Shared Ownership

[makeitmakesense]

Hoping someone will be able to shed some light on shared ownership.

My OH and I currently live in a 1 bed housing association flat in London with DS1. I am now pregnant with DC2 and we are in desperate need of a bigger place. We've been on the transfer and housing lists for absolutely ages but nothing ever seems to come up for us.

Unfortunately we can't afford to buy a big enough property outright so I've been looking at shared ownership but OH is totally against it, says it's a 'scam' and a bottomless pit for your money as things like service charge will constantly increase etc and all of his relatives are also discouraging him saying it's a bad idea.

Renting privately doesn't really make sense to me as I definitely would like to own my own home in the future so I don't want to line someone else's pockets with my life savings.

Is OH right? Is shared ownership a less than ideal solution?

I need someone to help shed some light on whether or not shared ownership is a good thing.

Thanks!

I looked into this for my daughter and found that it isn't a terrible idea for people who really need to buy a place they couldn't afford the whole amount for - it is considered better than renting, for example, but it does have drawbacks. The main one being that although you may only own 50% say of the property, you are liable for 100% of the maintenance costs. So if the property needs any money to be spent on the roof for example, you have to pay all of it but when you come to sell you only make 50% of any profit.

I wouldnt count it out but would want to staircase to 100% as soon as you can. My DM has a shared ownership home, owns 75% and wont be able to purchase 100%, its correct that she is totally responsible for all maintenance charges and its not striaght forward if she wants to sell (but its her forever home so not an issue for her).
Im not sure if youre restricted on mortgages for shared ownership, could be something to look into?.
Id probably prefer it to living in a small flat!

My friend is in shared ownership property, has been for years and is very happy. It allowed to get a house of the size she wanted and in an area she wanted.

It depends.

I've done shared ownership and I would say that it's worthwhile for some but a disaster for other and the biggest thing of all is the individual scheme. Not all shared ownership schemes are the same - tbh I think they are all pretty much different and this is where the knowledge and experience of a solicitor with experience in shared ownership is worth its gold if you decide to go down this route. Do not just pick the cheapest conveyancer.

1. yes service / rent charges are the number 1 issue to look for and how they increase year on year. We had rent to pay on ours which was reasonable but the compound interest increases after 7 years meant that we got into a position where the rent plus the mortgage was higher than if we just had a mortgage on the entire property. So at this point because our finances had improved we decided to staircase to avoid this issue. We found this very difficult for very bizarre reasons.

We had neighbours who started to struggle, with one ending up switching to an interest only mortgage. In practice for her it worked out cheaper than renting in our area and gave her more long term security than buying and more freedom to do what she wanted with her home but it wasn't an investment as such and not what she hoped.

Our scheme was much to better on service/rent charges than others Ive seen which were available at the time which are frankly bordering on exploitation. But i have heard that more recent ones have been more favourable as there has been much more awareness and government pressure to clean up this dreadful schemes.

2. Can you staircase? Do you want to staircase? Not all schemes will allow you to. This is important in case circumstances change.

3. How likely are you to outgrow the property? This is where it gets sticky. If you are going into shared ownership, are you likely to use it as a stepping stone up or a long term thing? My personal opinion is they seemed to be largely designed for people as a stepping stone into the market with the assumption that house prices would always rise and its a quicker way to gain more equity that rental doesn't allow you to do. Thats not necessarily how it works for most in practice.

We lived in an area where house prices dropped considerably and only regained their purchase value after 10 years. This caused problems - people lost equity at the same time as their rents increased. Shared ownership is a particular disaster after a decrease in property prices (even if you decide to staircase as we found out which sounds crazy).

One of the things that can happen is that people buy these properties and can 'get stuck' in a way you don't get with full ownership or rental too. If financially you struggle they can be harder to sell and you cant let the property out if you need to move areas. This caused one neighbour to end up illegally subletting for a while.

4. You still have a housing association to deal with and at times this is difficult as our experience was they don't care, are fucking useless and quite frankly they were total jobsworth. You dont have complete control over your house and i think the issue is particularly difficult with flats.

5. Even after we fully staircased we still found we had a problem with selling the property and moving out. There was a clause which gave the housing associations an effective veto over whether we could sell and them first option on purchase. We had to ask for permission to sell our 100% own house and get a release signed by them. We had no idea that this was hidden in the small print and it only came up right at the last minute.

I personally think that in certain areas with the right scheme (without punishing rent/service increases) and if your circumstances are likely to stay the same indefinitely its a good move if your alternative is to rent. It gives you long term security you wouldn't otherwise get.

If you are in a situation where you you circumstances may change in a few years (eg kids or possible relocation) I'm less convinced. Its harder to move. If you are just using it to climb the ladder onto the property market, don't buy if a property bubble is emerging and there is talk of a possible crash (and thats arguably now).

If you have a choice between full ownership (maybe with a slight compromise on location / size) and shared ownership, don't touch it. Just go straight to full ownership.

For us it worked - just. We may have been better off moving elsewhere but we would have to have left the area. For others on the same scheme as us in the same estate it was a mixed bag. For some a disaster. For others, not as good as it promised but better than rental.

The thing is to do you homework and go into it with eyes open. There are benefits and pitfalls unique to it. I wouldn't write it off, but it possibly wouldn't be my first choice either.

Would I do it again with the benefit of hindsight? Yes. DH is a bit more sceptical though. I think ge would have looked at alternatives more.

Fwiw neither DH or I would go as far as being negative as your OH and your relatives though.

Just be cautious. It may well be the best solution for your circumstances if you find the right scheme.

I think like the poster above says it’s important to look into the individual properties and schemes as they do vary, and some will be better than others and if the value of your property rises you might never be able to buy outright, or might not be allowed to buy fully.

My council were the landlords (rather than a housing association) and they had no interest in buying the property back when I came to sell it, so I could sell straight on to the open market. Other housing associations want the right to buy the property - and set the value it’s sold at - if you sell, which can make it difficult to sell on, especially if their valuation is totally at odds with the market! I looked at some properties which had a very high service charge or ground rent issues whereas my service charge was about £45 a month for the entirety of the time I owned the flat and was capped from being raised significantly year on year, with the ground rent permanently set at £50 a year.

I initially bought a 40%share in a flat, staircased to 75% 2 years later when the flat was valued at less than I had bought it at (so could afford a higher share) and then when I sold it a few years later, my flat had gone up in value so I made a small profit, which enabled me to then get a mortgage on a normal property with my new partner. For me it was a brilliant scheme as I’d never have been able to buy a property myself on the open market and although a lot of people talk about it as wasting money on rent, I was doing that anyway; if I hadn’t bought through shared ownership, I would have been paying 100% rent, and not building up any equity at all. And perhaps what mattered more to me was having security rather than being at the mercy of a landlord who might sell up, as had happened to me twice before, or massively increase the rent.

As Alice says when you come to sell shared ownership its a set price which you cant take offers on. I have been told of a friend of a friend story where the housing association refused to drop the price even though there was no interest. This poor couple were unable to move for 4 years when the HA eventually came to their senses and agreed that the sale price was too high and allowed them to drop the price.

That is the extreme end of the scale. I never heard of similar issues locally, and though they usually take longer to sell, shared ownership does sell on around here.