Shared ownership houses

16
Found 16th Jun
Hi, I’m viewing today a shared ownership house which is a brand new 3 bedrooms house costs £142000 and if I pay 35% will be £49,875 which I already have without mortgage and would pay for it and pay rent on top. As I spoke to the agent and he said I can own the house which I can pay for or increase the percentage whenever I have the money. My question is there any concerns and shared ownership that I need to know before accepting the house?

Thank you in advance
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My son bought his first house this way and has been very satisfied with the arrangement.
Bbc money Box podcast covered shared ownership this week. Go listen
My understanding is that you pay above market rate with shared ownership, so the price for a third is more than if you bought the house normally. The rent may also be above market rate. You need to read the terms they provide you carefully and in full, maybe with an independent advisor as well. I would expect every company does it differently.

Not sure what your situation is, but it is worth comparing the rent cost to how much you would pay with a mortgage on the whole property or similar (if your earnings allow that). With the size of deposit you have you'll have access to the best rates so would pay well under 2% interest. Doing it that way then you earn more equity with every payment rather than just paying rent, and this puts you in a much better position for the future.
Edited by: "delusion" 16th Jun
this is worth a read https//ww…hip

I'm very pleased to hear parsimony have a good word to say about this kind of arrangement. Its the first time I've ever heard a good word be said about it. If parsimony wouldn't mind confirming that (s)he has no interest in this kind of arrangement (i.e. isn't a builder or has interest in such a firm) that would be even more re-assuring. (Sorry parsimony but the internet is full of fake reviews and yours is the first good review of shared ownership that I have ever heard).

You may be offered one of their choice of solicitors at what looks to be a fantastic price. They will never warn you against the perils of the contract, just mention them so as to say they told you about it when you later complain (you will complain later). What you need is a solicitor who will WARN you against certain clauses and explain the true downside of them. It is impossible to stress sufficiently that you should get your own solicitor.

Research complaints against the seller/builder.

If its a leasehold house, your solicitor should a) advise against it and b) tell you of the intention to outlaw the practise. Never forget who funds the party that is promising to outlaw the practise. It begins with T (or is it a C?).

Moneybox is a good source of info as Wayners says. If they sound a little sceptical, they mean 'do not touch it' but can't say it.

Put together a spreadsheet of how much an ordinary house will cost you on a mortgage and how much a shared ownership scheme will cost you.

Good luck
If you can afford a third without a mortgage then buy as much of it as you can on a mortgage, a mortgage will be cheaper in the long run than the rent part. Just be wary you maybe charged fees associated with buying out more of the share so it’s better to buy as much as you can afford at the start. Additionally since your buying a percentage you only gain a percentage of any price increase when you sell and to buy out the remainder will cost you more as it too is a percentage of market value.

Assuming:

Current price 154k

35% = 53,900

If you buy your 35% and property prices doubles your 35% will be worth 107,800

The remaining 65% is currently worth 100,100 and in the event of the same scenario would be worth 200,200

Currently to buy say 70% would cost you 97,800

If you waited and bought 35% now and then another 35% in the scenario above it would cost another 107,800 meaning that overall you would have paid more than the original value of the house but own only 70% of it.

There’s no guarantee property prices will continue to rise but it’s a highly likely scenario over time given than the house I live in has quadrupled in value since it was built in the late 80’s and I’m not in London or in the SE.

My advice is to stretch yourself as much as you feel comfortable with remembering obviously whatever happens you need to pay the mortgage and take out life cover in case something happens to you or your partner or both so that your kids still have a home.
Check how much the service charge are. Flats near me want £192 a month which is ridiculous for what is basic insurance, water rates and the lawn being mowed monthly.
One more thing, make sure it’s freehold if it’s leasehold WALK AWAY!
cmdr_elito36 m ago

One more thing, make sure it’s freehold if it’s leasehold WALK AWAY!

Shared ownership is never freehold.
wayners11 h, 5 m ago

Bbc money Box podcast covered shared ownership this week. Go listen



Agree - it was an interesting - and eye opening - programme. Is it repeated tomorrow?
mas9924 m ago

Shared ownership is never freehold.


If you purchase the remaining percentage, does the leaseholder become the freeholder automatically, or do you just get the right to then purchase the freehold?
mas9931 m ago

Shared ownership is never freehold.


Yes they are, there have been problems with some being sold as leasehold (I’m talking about houses rather than flats). The leases then cost more than the house after they are sold to investment companies.
If you can get a mortgage for the balance then do that, don't go for shared. That way you can haggle on the asking price, get a good fixed rate mortgage deal, not throw rent money down the drain and not have to worry about rate rises or the value of it going up and making it difficult to buy the rest. The agent is just after his commission and is not interested in what is best for you so be wary about what he says and take proper financial advice if in doubt. And as others said check out the leasehold/freehold situation
mas9912 h, 38 m ago

Agree - it was an interesting - and eye opening - programme. Is it …Agree - it was an interesting - and eye opening - programme. Is it repeated tomorrow?


No idea if repeated but you can go on the BBC website and listen anytime
If you have nearly 50k then go straight for a mortgage, rates will be good as you have a very good deposit.

Avoid shared ownership as selling can be a nightmare and costs you way more. You could end un in negative equity by the time you cost everything up.
cmdr_elito14 h, 55 m ago

Yes they are, there have been problems with some being sold as leasehold …Yes they are, there have been problems with some being sold as leasehold (I’m talking about houses rather than flats). The leases then cost more than the house after they are sold to investment companies.


Go listen to that BBC program.
I'm talking houses as well.

You seem to end up in a strange hybrid with an odd rental agreement - its actually easier to be evicted and lose everything that you've put into a property with a shared ownership than it is with normal rentals.
Edited by: "mas99" 17th Jun
Toptrumpet15 h, 0 m ago

If you purchase the remaining percentage, does the leaseholder become the …If you purchase the remaining percentage, does the leaseholder become the freeholder automatically, or do you just get the right to then purchase the freehold?


The leashold and freehold are seperate things. I guess it will depend on the specific set up and contract. Bear in mind that many of them are not intended to allow you to buy the whole thing. The schemes were introduced to help provide affordable homes. If the property passes into your ownership then its gone out of the affordable scheme. Given that a lot of these are build because of planing rules I'd not expect to automatically be able to buy the whole thing.
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