Shared Ownership - to buy or not to buy

[makeitmakesense]

Currently in a bit of a complicated situation.

I'm on mat leave with DS1 and pregnant with DS2 who is due in Dec. Myself, OH & DS1 currently live in a TINY 1 bed social housing flat in London. We have been on the transfer list for 5.5yrs (first for a bigger 1 bed, then since falling pregnant with DS1 for a 2 bed) but if anyone knows about social/council housing in London they will also know that transfers are pretty hard to come by and it's unlikely we will get anywhere before DS2 makes an appearance.

The 4 of us cannot live in our current flat as there simply is no room for another person (no matter how small they may be, they still need STUFF!) and with me being on mat leave and about to go on another mat leave (will not be returning to work in-between) our mortgage affordability is pretty low and not enough to buy a big enough property in London.

So I've been thinking about shared ownership - we would be FTB and have enough saved up for a deposit, legal fees etc. And my partner would be able to cover mortgage & rent on his salary. The issue is I keep reading about people saying how it's a 'scam' and you should just wait until you can afford to buy outright.. Of course I would love nothing more than to be able to buy 100% of a property, but we don't have the luxury of time or money on our side at the moment unfortunately.

So I'm looking for any kind of advice / general input from people who have bought a property through shared ownership and whether they would recommend it (yes, no, why), is it a scam or can it genuinely help you get a foot on the property ladder, any lessons learnt, recommendations etc. basically anything that might be helpful/insightful!

Appreciate it's quite late in the day and even if we go down this route we may not get a property in time for the arrival of DS2 but I would feel a lot less stressed working towards something, instead of being in limbo waiting for a 2 bed council property that may not arrive for another 2/3+ years!

Thanks in advance!

I went down the shared ownership route, in 2006. Staircased to 100% about ten years later. Have just sold and made a nice deposit for a house. Can't find a house, but that it due to lack of stock and not liking anything rather than no funds. I don't understand why people think it is a scam; maybe it is if you buy a very small share with no intention of staircasing. There is no way as a single female I would have been able to get on the property ladder in Greater London without shared ownership.
What I would say is keep a look out for:

• Ground rents and how this increases (this applies to any leasehold property, I am assuming you are buying leasehold), and also service charges. This is very important, particularly look out for "onerous" ground rent (google it, loads of info), it could make any flat unsellable in future
• Cladding, and balconies (again loads of information out there)
• Lease, make sure you are not buying a short (

We recently sold our flat which we bought with help to buy - worked for us, we had a home big enough for our family, ground rent and service charge were manageable and our new build flat held it’s value plus a bit when we sold recently, plus we had paid off some of the mortgage so built equity while we lived there.

@areyouhavingagiraffe was the staircasing expensive to do (legal fees etc) or was it manageable if done a few chunks at a time?

Also how easy/hard was it to sell? I've read it can be tricky but I guess that's if you don't own 100% of the property?

Thanks for the rest of the info - really helpful will def look into the things you mentioned.

Staircasing was easy, I don't remember the fees (think solicitors fees etc), so couldn't have been extortionate. My flat sold within a few days. The fun and games start when you go through the Sale enquiries from the Buyers Solicitors. Leasehold properties always take longer than freehold since there is a third party. Most solicitors are now over-cautious regarding ground rent, my buyers' solicitors kept raising it as an issue and I have to fight it. I was lucky my Buyer was not frightened and didn't get scared. I made £160,000 on my Sale, which is not sitting in my bank account, waiting for me to find me a berluddy house that I want to buy!

Sorry, just to say the £160K includes any equity. So essentially that was the cash I received following me paying off the remainder of the mortgage

We bought a flat through shared ownership and it worked really well for us. After 10 years, we had enough equity to move to a small (non shared ownership) house.

The reasons it worked for us:
We were able to buy 50%, which meant we found build up decent equity.
When we moved to a house, we were willing to downgrade in order to buy a house, so the house is smaller than our flat, and in a less nice/further out part of london.
Our block was small, so it stood out compared to the many other shared ownership flats in massive blocks, making it easier to sell (and a pleasant, friendly place to live).
The rent and service charge was reasonable.

I would always say to someone to who is considering shared ownership, that it is great as an alternative to private renting, as it gives you the stability that private rent often lacks. And you get the opportunity to build equity. But the former point doesn't apply to you.

First things first, speak to a mortgage broker, which you can do for free. You might find that you can't borrow enough anyway. Lenders take into account nursery fees when calculating affordability. Which is why we moved house, and waited for dd1 to start school, before trying for dd2.

I think it very much depends where you are and on your circumstances.

But if you do it, I’d do it on the understanding that whatever you buy might be your “forever home”. If you can find something affordable that you’d be happy to be stuck in, you’ll avoid a lot of the issues that could crop up.

If you would have to choose something and hope to sell and move later, it’s a lot more risky. Some people do well at getting in & out, others get absolutely stuck.

I wouldn’t do it, if I’m honest, but I do own a flat outside of London and plenty of people on MN wouldn’t touch any type of flat with a barge pole, so it’s horses for courses to a certain extent. You’ve got to take the risks that seem worth it for you.

I’d question if you’ll make it in for December, though. I’m due in December too, and midway through a sale, and still worried we’re going to cut it fine!

If buying a flat beware South facing- these are often very well insulated properties.

I've solved it by buying an air conditioner, but still. Having said that, heating costs are lower and newer builds are generally very energy efficient.

If you buy you have got to have an exit strategy.

Don't buy into a huge block on a huge estate - you will find lots of competition when it's time to sell.

Ask to see service charge forecasts and sinking fund forecasts.

Try to avoid mix tenure blocks - sadly it only takes one to ruin the estate ( mixed tenure also includes those who buy to let or air bnb not just council/HA tenants)

And before anyone's says I'm being a snob - I've worked in housing for nearly 15 years and unfortunately have had to deal with many a shared owner that has been let down.

Try to avoid anything with new dangled technology - no one looks after these properly or at least ask what is the maintenance schedule and who is responsible.

And lastly ensure you have read and understood your lease.

Shared ownership is a trap and nightmare in a declining market. It only works if prices rise. Be wary of the market in London atm. (Been there and have the stressful tshirt).

Its all in the fine print. The terms and conditions and what rent (and how it increases) or service charges (again and how they increase) are critical.

Not all schemes are the same. Indeed there are so many schemes out there its difficult to tell someone yes or no. Some are good. Some are shocking and should be outlawed.

Get a good solicitor with experience in shared ownership if you do buy (don't cut corners on legal).

The mortgages available for shared ownership are limited and don't give as good rates.

If you and/or your partner are unlikely to have a significant career progress, you may struggle to staircase / get another property further up the ladder. I echo what a previous poster said about considering it might be your forever home. Shared ownership can be harder to sell for a variety of reasons. It might be better to see it as an alternative to renting which is more security rather than an investment as such. (particularly if there is a market crash).

We had issues with both staircasing and selling at 100% (needed a release to sell our own home from former housing association). Staircasing was not as easy nor straightforward as it was made out to be (see above comments about declining market which is surprising)

Check if its a for profit housing association or a not for profit one.

How likely are you to move out of the area? Remember you can't sub let. It can make relocation more difficult if you need it quickly.

One issue with selling on is you can't take offers. Its a set price which is non negioable. It can be problematic to get a reduction agreed if you are not getting any interest in selling. I have heard of someone getting stuck for 4 years because the HA refused to drop the price of their property. (See point above about relocation - but also applies if you run into an issue where financially you have to sell).

It worked for us (just - but not easy and we are not typical). For others on our estate it caused a lot of heartache and problems.

DO YOUR RESEARCH into the scheme you are looking into - don't rely on others knowledge or experience as because they are all so different and they rely are heavily dependant on your individual circumstances (to a degree which is more than full ownership).

With hindsight would I do it again? I find this a hard question. Possibly. But I might consider more alternatives than I did at the time. It wasn't quite as good as the promise.

Dealing with housing associations is dire. Dreadful organisations which remind me of badly run parties in drinking establishments.

As an example of PPs post my HA says if you have to sell via the Housing Association for first 3 months, if no interest can then sell on open market.

I found staircasing mixed- pretty straightforward but a pain having to pay the fees again (approx 1.2k). Some schemes allow you to buy 1% a year for 15 years at the original purchase price which is good, with no fees.

Be careful with new builds, they can be over or under priced. Mine was underpriced as it took so long to complete, I was shocked when I went to staircase 18 months later it had risen 12%.

In your shoes I would check out Help to Buy. The schemes have similar financial benefit. In Help to Buy it can be for open market and you get a loan which you only start to pay back after a certain time has passed.

flats near me are mostly empty...rent and service charge portion is basically a full mortgage....maybe look cheaper area to buy a house etc outright...i would....and no leasehold restricitions etc etc.

@MistySkiesAfterRain

As an example of PPs post my HA says if you have to sell via the Housing Association for first 3 months, if no interest can then sell on open market.

I found staircasing mixed- pretty straightforward but a pain having to pay the fees again (approx 1.2k). Some schemes allow you to buy 1% a year for 15 years at the original purchase price which is good, with no fees.

Be careful with new builds, they can be over or under priced. Mine was underpriced as it took so long to complete, I was shocked when I went to staircase 18 months later it had risen 12%.

In your shoes I would check out Help to Buy. The schemes have similar financial benefit. In Help to Buy it can be for open market and you get a loan which you only start to pay back after a certain time has passed.

Help to buy is a scam. It benefits house builders not people struggling to buy.

The problem is they effectively put a 20% premium on help to buy property. And after the 5 year term of being interest free you have to start paying back the interest on your loan. Unfortunately this can create a problem if you want to sell, because you are paying the extra interest but your house on the open market won't necessarily bridge the 20% premium you paid at this point. So effectively you can end up in negative equity trapped with a loan in with the interest is piling up.

There been warnings about how the scheme is flawed and its one of the next big housing scandals to break. At the moment its known about by politicians but its just bubbling under the radar of most people.

Having looked into the details of the scheme and worked out how it works and run the maths wouldn't touch it with a barge pole.

And I've had a shared ownership house and certainly know its not a trouble free option and has a lot of pitfalls and has been particularly problematic for some with spiralling interest on service charges and rent (our rent plus mortgage was higher than our mortgage when we staircased to 100% and was one of the reasons we did it - it was a struggle to do and not an option open to a lot. I personally think its outrageous and that rents should be capped rather than allow an annual inflationary rise indefinitely).

@RedToothBrush you've raised some really interesting points that I wouldn't have thought of so definitely opening my eyes and giving me food for thought as to whether it's the right solution for us.

Did you need a release to sell even though you owned 100% of the property? And would the housing association still get first refusal even though they no longer owned it? And once you own 100% are you still only selling to other shared ownership applicants or can the flat go to anyone on the open market?

I think we would definitely be able to staircase over the next few years once I'm back at work, but I don't think we'd look at it as our forever home so maybe that's something we need to consider in more depth.

Did you need a release to sell even though you owned 100% of the property? And would the housing association still get first refusal even though they no longer owned it? And once you own 100% are you still only selling to other shared ownership applicants or can the flat go to anyone on the open market?

It depends entirely on the small print of your terms and conditions when you buy.

We found out at the last moment of selling our 100% owned property that there was a clause in our agreement that said if we staircased the HA had first rights on purchasing the property back to use again as shared ownership. It wasn't picked up by our solicitor until we were trying to go through the process with a buyer we already had through the open market! No one had advised us of this when we first bought or when we staircased. And then the HA dragged their feet on it because naturally given it wasnt their responsibility anymore they couldn't be bothered. As it was they had no interest in buying out the property which was quite fortunate. Legally we couldn't sell until we got the sign off either. The new owners are now free of the HA clauses going forward.

I think with hindsight having staircased it felt easier to do than move somewhere else at the time. We loved the house and location. But it stretched us dreadfully because although the property had dropped in price and we had put a 10% deposit down and over paid the mortgage and doubled our household income and were paying more in mortgage and rental combined than the new mortgage we struggled to get a mortgage. We found that although the total value of the house was now (not real figures) £175k rather than the initial £200k we were effectively in negative equity. If the house had been valued at £185k with the exact same figures we would have less problems buying it!!! The £10k saving also put us on a higher interest rate. Nuts i know. Even the mortgage lenders were saying the same thing that we were a really good low risk potential customer but computer said no.

We ended up borrowing £3k from my parents to bridge the gap to get out of the rental issues overwise we'd have had to save for several more years or wait for the property market to go up again.

In hindsight we may have been better at this point to move to another place slightly cheaper although we would have incurred moving costs doing that. I think we did the right thing. DH disagrees.

My point being here about how you need to under that shared ownership only really works in a market where house prices are going up. Otherwise you can find yourself in a double negative equity / rising rent or service charge problem if thats the terms of your agreement.

One of our neighbours has found it difficult and had to eventually switch to an interest only mortgage - effectively making it a home with security of ownership and no chance of being kicked out like she would have in a rental - but she will never own the house outright or have it as an investment. At one point she had also briefly moved in with her bf and illegally sublet to a friend.

I know some schemes dont require you to pay rent at all though. Others have hefty service charges (ours was actually very small - others on the same estate in the same houses had a less favourable agreement and had real issues with a spiralling service charge as they bought after us. I know it made it much more difficult for them to sell as the t&c pass to the next person if they buy as shared ownership)

Hence me stressing above to not skim on a solicitor for shared ownership! Get them to properly go through the contract with you so you fully understand. Don't trust whoever is selling to you. We were told by the builders it was leasehold bit would turn freehold on completion of the building of the estate only to find this wasn't true in final agreement. We also found there were last minute changes to rights of ownership and access on the shared carpark which were quite important.

Its easier now than it used to be as there are more solicitors who have experience in this area. This certainly wasn't the case when we bought in 2007. The same goes for mortgage brokers and lenders too. We found we were always eligible for the best mortgages as there was a clause that wasn't immediately obvious to the public about it not being available for shared ownership.

The best joy we had with the HA was when we staircased. They had never done one before. We had had little contact with them as we never needed to so it came as a bit of a shock to find out just how bad they were (i feel the pain of housing association tenants saying this). They were incompetent. We realised how useless they were and stressed to them that we no longer had to pay rent and please could they cancel it from their system as we were worried they would cock it up. We cancelled the DD from our end as we needed to.

Lo and behold we got a nasty letter threatening us with legal action and how they had downgraded our credit score for non payment of rent on the house we now owned 100% and they had no financial claim over. DH had fun reading them the riot act.

I would also echo what a previous poster said about mixed ownership types. Our area of the development was shared ownership and full ownership and that was fine. Another corner of the same development did have housing association tenants, shared ownership and full ownership and that had problems with antisocial behaviour from the HA tenants quite sadly. As much as i believe in it in theory, if you are investing your financial future in brick and mortar you might want to consider how it might affect you and the value of your house (saleability).

Having said all the above which sounds negative, dont let it completely put you off the idea!! It did work for us. We wouldn't have been able to buy anywhere in the area if we hadnt. That means we would have had to either waste money on rent or move somewhere cheaper and not as good in terms of location (which would later have been problematic for career opportunities). I loved the house and was sad when we did eventually move.

Obviously there are also risks to buying a full house too. The main issue with shared ownership is its not ideal and full ownership is preferable in most scenarios because there are simply more risks with shared ownership even though you aren't taking on a larger loan.

It definitely has a purpose and i think more recent shared ownership schemes have to be more favourable because it began to be noticed how flawed some schemes were (be wary of older shared ownership properties for this reason) and I definitely think that its less flawed than help to buy.

Just make sure you know what you are getting, what you want out of it in both best case / worse case scenarios and whether this would be better than renting indefinitely.

I personally think its (generally) a good thing though ive heard some horror stories (but you can buy outright only to find you have the neighbours from hell and it turn into a nightmare in other ways). It does give more security than renting. And that is a huge thing for many.

I cant stress doing your homework first strongly enough.