is perhaps freeing up the Council house waiting list for those who need them (there are a lot of people earning up to and above average salary who are caught in the gap between eligibility for a Council house and being able to afford to rent privately or buy outright), or is projecting long-term once the lease ends next century. I don't know???

OP posts:

sulee · 26/06/2019 21:42

The 75% SO no rent schemes operate in my area- no catches, but they sell very quickly when they become available. I’d snap this one up personally.

HopelessLayout · 26/06/2019 23:58

I'd go for the 75% ownership with no rent, every time!
If you have extra money to invest, put it into something else.

raspberryk · 27/06/2019 12:31

Shared ownership houses tend to work out more expensive than regular ownership when you compare 100% of the house value (at least in my area)
If you can afford 50% with no mortgage, or 75% with a small mortgage I personally would look into what you could afford to buy on the regular market. You could probably get a similar house for around the price as you'd pay for 75% if you see what I mean.

Notabadger · 27/06/2019 12:42

I wouldn't buy a shared ownership property with no mortgage. If you get into rent arrears and not able to resolve it you might be at risk of losing the property and the equity, (although this is based on quite an old legal case so might have changed?) see www.theguardian.com/housing-network/2013/sep/03/hidden-dangers-shared-ownership

raspberryk · 27/06/2019 12:47

Notabadger - you are right, if you get into rent arrears you can lose the property and the equity - this is in my s/o contract, however that could happen regardless of whether the share was owned outright or mortgaged. I think it's 3 months arrears in my case, and luckily the rent is very low so I hope it would never become an issue.
I have a s/o 40% owned outright with no mortgage, sadly I couldn't buy anywhere else as I couldn't get a mortgage at the time.
I wouldn't buy s/o if there was another viable option as you are at the mercy of the housing association who owns it.

SapatSea · 28/06/2019 19:22

I agree with the poster upthread who advised looking at regular properties for sale. Certainly where I live the Shared ownership properties are overpriced compared to regular (not newly built) houses and flats but s/o is often the only way some people can buy.
The yearly serice charges are eyewatering and don't include any maintenance/repair/upgrade costs that may arise.

You might be able to by a regular freehold (older) property with a small short life mortgage or outright. Much simpler and usually quicker to sell on than s/o and if freehold then no ever rising service and maintenance charges where you need to have contingency money as you have to pay towards anything that needs repair or upgrading at a usually a higher cost than being able to get maintenance done yourself and with no choice about the matter. (Relative recently had to stump up £4.4k for some block works on her flat (part of a large old georgian house)that basically amounted to a bit of render and guttering repair and painting)

Buyitinbamboo · 28/06/2019 20:26

We own a 50% shared ownership property which we are struggling to sell and I've noticed that people who are selling in the same block have a lower percentage and seem to be getting more viewings so I wonder if 50% puts them off? Someone up thread said they live in an area doing the 75% and they go quickly so maybe the 75%is better to resale.

Flip