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Thinking of buying a Shared Ownership

55 replies

BuyingSharedOwnership · 24/08/2020 11:31

I'm looking at shared ownership in my area, we need a 3 bed but can't afford anything through standard or HTB routes. We're considering these two properties, what would you go for?

Option 1:
www.rightmove.co.uk/property-for-sale/property-93150077.html
Option 2:
www.rightmove.co.uk/property-for-sale/property-83751694.html

Option 1 is possibly the nicer village, better walks, bakery on the doorstep. Closest main town is Didcot.

Option 2 is on a nicer new build estate (not quite finished, better community areas) but more central to the village and is closer to the main town of Abingdon.

I think it's 6 and 2 3s about the primary schools, but possibly different catchment for secondary (abingdon vs didcot).

Which one would you pick and why? Is there anything I'm not spotting to rule out one over the other?

OP posts:
lurch3r · 24/08/2020 17:57

At the risk of sounding like my nan and going on about this, Option 2 looks suspiciously like you would be staircasing towards owning 100% of a leasehold property. If both are the same in terms of finance, I would be asking why are the tenures listed differently in the adverts? Which one contains the typo? It will (should) all come out in the conveyancing but you'd have spent money by then, so best to get it crystal clear in writing first. Don't be fobbed off by the estate agent's vague assurances, they are working for the vendor.

lurch3r · 24/08/2020 17:59

Ok, cross-posted and apologies. I shall now cease banging on about the tenure.

RedToothBrush · 24/08/2020 18:23

@lurch3r

Option 2 is leasehold whereas 1 is freehold. Does this mean that even if you eventually bought the mortgage for the whole property, you'd still only have leasehold? I would check that out because if that was the case, definitely freehold option 1.
Knowing the problems of shared ownership and new builds (none shared ownership) having done it, look VERY closely at this. I wouldnt touch leasehold.
RedToothBrush · 24/08/2020 18:28

@lurch3r yes we have checked we won't be paying ground rent on the leaseholds as they are freehold at 100% and therefore the HAs don't put a ground rent on. They're not allowed to make a profit and have to break down the service charge annually to ensure it's justified.

Get a solicitor to check this explicitly.

We were fed a load of crap about this and it turned out at the last minute that it wadnt the case at all. It was lies to suck us into the sale.

We did go ahead with the purchase in the end but its dodgy as fuck.

When we moved we did look at another leasehold property on the same estate as we lived. We obviously knew that some properties had better terms than others and some people were facing financial problems as a result

We asked for full details in writing of fees and terms before proceeding. If this isnt forthcoming back away sharpish.

Takingontheworld · 24/08/2020 18:46

I'd choose house 1 personally!

However you will not get far offering lower. SO has a que after each house and each HA process applications differently.

mumwon · 24/08/2020 19:06

in London (for instance) I know of someone who has a 1 bed flat in a decent area shared ownership it cost at least couple of hundred less a month than renting - & with more security (including maintenance & ground rent) if you don't staircase (increase proportion of ownership) you can resell to someone else in your position & you should be able to gain on any increase (again I know of someone who had this) if house goes down in value (worst case scenario) you haven't lost as much as other householders. It can be a good way of getting on ladder - check resales if these aren't new (can be cheaper)

mumwon · 24/08/2020 19:10

I like 1 (I lived in a town house with 2 young dc - perfect way to loose weight & I was for ever taking stuff up & downstairs, no thank you) & I like the bakery!!

elaeocarpus · 24/08/2020 19:43

Steventon has a more 'premium' village feel, but i would check where the floodplains is/ was and whether that estate is on it. There was a villagers objection to one or more development propsal a few years back and one reason being Steventon floods in places most years and one development was sited on the floodplain. You should also check where it is in relation to Truck festival

That part of Drayton is less nice part, i would check the crime stats for the area.

For both villages look at which way you will commute to work- they bottleneck frequently, especially with people avoiding the A34. If the didcot/culham expansion and quarry expansion goes ahead, Drayton will be a lot busier with cars.

BuyingSharedOwnership · 24/08/2020 20:21

@mumwon sounds like the town house needs to be next door to the bakery! Then I can stuff my face and not get fat!

@elaeocarpus I've never heard of a bad side of drayton? The house is on the Bovis estate off High Street. We checked crime stats and there's nothing on reported on the estate itself.
Steventon one is the estate by the bakery. on the drayton side of the village

OP posts:
elaeocarpus · 24/08/2020 21:05

This is useful, as shows what reports where by month

www.police.uk/pu/your-area/thames-valley-police/abingdon-outer/?tab=CrimeMap

BuyingSharedOwnership · 24/08/2020 21:21

@elaeocarpus yes we've been through that, no more crimes reported for the village than any others and nothing really around the estate, a few on east way but the estate seems unaffected. Seems like over the top end is worse and the side by the school/village hall. Is high street the bad side of the village and the crime stats aren't showing it?

OP posts:
BuyingSharedOwnership · 24/08/2020 21:59

I meant the bloor not bovis!!

OP posts:
Requinblanc · 25/08/2020 09:52

Do not buy a leasehold house under any circumstances...

You are being misled if they are telling you that it will be easy to switch to freehold if you staircase to 100%.

I bitterly regret buying a SO property. The housing associations who usually run the schemes use them to line their pocket and service charges can just rocket. It is very naive to think that this won't be the case.

The staircaising process is expensive and these properties can be difficult to resale.

Frankly I would try to buy something on the open market even if it is smaller and needs work rather than this.

LittleGwyneth · 25/08/2020 09:59

I find people on MN are often quite negative about shared ownership, but we did it a year ago and so far it’s the best decision we’ve ever made in our lives. We pay less than we would in rent, we’re working towards stair casing and we can paint and put up pictures without having to ask permission from some landlord!

I can’t help you with picking between those two houses, but I hope the inevitable people telling you Shared Ownership is a scam don’t dull the shine on this for you. Buying a home is buying a home and it’s incredibly exciting!

RedToothBrush · 25/08/2020 10:11

@Requinblanc

Do not buy a leasehold house under any circumstances...

You are being misled if they are telling you that it will be easy to switch to freehold if you staircase to 100%.

I bitterly regret buying a SO property. The housing associations who usually run the schemes use them to line their pocket and service charges can just rocket. It is very naive to think that this won't be the case.

The staircaising process is expensive and these properties can be difficult to resale.

Frankly I would try to buy something on the open market even if it is smaller and needs work rather than this.

Agree that staircasing is a LOT more difficult and problematic than it is sold on purchase of a shared ownership property. It SHOULD have been easy but our experience was that it was anything but. Even our type of mortgage was more restricted than if we had bought a normal property and the legal side and dealing with the housing association an absolute nightmare. The housing association tried to charge us rent and sent us threatening letters AFTER we had bought them out and owned the entire property, even though we'd made a point of saying they needed to remove us from their rental list (as by this point we'd realised they were so incompetent they wouldnt unless we asked them - and they didnt fail to disappoint).

We also found ourselves in the nonsensical position prior to staircasing where our rent and mortgage were more than the mortgage would be for the full property and struggled to get a mortgage even though we had perfect credit, few out goings, our income had more than doubled since we'd originally bought the property and the overall value of the property had dropped. Even the mortgage lenders were telling us, we were a safe loan and it was ridiculous that their system was saying no.

In hindsight, moving to another property worth more rather than staircasing in the same one would have been easier and more sensible. Which sounds ridiculous. Its only because we absolutely loved where we lived that it was worthwhile for us.

Honestly dont be sucked in by the sales spiel!

RedToothBrush · 25/08/2020 10:27

@LittleGwyneth

I find people on MN are often quite negative about shared ownership, but we did it a year ago and so far it’s the best decision we’ve ever made in our lives. We pay less than we would in rent, we’re working towards stair casing and we can paint and put up pictures without having to ask permission from some landlord!

I can’t help you with picking between those two houses, but I hope the inevitable people telling you Shared Ownership is a scam don’t dull the shine on this for you. Buying a home is buying a home and it’s incredibly exciting!

With respect, you've only lived in it a year! And you've not tried to sell, staircase, had increasing rental charges or had other financial problems. So you've only had a tiny taste of shared ownership rather than fully experienced it yet. You have no idea if you will hit any pitfalls at this stage!

I think shared ownership works for some people. For others its a dreadful idea and the dream slowly turns into a nightmare.

I am very much about making sure that people go into it with their eyes open as a results. I think this is misconstrued as 'being negative' about shared ownership rather than trying to properly inform buyers of potential longterm issues with shared ownership.

You need to think about things like negative equity (its a bigger problem with shared ownership than normal property), rising associated fees which you are locked into and problems with sale if you do need to move for whatever reason. Shared ownership offers security rental doesnt but it also can be a bigger trap than owning a house outright.

Shared ownership is unique in its positives and negatives - and to make matters worse these differ by each individual scheme so attention to detail is much more important and the danger of being mislead is much higher.

I get pissed off with people who think its a magical idea for this reason. Thats naivety and a lack of awareness. It has its place, but you need to be very careful about what you are getting yourself into too.

Leasehold is the thing here that sets off my alarm bells.

BuyingSharedOwnership · 25/08/2020 11:04

Yeah, as I've said, both houses are the same with the freehold given at 100%. There's no difference, if anything Option 2's advert is more honest than option 1. Option 1 is leasehold at the moment, otherwise it wouldn't have a 125 year lease written in the features.

Thanks for the heads up, as I've said, we've done our pros and cons and talked to our friends in SO and our friends that did the buy small now.

The ones in SO (5 years) have had no trouble remortgaging or anything in our area. They're currently staircasing with the same HA as option 2 and are happy with the process. Maybe we've struck gold with the HA as the HA doesn't even insist on their 6 weeks to sell policy in the lease, it's straight to Estate Agents and the seller runs it.

Our friends that bought smaller, over stretched their budget in the area and have one less bed than comfortable. They are stuck in their house as there are some structural issues they need to fix (that's a thread in itself, neighbours, money and party wall). If they sold now, the structural issue would devalue their property and wipe out equity. Add in that their clock is ticking and they want another baby, but have 2 sharing a small bedroom already. Their house has destroyed their MH. I think I'll pass on doing the same as them, we haven't ruled out another DC. If we're going to get stuck in a house, I'd rather it be a house I like and have space in.

OP posts:
Takingontheworld · 25/08/2020 11:04

All SO are leasehold until staircased to 100%when the freehold is transferred to full homeowner?

BuyingSharedOwnership · 25/08/2020 11:27

@Takingontheworld not all, it's something we're checking with every house we look at. Most should be and we wouldn't touch one that isn't. Apparently (although I haven't found one of these properties) some will charge extra for transfer of the freehold. These two are both freehold at 100% and option 2 definitely does not have an extra charge for the freehold.

OP posts:
WombatChocolate · 25/08/2020 16:28

Is it possible to ask to speak to people who have used both schemes and moved beyond them into full ownership and also selling them and moving onto standard ownership?

I get that you want to compare the properties. I get that you've decided SO is for you. However, given they are different schemes and SO impacts occur at the point of purchase, whilst living in them, whisky staircasing and whilst selling and moving on, it's best to be fully informed about the realities at each stage. So many people have had surprises somewhere along the way with SO.....whether that was because they failed to do due diligence when buying and got apcaught up in the excitement of home ownership and didn't take a long view, or whether it was the HA being a bit economical with all the facts I don't know. The thing is, whilst SO sometimes is the only way for people to get on the housing ladder, it often is a more costly approach in the long term....and the people doing it are least able to afford that extra cost and it seems sometimes have less financial savvy than lots of people.

All the things people keep raising about SO might seem annoying and critical, especially if you've decided to do it. However, as each scheme is a bit different, it really is vital to push hard for all the answers in writing before proceeding.....one scheme probably will turn out to be a bit better than the other and that's something to factor into your choice.

I would say one other thing that probably won't go down well too. I think SO and Help to Buy lure people not just into home ownership but into home ownership beyond what they can essentially afford....even if it's affordable on a monthly basis. The reality is that lots of families can afford a 1 bed or 2 bed and not a 3 bed. They might like a 3 bed, in the same way they would like a brand new car, but their income and savings levels don't stack up to a new car or 3 bed.....unless they go into a scheme which makes it affordable monthly, but lomg term is extremely costly. Sellers of cars on finance and lease plans and sellers of SO or Help to Buy push the idea that we're all entitled to a new car or a 3 bed house if we have 2 kids and that we should have one. There really isn't a freebie or a bargain out there....you pay in the end and if you pay less up front, you pay more in the long run. Lots of people never really make the comparisons and want it all today when they can't really afford it.

It is difficult to know what's best to do and the future of the housing market makes it hard too. People I know on both SO and Help to Buy who did it about 5 years ago regret it. Both were really relying on decent rises in house prices to make it work and in the south east, prices have been pretty stagnant. The SO people found they were restricted in who they could sell with, the solicitors they used and the mortgage rates they had to pay when they remortgaged at 2 and 4 years. Staircasing cost when they did it. And yes, they did feel they had the benefits of security and not being in rented, but they didn't feel they had the full benefits of standard home ownership and that there were extra costs around every corner. The Help to Buy people found that after 5 years, the equity they had hoped would accumulate allowing them to get a usual mortgage for 100% of the value after 5 years just wasn't there. They were stuck remortgaging at terrible rates because their LTV was still so high. They wished they had bought an older, smaller property which wouldn't have seen the drop in value of an inflated-price new build and that being in a smaller house with less bedrooms would have been better financially. Because of it, the woman felt she had no choice but to return to work full time after child 3, whereas if they had made different choices, they might have had less bedrooms but more financial flexibility.

I can see the stamp duty holiday does alter things somewhat. Rishi is succeeding in stimulating the housing market for now....but also think about it longer term too - we are in a recession and the worst of the job losses with their impacts on housing prices haven't come yet. Might it be a good time to save like fury and watch prices drop over the next year and then buy in the usual non SO way?

Op keeps saying she's not interested in views on the pros and cons of SO just which house is best....but a thread about SO houses will always invoke some discussion of that and the actual terms as they are actually as integral part of the pros and cons of a house, in a way your standard freehold house purchased 100% lacks such variation. Why even mention it's a SO scheme rather than just show the plans of 2 houses if you don't want any discussion of it.

Don't see the comments as criticism but helpful points to ponder.....when you post on an open forum, you really can't narrowly pin down what people can discuss and what you don't want to hear about....it becomes a discussion about your particular issue, but the broader topic too.

RedToothBrush · 26/08/2020 09:30

@Takingontheworld

All SO are leasehold until staircased to 100%when the freehold is transferred to full homeowner?
No.

They are not.

We staircased to 100%. It remained leasehold. It depends on the ts snd cs of each individual property.

We were told when we were buying it would change to freehold on completion of the estate. This was a lie.

This is why i stress not to take word for it and to get this information in writing.

RedToothBrush · 26/08/2020 09:36

Interesting about help to buy. Ive long thought help to buy a con. The properties in my area with it are priced at around 20% the market value of other similar sized properties. After 5 years their value adjusts to match similar sized properties because they no longer have the attraction of being help to buy or brand new newbuilds.

The market here hasnt increased by 20% either, meaning that the danger of being stuck in negative equity is staggering.

Help to buy is the scheme id tell people to avoid like the plague above and beyond SO.

But as i say, get the details of shared ownership in writing because of the pitfalls with it...

notheragain4 · 26/08/2020 11:14

@RedToothBrush what people seem to forget when slagging off a new build for its premium, is you're getting everything brand new. Just as you'd spend more on an older house that has been renovated vs the doer-upper, you should expect to pay more for a new build- you've got brand new boiler, electrics, plumbing, roof, appliances, sometimes flooring is included etc plus a warranty (I know there's some scepticism around that) There is generally very little initial outlay in a new build (depending on the developer and incentives of course) it's not quite like a car that depreciates very quickly. So for people with low deposits they're a great option. Yes if you try to sell very quickly there is a risk of negative equity and it won't be the same kind of investment buying an older property or doing a house up yourself, but if it's a longer term purchase there is no reason it still wouldn't be an investment (unlike a new car which is often the comparison).

That said I know they are massively inflated in other areas, the London HTB scheme seems very dubious to me, but where I am in the midlands the new builds aren't unreasonably more and still allow profits after a few years.

WombatChocolate · 26/08/2020 12:28

In the end, it's all about being in receipt if full information isn't it, about the particular houses, schemes etc in your area so you can make an informed choice. There are generalisations which can be made and which apply generally, although not in every case, but everyone needs to do due diligence.

You'd have to be able to get a sense of the price of new builds vs older houses and also how their prices change over time. Given no one can exactly predict the housing market, it's hard to predict ahead, but you need to do it using worst case scenarios to see if the initial drop in price of a new house is substantial (is in some areas) or not, compared to that lack of drop annolder house will see. You do have to factor in repair/decoration costs in an older house....quite hard for lots of people to do this who have never owned. You do need to know all the upfront costs involved in buying a SO or Help to Buy plus all the costs and potential inconveniences involved in staircasing, re-mortgaging such property and re-selling costs, vs the costs of remortgaging and selling costs in a non-SO or non-Help to Buy.

Gathering all this info isn't easy. Persistence with EAs or HAs to get accurate written info is needed. Careful research into the local market is needed. A knowledge of mortgages and costs of buying and selling are needed. Having some sense of historic trends and likely direction of house price movement in future is needed. It's all a pretty big ask for anyone, never mind the first time buyer who perhaps isn't quite as money savvy as the buyer with a bigger deposit who isn't considering the schemes. And it's this lack of info that leads to lots of people getting stung. Unfortunately a lot of these schemes are rather thin on the detail about the long term and not forthcoming with it unless directly asked....and buyers need to have some knowledge to know what to ask.

In the end, if you've done all the due diligence about now and the medium and longer term and SO or Help to Buy makes sense....fair enough. But I think generally people are pointing out pitfalls which might exist and are often missed in what is essentially a more complicated route over the longer term. It's often the people least able to navigate the complications that use these schemes and it really needs to be a case of buyer beware!

notheragain4 · 26/08/2020 12:38

@WombatChocolate I take your point and due diligence is absolutely required, there are always pros and cons and you need to go in with your eyes open. But you're talking as if everyone has a choice, if everyone had a choice I'm sure most would just buy with a mortgage to save themselves the hassle, but the schemes open up home buying to more people. Especially at the moment, they are allowing people with 5% deposits to get on the ladder which you can't do with just a mortgage at the moment. I think it's quite patronising to suggest people are ignorantly using these schemes as if they had another option.

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