Buying a house - Shared ownership

[MontyVeda]

Anybody bought a 'shared ownership' house, or has any experience of the idea?

There's a new development on the edge of town offering 25%, 50% and 75% shared ownership... but what I'm wondering is just how secure it is.
What happens if it needs a new roof or significant structural repair? Is it a shared cost or something that the resident owner would have to fork out for in full?
What happens if/when the other owner wants to sell their share?

 

[FrankCrank]

Had one way back on first leaving parents. Part of the deal was paying into a monthly maintenance fund to cover all these types of things.
Ours was quite extortionate given the little maintenance they actually did, but guess they vary per project.

 

[Sharky]

My son bought his first house on a shared ownership basis. It meant that the deposit he needed was only the % amount of his share. So was a good way to get started on the housing ladder. But he had to pay rent on the share that wasn't his.

Overall, I think it worked out cheaper than the mortgage that would have been needed to buy the house outright.

But you need to study the T&C's, covering maintenance and what happens when you want to sell.

Also, if you want to sell while new builds are still available, your future sale price may be capped by the price of the new builds, which could be more attractive.

 

[bikingdad90]

With shared ownership you own part of the property and the other bit is rented. It is based off market value at time of sale and means tested.

Your rent increases in line with CPI +1% and you don’t normally get a downwards adjustment.

Generally you are treat like a leaseholder and have to pay for most things.

There are model leases available online here
https://www.gov.uk/government/collections/affordable-homes-programme-2021-to-2026-model-leases

The newest lease model offers a minimum of 10% and either buying 1% per annum for 15 years or buying in chunks. The older model starts at 25% and minimum staircasing percentage is higher.

If you later decide to sell, you technically get bought out by the landlord and they then resell the share either for the same amount or a higher percentage.

 

[bikingdad90]

There is also another product called rent to buy where you pay 80% of the market rent and the 20% is used to save for a deposit.

The tenancy is usually around 5 years and you either buy or move onto market rent or end the tenancy.

 

[MontyVeda]

Thanks for the replies. It looks like Shared Ownership isn't a viable option for me.

I shall have a look at Buy to Rent and see if that's viable, or even available in this area

I'm in a tricky situation where I'm finally earning enough to get a half decent mortgage but I'm only ten years from retirement

 

[Sharky]

Buy to Rent

I thought this option is when an investor buys a property outright, with or without a mortgage and then places it on the rental market for an income, to off set the mortgage costs.

 

[bikingdad90]

Kind of @Sharky.

The one I am on about is a product designed to get people on the housing ladder, so you can buy outright or move into shared ownership at the end. It is sometimes called buy in time and often by social housing landlords.

The not for profit or for profit landlord is the investor and can be backed by a funding partner. They take a risk on if the tenant will convert releasing their capital and share the market value risk.

The other product is build to rent/buy to let which is purely for renting out

 

[T4tomo]

I'm in a tricky situation where I'm finally earning enough to get a half decent mortgage but I'm only ten years from retirement

Yeah that is quite tricky as you arguably don't want a 25 year mortgage if you're planning on retiring in 10 years, unless you have a good pension provision waiting and the 25% tax free lump sum will pay off your mortgage.

 

[cyberknight]

I looked at shared ownership on new build at 25 % shared , 75% owned and I was looking at another £300 a month in rent on top of the mortgage

 

[wafter]

I briefly considered shared ownership but quickly discounted it since it appears to be littered with caveats that are potentially detrimental to the "buyer".

I can't remember the specifics but IIRC the terms can be quite restrictive, onerous and biased against the best interests of the "buyer". A few things I do recall are that there's often no option to buy the full 100% share of the property, rents can sometimes be not a lot cheaper than a mortage (and offer zero benefit in comparison) while I've heard of issues when selling and I think you can potentially get stitched if the property falls in value... plus there are all the issues associated with leasehold properties that you'd otherwise not be subject to if buying a house through more traditional means.

On top of that I'd be very wary of buying a new build as they always seem massively overpriced / subject to a lot of depreciation in the first few years - especially now when house prices are stagnant / potentially falling in real terms. Plus there seem to be many quality issues with new builds; which probably aren't getting any better in the face of rising labour / material costs and falling sale prices.

I'd just chalk it up to another government scheme to be avoided (along with "help to buy") - a cynical exercise to maintain property prices and line the pockets of developers / other vested interests under the disingenuous guise of helping those at the bottom of the food chain.

 

[Pat "5mph"]

I'm in a tricky situation where I'm finally earning enough to get a half decent mortgage but I'm only ten years from retirement

Tbh, I wouldn't buy a property at your stage in life, unless your motivation is to leave something to your loved ones.
Even in that case, imo, it's a bad idea.
If you stay in the rental market, either social or private, once you retire you will get help with rent and council tax.
Should you need to move to a care home, there won't be a property that must be sold to pay the costs.
A bought property needs repairs and maintenance, I'm not saying continuously but you must have a sum set aside for this after you retire.
I have set aside a little over £10,000 for a 2 bedroom flat, but I'm doing all possible repairs and renewals while I'm still working.
If you rent and, say, your boiler needs changed, your landlord must take care of it, if you own the property you are on your own.
Granted, a rental property is often offered in somewhat shabby conditions, but it will cost you much less to fix the cosmetics to your liking than to take over a new property and start with new kitchen, bathroom, windows, etc.
Imo, I would save as much as you can now that your wages are better, then once retired, use the savings to treat yourself to things that your state pension won't stretch to.
Of course, join your new employer's pension scheme too, 10 years of employer's contributions is not to be sniffed at.

 

[MontyVeda]

Tbh, I wouldn't buy a property at your stage in life, unless your motivation is to leave something to your loved ones.
Even in that case, imo, it's a bad idea.
...

My motivation is to give myself housing security.
Council housing is in very short supply and there will always be people more in need of it than me.
Private renting means living at the whim of the owner. If they decide to sell then I'll have to find somewhere else to live. That could happen every year or two and there's nothing I can do about it.
The only way I see that I can give myself housing security in my later years is by buying somewhere.

 

[simongt]

We had a 50 /50 shared ownership house from new. No particular issues with the 'landlord' except when they informed us we owed about £1k in back rent. I asked them to prove that we'd been informed of the various rises in the rent which they couldn't, so no more was ever heard.
As we now own the property outright, sorted - !
As a guide, the property; a 3 bed semi, was valued @ £50k when we first started. When we staircased the balance to buy the other half fourteen years later, the house was valued @ £200k. - !

 

[CentralCommuter]

What does staircases the balance mean?