Is part ownership too good to be true?

[Sheknowsnodifferent]

Considering buying a part ownership house and I was wondering if they are a ploy to get you to buy and then hike up the prices on the rental part. This isn't a flat so service charges shouldn't apply. Does anyone have any experience of a part buy/part rent home? Thanks

They are normally overpriced I think. A friend bought a part buy on a new build that is valued at 400k. No way on gods Green Earth is that house worth 400k! So I assume they inflate the price.

I think it's selling it that's an issue.

Yes selling on CAN be difficult and just because it’s not a flat doesn’t mean it’s not lease hold so go over everything with a fine tooth comb

There certainly have been cases where people end up stuck between a rock and a hard place.

All it takes is for the company to up your rent, or service charge, to the point it's too expensive and a) you can't afford to live there any more b) you can't sell because it's not an inviting prospect for someone else

You need to check re service charges. Occasionally houses attract service charges for shared private roads, gardens etc.

What do you mean by “too good to be true?”There’s no “ploy” or catch with shared ownership, it’s a mainstream home ownership vehicle. There will be clear terms in your lease regarding the rent on the share you don’t own and by how much it’s allowed to rise - they can’t simply e.g. double it whenever they fancy.

But whether it’s the best option for you depends on why you’re considering it. If it’s mainly so you can get something you perceive as being better and newer than you could afford outright on the open market, then you do have to factor in that it’s also an expensive way as you’ll be paying the rent element; and additionally, unless you’re in a very popular area, then they can take longer to sell on, particularly if you’ve purchased a relatively high share.

Shared ownership has an absolutely valid place in the market if it’s the only means by which you’re ever likely to afford to buy because you have little chance of ever saving enough of a deposit or earning a high enough salary to get the mortgage you need for an outright purchase - which is the reality for many people in the most expensive parts of the country earning average wages. The downsides still remain, but many people decide they are better on balance than the downsides of private renting potentially forever.

It’s good in London because you can live somewhere decent, and often sell your share for a decent profit when you can finally afford your own place.

I bought a new build on a shared equity "affordable housing" scheme. I looked into it extensively with my financial advisor. He said you have to be careful as there are many different types of shared ownership and some can be very restrictive.

However - my particular one was the most flexible and he advised it would be a good move for me. It got me on the housing ladder and, a couple of years down the line I bought out the government share and now own 100% of the property. Part of the agreement was that I was able to do this at anytime. It saved me throwing money away on rent for those years and the value of the property has gone up significantly. I purposely bought out their share before doing extensive renovations as it would be madness to increase the value before hand as I'd then owe them more money (as government share is % based).

My advice would be to speak to a financial advisor. It can be complicated as there are so many schemes but thankfully my advisor specialises in shared equity properties so was fully aware of all the ins and outs. You also need to be aware that not all banks will offer mortgages on shared equity properties - again my FA sorted that all out for me and got me a great deal.

Looking back it was definitely the right move for me but I'd definitely recommend speaking to a specialist advisor first.