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Ginger Badger

Shared Ownership - Again

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Firstly sorry for starting a new thread on shared ownership when several already exist, however hopefully this way we can have a discussion on whether shared ownership is a good idea, bad idea or whether it really depends on your personal circumstances.

From reading this and other forums it seems that people are either passionately in favour of shared ownership arrangements or conversely absolutely despise them! Like many 'newbies' to the housing market I initially thought they were a good initiative, however many of you have identified problems which I'd like to gain understanting on...

I have a few questions below if you could let me know your thoughts/experiences that would be great. Plus if you havea had a good/bad experience do tell me the name of the housing provider - I'm sensing there are some good/bad ones. I am looking at a property with One Housing Group, anyone got any experience with these guys?

1. Rent increases. I am looking at a property that has an annual rent of 2.5% of the property's un-owned value. To me that sounds reasonable however some of you have stated that the rent may increase suddenly year after year to unmanagable amounts. Now the housing provider that I am looking at says in their terms that the rent can only go upto by RPI + 0.5% per year up to a ceiling price set by the government for prices in the area which is not much more than the current rent. Therefore, as these terms exist, how have housing associations got away with raising rents in the past?

2. Service charge increases. I have noticed that service charges on shared ownership properties vary greatly from the outset. The property I am currently interested in has a relatievly attractive service charge. However many of you have stated that the charge may inflate after the first year - sometimes by over 100%! The assoication I am registered with says that the service charge is independently audited every year to assess its value. WIll this mean that I can expect the service charge to always be 'fair', or does it not just work like that?! Again experiences and associations concerned would be great.

3. Purchase costs (i.e. legal, mortgage, other fees that I haven't thought of!). What would I be paying in legal fees to acquire the property? Are there any competitive mortgages I can get for shared ownership properties? I have a healthy deposit so would consider myself maybe lower risk than some. Stamp duty - the value of the flat is over the minimum threshold but the value of the share is not - would I be liable for this now? Don't really know much about things in this area.

4. Selling/staircasing. A number of you complain that shared ownership properties are hard to shift and I can see why as it is a niche market controlled by the developer. I don't however think that this is unfair because as it is social housing they have right to sell it at a 'fair price' to another individual who has a need for a shared ownership property. However will the price always be 'fair'? The housing association I am looking at say that the price is always independently valued by a RCIS surveyor. Does this mean it will be 'fair' or are there still ways of making me part with it below market value? And then the exact same thing with staircasing. Again they use an RCIS surveyor - can I be confident that I will not be paying an over-inflated value for a greater share? What fees would typically be involved with staircasing?

5. Maintence. I understand that it is my responsibility and I am happy with that. However with the property being a new build complete with new build guarantee, what is the worst that could happen in terms of maintenance? I'm guessing with new builds that there a lot of 'niggles', but less chance of an absolute catastrophe? Any info most welcome as I don't have much knowledge in this area.

I think that's it for now. I am considering shared ownership but only if I can reassure myself on the points above. I understand that many of you have been caught out by suddenly needing to move and findinbg that you cannot shift the property quickly or that the property market has dropped and you are faced with negative equity due to the low deposit required and in these two cases shared ownership is not a great idea. Personally though I am looking at a flat in a location I like and that I would like to live in for a while and that I have a substantial (but not excessive) deposit to put down. What am I missing...???

Your considered views much appreciated...

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Shared ownership was originally designed to help FTBs in a time of ever rising house prices. In a falling market they are beginning to look a little pointless as 100% ownership becomes more affordable. Shared ownership combines many of the disadvantages of renting with many of the disadvantages of homeownership.

From a buying and selling point of view, you are correct that HAs use RICS surveyors, but they can and do get prices wrong. There were a large number shared ownership properties in one development in Peterborough I am very familiar with, which were sold for sky high prices shortly before the credit crunch, with surveyors backing of course, now only worth 70% of what was originally paid for them - so they are not immune from the HPC. If you want to sell for more than the surveyor says (or even for less to speed up the sale if values drop) then you have a battle on your hands. Also it is very often the case (see my other posts) that the values a vendor and buyer perceive as a fair price on any property can differ wildly.

In some circumstances a buyer will still pay over the odds for a property. A property on the market for £x can often sound quite expensive but sell it for £0.5x and it can quickly sound very cheap indeed - I have very recent practical experience of this. Equally we have had a very reasonably priced shared Eq flat that we haven't been able to shift for love nor money.

Solicitors always charge more for dealing with a shared ownership property, you will be looking at £200-400 additional fees per transaction. You also state that the property is over the stamp duty threshold. I assume you mean the £125k threshold but I am also assuming you are an FTB and would qualify for exemption up to £250k. If the total price for the property is over £250k then it doesn't sound very affordable to me! Further, if you aren't an FTB, then you run the risk of the HA turning your application down. For more info on stamp duty see here HMRC.

For staircasing I would imagine you will be paying solicitors fees, survey fees, mortgage arrangement fees, further stamp duty and possibly an admin fee to the HA.

Most new homes come with a 10 year NHBC certificate, so yours should be built as well as the rest of the houses on the site. Shared ownership homes on private developments are often built as an afterthought and will usually feature lower quality fixtures and fittings, however I have seen some very good quality equity share homes in my time. The worst that will happen is that your house could fall down :ph34r: , but then that is why you take B&C insurance when offered.

My considered advice? Shop around. If you are an FTB, every agent in this land will kill to have you as a registered buyer at the moment. Site managers at all the new homes sites in your area will bend over backwards to accommodate you, and will no doubt offer a plethora of added extras to entice you to buy. You might be surprised how far your money will get you in the open market.

Good luck.

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If I had the inclination then shared ownership would be a great racket business.

I buy a house then you get to return most of my cash when you buy some of it from me. I charge you rent interest on the remaining amount.

So now I am part owner of a house and will be entitled to a percentage of the profit when it is sold at a price that I agree to. But I am not all that interested in profit on the cash since I am getting a monthly return on it anyway and the best bit....if prices collapse I do not share any loss, my money is guaranteed and you still have to repay the outstanding amount to me.

I also get to charge you maintenance fees and jack up my interest rate when it suits.

Edited by richyc

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If I had the inclination then shared ownership would be a great racket business.

I buy a house then you get to return most of my cash when you buy some of it from me. I charge you rent interest on the remaining amount.

So now I am part owner of a house and will be entitled to a percentage of the profit when it is sold at a price that I agree to. But I am not all that interested in profit on the cash since I am getting a monthly return on it anyway and the best bit....if prices collapse I do not share any loss, my money is guaranteed and you still have to repay the outstanding amount to me.

I also get to charge you maintenance fees and jack up my interest rate when it suits.

If prices go down, then as far as I'm aware the cost of buying the remaining share goes down.

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Shared ownership is indeed a minefield, but I'll attempt summarise for you what I have learnt:

Shared ownership comes in the following forms:

1) Government backed - This is the best bet since rate rises are often set in stone and put into the contract, an example of this would be HBD scheme (Home Buyer Direct).

2) Housing Associations - Much like the Government one, but at a local level.

3) Private shared ownership - This is where it gets complicated. Contracts in these sorts of agreements are drawn up by lawyers representing the parties involved or are handled by property management sharks with their £70 admin fees and such. They often have loopholes to stop any loss coming the other persons way (you are usually dealing with a landlord or private property firm here), my advice is to stay away from these. It should also be noted that these private firms usually keep at least 5% of the property for themselves, which you can never buy out.

I currently only have real experience with the HBD scheme (which I think it is being scrapped??) you get 30% of the house value from the Government and don't pay anything back for 5 years, after this time you pay a set amount back each month until you pay it off (note that what you pay back does not reduce the loan, you are paying a capped interest) the amount you pay back can only reach so much before it can rise no further.

Under the HBD scheme you can staircase out by increments of 10% at a time (or more), it is done on the current market value of the house, so if the house price goes up, you pay more, goes down and you pay less (in theory).

As for the other items, the house is 'yours' by name so you can do whatever you want to it and are responsible for all costs associated with it i.e. insurance, council tax, repairs, etc.

Finally, under this scheme your first mortgage (if you take one) will have higher rates than if you brought the house alone so be wary of this.

Hope this helps.

*EDIT* And when you sell you pay back the loan at what the house is worth at the time you sell, so if it sells for less you pay back less (again, in theory). You should be careful here as the small print specifies that the Government can take back any losses from you directly if they think you can afford it, as per usual this is very vague and depends on if they want to take back the lost money or not.

Edited by retz

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Question:

Does Shared Ownership make more sense of the the 50 or 75% owned section isn't mortgaged? :unsure:

If you can afford to buy the share without mortgage then you should be able to get a mortgage for the other part and I don't think shared ownership will be for you.

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If you can afford to buy the share without mortgage then you should be able to get a mortgage for the other part and I don't think shared ownership will be for you.

What I've been looking at is the possibility of buying a 25% share for cash. The rent and service charge on the remaining 75% is less than what I'm paying at the moment, and I could use that saving, plus my current monthly surplus to save up to buy additional shares for cash. Would that be a sensible idea?

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  • 276 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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