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Shared Ownership Should I Buy?

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

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I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Just to quickly clear something up for you.

It never was a property ladder, it's a property escalator, and it's currently going down.

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

There are numerous threads on this site saying don't even go there. Shared ownership is a financial nightmare. It just doesn't add up. You pay the rent, but you pay the repairs as well. You are only paying 400 a month now and if the boiler goes they cough up hte 1200 to replace it, pipe leaks? etc. If you go to share ownership, they get 3/4 of the rent (which is more than you are paying now) but they don't pay a brass razoo towards the maintenance. Rip Off.

Basically unless you are in a horrid rental, how are you better off. You are probably about 400 worse off, which you could be saving 4800 a year towards a deposit to own the whole thing not taking into account repairs. If prices were going up crazy I would say maybe go for it but they aren't, at the moment they are going nowhere - tetering on the brink I would say but even if you don't believe that, they are still going nowhere, so why not wait a little longer? There are 100s of these share ownership flats about. They can't give the things away because of the restrictions on who can buy.

No! Due to the 21 year option...

I bet none of you know about that... ;)

No. What is that?

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Are you totally bonkers? If you can't afford to buy a whole flat why would you want to buy 1/4 of a flat? If you believe the spin that "property only ever goes up" then you will never be able to afford the rest of the flat and you will be liable for the rent AS WELL AS the service charges and costs of repairs....

If the current dip in prices turns into massive correction (it's not rocket science) you will also find yourself buggered as you would have been able to purchase a whole flat!!

What happens if you want to move?

This is a decision only you can make, but it sounds like a total rip off to me. I'm quite surprised you're even considering it...

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As tempting as it sounds. Personally, I would stick with the rented accomdation you've got. £400 sounds like a good deal for a 2 bedroom apartment in London.

I too have considered the shared ownership scheme but there are a number of issues which put me off, as described above, if something goes wrong, you will be liable to pay your share. Also, what happens to the value of such a property when you want to re-sell it? How do you move up? These are relatively new schemes which aren't entirely tried and tested! Ultimately, at the end of the day. You're paying a mortgage + rent to live in a place you can't call your own. Is it worth it?

I think you'd be best staying put, saving your money, investing it & waiting to see what happens this year. I think 2006 will see a shift in sentiment & hopefully the start of a marked price correction.

Hope it all works out for your, whichever path you choose.

D.

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

I can only assume that you asked this question here because you want to be dissuaded?

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Are you totally bonkers? If you can't afford to buy a whole flat why would you want to buy 1/4 of a flat? If you believe the spin that "property only ever goes up" then you will never be able to afford the rest of the flat and you will be liable for the rent AS WELL AS the service charges and costs of repairs....

If the current dip in prices turns into massive correction (it's not rocket science) you will also find yourself buggered as you would have been able to purchase a whole flat!!

What happens if you want to move?

This is a decision only you can make, but it sounds like a total rip off to me. I'm quite surprised you're even considering it...

I think you`re on to something there, what a brilliant idea, wow wished I`d thought of it, why not ask your parents to help as well, here, crucify yourself, be my guest www.firstrungnow.com :lol:

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

See above. Don't do it! :blink::blink::blink::blink::o:o:o

Edited by Buffer Bear

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Hi, this is my first post on this site.

Our first home as newly weds was a 1 bed flat - 50% Shared Ownership with Warden Housing Association, now Home Housing Association. So I feel I may be able to offer a positive view on buying a Housing Associations property, not just from a financial point of view either. A lot of people on this site seem to be very anti Housing Associations.

I would advise against buying a 25% share in this flat. And 300K plus for a first home is a bit excessive don't you think?

However, I would advise you to search a bit harder for the chance to buy a 50% share in a 1 bed flat in London. I'm sure you will find some thing in the 130-180K region if you look out in the suburbs.

With a HA, if you are single or a childless couple you can only buy a 1 bedroom flat. (HA's help you with what you need, not what you want). If you have children, you can buy a property with the needed amount of bedrooms.

From my experience, buying a 50% share through a housing association is a great idea as a first step on the property ladder.

And I think buying only 50% now, at what may be the top of the market may be a less risky move as you will only be liable for 50% of any negative equity if prices do go down.

Our first home was a 1 bed flat in Harrow, NW London. We bought it in 1994. It was 56K, so our 50% share was only 28k. The girl we bought it from had bought her 50% share at the top of the last peak when its 100% price was 70K, so she would have had a small amount of negative equity. Fed up of the 90's recession, she emigrated to Canada and we bought most of her furniture / kitchen stuff from her for about £300.

Mortgage Interest rates at the time were 10%, we fixed at 9% so paid about £250/month on a repayment mortgage. The rent on the HA's share was £200 a month. HA's seem to keep the rents reasonable.

The service charge was tiny too, about £20 a month. There were twelve flats and we had a fortnightly gardener, weekly cleaner, monthly window cleaner, complete redecoration of communal areas twice a year and a sinking fund for repairs etc. There was no lift, which I suppose kept it cheap. There were no major problems in how it was run.

The flats weren't luxurious. They were basic, again, meeting your needs rather than your wants.

We lived there for 7 years and I have really fond memories. There was a really strong community spirit. We had regular residents meetings with the HA Officer, where we all got to know each other through the meetings. Every one who lived there was a working person, albeit on a low income, e.g a shop assistant, a male nurse, a cook, a taxi driver, secretaries. Exactly the kind of people Housing Associations are set up to help.

When we moved in, times we hard, we were still in the 90's recession and the housing market was at it's bottom. There were also two families with children living in these one bedroom flats (one with baby twins -unplanned). Both families were trapped by negative equity, even though they only owned a 50% share of the 70K value at the market top.!!!!!!! They even had allotments and grew their own food as work was also erratic. Eventually, as prices picked up, they were able to move on and bought houses outside London - often reposessions - presumably from those unfortunate enough to be liable for the full 100% negative equity.

When we moved in, my husband and I were newly weds in our mid 20's. He was earning about 12K and I was unemployed -having just moved down from the east mid-lands to live with my new husband).

Having been through/ at the tail end of the 90's recession, we were very cautious about taking on a mortgage that needed both of us to be working. So we got a mortgage based on his earnings only. (Funny, we still think that way today - 12 years later :)

I got a temping job a few weeks later, 2 minutes over the road from home and eventually got taken on permanently as a Directors PA on 15K. After going wild financially in our first year of marriage - e.g spending £700 on our King Size bed Matrimonial bed and generally wasting money on other expensive tat, we woke up one morning - in our lovely bed - and realised we had a huge burden weighing us down - our mortgage - all 28K of it. Believe me, at the time, to us, it felt massive.

So, we decided to create a plan and pay it off. We worked out it would take three years if we just lived on my husbands wage and used mine to pay it off. Every month we went into the Halifax and paid about £800 off at a time. It was great to see the mortgage payments go down each month. After 3 years, we had paid it all off, big celebration and we received the deeds to the flat in the post. That was the best thing, the fact that the mortgage was so small, we were able to pay the debt off quickly - not much chance for many of today's buyers who "own" 100%.

When we look back, we both agree those were happy days. We had a joint goal we were both working towards, we really thought about how we spent our money, we lived frugally and simply. To make the most of our week-end spending money, we bought an old VW camper van for 2K and most week-ends, even in winter, went camping by the coast or somewhere interesting. We used it for our summer holidays, two weeks in cornwall, two weeks in Norfolk and one summer we spent our two weeks going round France in it, going over the Massif Central and even getting to St. Tropez and Monte Carlo in it. We sold it eventually for £1800, a loss of £200 - not too bad, considering how much fun we had in it.

After living in the HA flat for seven years, we needed to sell as I had a new job back in the East Midlands.

Obviously, the downside of only owning 50% is when you come to sell and the market has gone up, you only get 50% of the gain. If you keep an eye on prices and they start to take off, I would suggest trying to buy the other 50% share. You can also buy 25% so you own 75%.

Also, you can only sell to someone on the Housing Associations waiting list of suitable buyers.

We had to get three Estate Agents quotes and submit them to the Housing Association who took the average as the price we could sell at. Obviously we went to about 6 or 7 agents to get quotes and got them to add on a few thousand pounds more and handed in the highest 3 quotes. We sold at a 100% valuation of 92K. We sold to a nurse in her late 20's who earned 19K, so her 50% mortgage was 46K - roughly 2 and a half times her salary.

It was really interesting who we had coming round to view the property. Lots of people who I expect are kicking themselves now, as they will be totally priced out of the market. They didn't have a clue. The nurse was on the ball, saw it was ideal for her, realised prices were going up and that if she didn't act quick she would soon be priced out at even a 50% share. She got her mortgage sorted in a few days and hey presto, the sale went through.

It was the year 2001 and we relocated upto the East Midlands, as I had a new job, and after renting for a few months, bought a 3 bedroom detached house on an established housing estate for the same price as the 1 bed flat we sold - 92K !!! Well chuffed :)

We sold it two and a half years later in 2004 for 150K and are currently renting in Clifton, a beautiful part of Bristol as hubbie is a mature student in his second year at Bristol University. We have nearly 100K in the bank and use the 5% p.a interest to help pay the rent. (No tax on savings as Hubbie is a student) I work part-time as a sales assistant for 2.5 days a week and use our previous experience of living frugally to live a more relaxed, creative and spiritual lifestyle.

So, as you can see, our first home was good for us.

I meet so many people who moan that it is so unfair that as first time buyers they can't afford a house.

I suggest they look at flats, if that is too expensive, I also tell them all about Housing Associations and how it works, and how we benefited. It's was always an affordable option for anyone earning between 15 -20K.

But none of them do anything about it. They prefer to carry on renting and moaning.

I know life seems unfair, we would all love to be able to have a 3 bed house for our first home, but life isn't like that.

If a Housing Association flat is your only option, then grab it, you'll soon be moving up the ladder, by buying a bigger share if you want to or getting a bigger HA home if you need it if you have kids etc.

Look in the yellow pages under Housing Associations and start ringing them.

Good Luck.

Let us know how you get on. If you earn between 15-20K and find that you cannot afford to buy a 50% share, and can only get a 25% share, then that is yet another sign that the housing market is way over the top. It would also bugger up the governments plans for affordable homes for key workers as they would only be able to afford 25%. IMHO the only way for houses to be made affordable for first time buyers, is for them to fall to first time buyer price levels. Building loads and loads of new houses doesn't make sense. There are enough homes - just not at an affordable price.

--------------------------------------------------------------------------------------------------------------------------

I also have another possible solution for first time buyers.

Do you have a pension plan? If so, instead of, or as well as, your salary, you may be able to use it to help you get an interest only mortgage.

Hubbie and I are tentatively thinking about buying somewhere again after he graduates next year - offering 20-30% off asking price of course :)

Last month, we spoke to a Mortgage Broker who has arranged an interest only mortgage for us for 110k.

Because we don't "earn" very much from jobs, we can't get a mortgage based on salaries.

The basis for our mortgage is our pensions (using the 25% Lump Sum you get at retirement to pay off the principle).

I suppose it is a bit like an endowment mortgage, but we already have a well established "investment vehicle" in place.

The mortgage was approved on the basis that, hopefully the pension plan will grow enough to allow us to use it to pay off the principle.

If we do decide to do it, as you will probably guess, I hope to have paid the principle off well before then, which you can too.

Just an idea.

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WP,

Your situation was different to now and it makes all the difference. You bought at the tailend of the last crash and you traded up by leaving London. At the current point in this housing cycle, SO or any other government funded initiative (eg Homebuy) is not sensible, IMHO, and I am eligible for them all.

Please see the latest offerings from Threshold HA below as at 20.1.06:

11 one bedroom apartments (Southfields) now available with prices ranging from 220k - 275k. Minimum household income required 25k. I guess this income is based on a 25% equity share as rent also needs to be factored into overall figures.

3 one bedroom apartments (Hampton) now available with prices ranging from 157k - 165k. Minimum household income required 20k. Again, I guess this income is based on a 25% equity share as rent also needs to be factored into overall figures.

This figures don't look very attractive to me and besides, we have two children so we need at least a 2 bedroom property, don't we or am I expecting too much? :unsure:

Edited by Buffer Bear

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" After 3 years, we had paid it all off, big celebration and we received the deeds to the flat in the post."

Surely the HA owns the deeds?

Yes we did get the Deeds.

Although now I think about it, it does seem strange.

Maybe it was a copy????? and the HA had the original.

Anyway, it was interesting bed time reading whatever it was.

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Agreed, our situation was different.

We chose not to have children, for many reasons, including financial. I can sympathise that it's really tough at the moment.

Have you thought of moving out of London?

I know in an ideal world you "shouldn't have too" etc etc, but unfortunately, it's not an ideal world.

There are lots of nice places to live in the UK, with more affordable property than London.

I don't miss it at all. I have been back twice for my "Shopping Fix" and that keeps me going for a while :).

With 2 children, you still would be able to get a small 2 - 3 bed house with a Housing Association at least, I would have thought. In Bristol, there are still terraces for 120K and Semis for 150K.

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And I think buying only 50% now, at what may be the top of the market may be a less risky move as you will only be liable for 50% of any negative equity if prices do go down.

I thought you were liable for 100% of any negative equity even though you only own a share? Can anyone confirm this?

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I thought you were liable for 100% of any negative equity even though you only own a share? Can anyone confirm this?

Maybe it depends on the Housing Association.

Our deal, with Warden/Home Housing Association, was - when you came to sell, you sold your 50% share as 50% of a recent full valuation (the average of 3 estate agents quotes which you had to get yourself and pass on to the HA.

So if the total price had gone down 10K you would only have 5K negative equity as a result of only owning 50%. Correspondingly, if it went up 10K, you only made 5K profit.

Also, if you had made improvements, such as installing a new kitchen, provided you gave the HA a copy of the receipt, they took this into account when you sold and you were reimbursed fully for it, maybe with a slight reduction for wear and tear.

We never made any major improvements, but I did ask the question about a new kitchen, and it seems that they didn't want to discourage you from making improvements and would re-imburse you fairly on the full cost when you came to sell.

Our experience of a Housing Association was positive.

At the end of the day, they are not there to rip you off. They are not-for-profit charities.

They are upfront and should be able to provide you with fact sheets and answer any questions.

Also, if you go to a solicitor with a fact sheet, they will be able to pick up on any pitfalls.

There are solicitors who specialise in conveyancing with Housing Association properties and can generally guide you.

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Waitingpatiently

you seem like a very genuine, honest person, and your prose is delightful.

Rare things on this forum!

I think the key to your story is the fact that you consider prices to be too high. If some people can't afford a home AFTER the crash, then I would say your advice is very sound.

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Thanks for all the replies and advice. After watching prices soar and not able to jump on for the last 5 years I'm probably not thinking rationally. When the details do arrive through the post, I'll post them here for all to see and judge. I thought hard over the weekend and taken on board what people have said here. I too don't think prices will jump much higher and if they do, they will most likely fall back again.

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Have you thought of moving out of London?

I know in an ideal world you "shouldn't have too" etc etc, but unfortunately, it's not an ideal world.

There are lots of nice places to live in the UK, with more affordable property than London.

I don't miss it at all. I have been back twice for my "Shopping Fix" and that keeps me going for a while :).

With 2 children, you still would be able to get a small 2 - 3 bed house with a Housing Association at least, I would have thought. In Bristol, there are still terraces for 120K and Semis for 150K.

WP,

Thanks for your comments

It is always an option but one I wouldn't choose. My siblings, father and extended family are all local and we are very close. They are a great support and we do our bit too. Only this weekend, we looked after my 2 year old nephew overnight and on Sunday my 8 year old nephew came over on Sunday to see Liverpool get beaten by Man. U. We sometimes leave our children with our sisters at the weekend and they fight over who will be next to have them overnight!

I am not prepared to move out of London to get on the ladder and lose the most important thing to me, regular contact with my family. For me, it really is not a great trade off.

My family recently had a brilliant 3 week holiday in Florida with my mom, and other family members who live there. Only today, my husband was talking about what a great time he had, when my 4 year old daughter said that although she really enjoyed her time, it was "too hot" and she "missed all my family." She has lots of aunts/uncles and cousins that she sees regularly and the family thing is beginning to rub off on her too.

My husband and I have reasonably paid jobs and by remaining patient we will be in a postion to buy but at a time when the mortgage will be manageable. That way, we can still provide a good standard of living for our children.

BB

P.s To put things in perspective in terms of the madness of the current housing market, my father was a factory worker (manual) with a very, very basic education. He owns 2 houses mortgage free. In the current market, they would probably be 'valued' at roughly between 500k - 550k and 300k. I can tell you, my husband and I earn much more than he ever did and he was able to buy a house in London when he first bought.

Things will return to the historical norm, I have no doubts about that.

Edited by Buffer Bear

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I wonder whether you would be as sanctimonious if it was in a declining market.

"We sold it two and a half years later in 2004 for 150K and are currently renting in Clifton, a beautiful part of Bristol as hubbie is a mature student in his second year at Bristol University. We have nearly 100K in the bank and use the 5% p.a interest to help pay the rent. (No tax on savings as Hubbie is a student) I work part-time as a sales assistant for 2.5 days a week and use our previous experience of living frugally to live a more relaxed, creative and spiritual lifestyle.

So, as you can see, our first home was good for us.

I meet so many people who moan that it is so unfair that as first time buyers they can't afford a house."

We can only aspire to be like you, dear.

Sanctmonious - that was the word I was looking for whilst reading WP's autobiography. Well done her and her 'hubbie' and it's excellent news that her experience of frugal living has enabled her to live a 'more relaxed, creative and spiritual lifestyle'. Excuse me, gotta go and puke.

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

Yes, do it, do it, do it. You want that one! Be an idiot...or just wait a while and get a whole property to yourself.

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I have been offered a 25% share of a 2 bed flat in NW London, on the market for £300K.

I need a mortgage for £75k and need to find another £450/month for the rent and service charge on the other 75%.

I'm seriously considering it as I would love to get on the ladder but, and it's a big but, it would mean giving up my current rented 2 bed flat, which I only pay £400/month for.

Any advice on my situation or on shared ownership in general would be appreciated. :blink:

You may be on the wrong website. ;)

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"We sold it two and a half years later in 2004 for 150K and are currently renting in Clifton, a beautiful part of Bristol as hubbie is a mature student in his second year at Bristol University. We have nearly 100K in the bank and use the 5% p.a interest to help pay the rent. (No tax on savings as Hubbie is a student) I work part-time as a sales assistant for 2.5 days a week and use our previous experience of living frugally to live a more relaxed, creative and spiritual lifestyle.

So, as you can see, our first home was good for us.

I meet so many people who moan that it is so unfair that as first time buyers they can't afford a house."

We can only aspire to be like you, dear.

Sanctmonious - that was the word I was looking for whilst reading WP's autobiography. Well done her and her 'hubbie' and it's excellent news that her experience of frugal living has enabled her to live a 'more relaxed, creative and spiritual lifestyle'. Excuse me, gotta go and puke.

I just wonder what the hell she'd have done if she hadn't had a 'hubbie'!

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  • 301 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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