Jump to content
House Price Crash Forum
rickycockroach

Should I buy more of my shared ownership, or stick to renting?

Recommended Posts

Hello HPC! I’ve a quandary that led me to this site which I’ve been following for many years now. I’m still stuck on what to do, so here’s my first post. Thoughts very welcome.

10 years ago I took on my first mortgage for 30% of a shared ownership flat - full value back then was 252k. This year I paid off my mortgage, so I’m left paying rent + service charge for the 70% at £670 a month (an increase of £200 since I moved in). I live alone, I’m single, 44. I wish to stay here, potentially retire here as I love the flat and the area, it’s my home. I’ve been saving to buy the rest of the flat. The problem is it's now valued at 550-600k and I can’t afford it. Buying part of it (say another 20-30%) would double or triple my outgoings and lower the rent only a little. It’s much cheaper to rent than to buy.

I’m happy to rent for the rest of my days but worry about covering it on a state pension. For years I’ve been trying to figure out what to do whilst waiting for the crash/correction that seems will never come. I’ve explored suggestions ranging from buy-to-let to generate an income stream (makes me uncomfortable), to buying 100% and seriously over-stretching myself for the rest of my life (living in stress, risk and fear). What with stamp duty, a bank recently told me I simply can’t afford 100% anyhow, suits me as I don’t want to take on that kind of debt. A friend of mine went 100% a couple of years back and recently got made redundant. He is 50+ in age, and has had a nightmare getting another job - he’s had to take a 50% pay cut to keep working. With a seriously big mortgage debt, things don’t look good. 

I’m very aware of job insecurity with age and taking on massive mortgage debt. I’m ok with renting, it’s just retirement - how the hell would I cover that kind of projected rent? What can I do now to help times ahead? I can’t find anything worthwhile to do with my savings (50k), maybe I’m better off ploughing it into the flat, buy another 10% than it being eaten by inflation. Or stick it in an index fund? Is it too late for that? Too risky? Markets look surreal and overwhelming to me.

Overall, I’m happy and have nothing to complain about, things could be worse and I’m very grateful for what I have. But it feels a little frustrating to have so far been independent, sensible and planned ahead and now see that won’t work anymore. The only answer I can see is to leave the flat one day and go live somewhere much cheaper, alone and far away from my roots and community - the thought of which caves me in. I wonder if others in shared ownership are in this predicament. Obviously, it’s easier if in a couple to buy more over time, but I'm on my own with this.

Thanks for reading if you got this far!

 

 

Share this post


Link to post
Share on other sites
12 hours ago, rickycockroach said:

I’m happy to rent for the rest of my days but worry about covering it on a state pension.

...

Or stick it in an index fund? Is it too late for that? Too risky? Markets look surreal and overwhelming to me.

...

The only answer I can see is to leave the flat one day and go live somewhere much cheaper, alone and far away

Hi there!  It's not possible to directly answer your questions without that amounting to giving financial advice, which I can't do as I'm not authorized to do so.  And in any event there are clearly no easy answers here.  However, a few thoughts just to throw out (you may well of course have thought about these already)?

- You refer to the State pension - do you have any work pensions from your current or previous jobs?

- No-one can say with any certainty how index funds will perform.  Although you say markets look "surreal" the FTSE All Share yield is currently around 4.2%, compared to a typical level of more like 3%.  That isn't surreal, just a little bit better than the historical average. That is not to say, of course, that shares won't drop 20-40% in the next year - stockmarkets do that kind of thing - but if you're investing now for age 65 (21 years' time) then you have time to ride out fluctuations.  However, it's hard to see how you could ever invest 50k in an index fund such that it would be enough to buy a 400k share of a flat.

- Are there no cheaper properties in your current area?  A smaller flat perhaps?  Also, is your current flat leasehold and how long is the lease?  If you stay there for the rest of your life would that take you beyond the end of the lease and if so is the cost of renewing that factored in? 

Share this post


Link to post
Share on other sites

Hi, thanks for your thoughts, appreciate it!

– No other pensions.
– No cheaper properties - my area has gone crazy with gentrification and 'luxury' flats and workspaces (East London) - new builds on my road are now going for 800k to a million and they are putting swimming pools on top of buildings.
– Leasehold left is 115 years. 
– Yes, a financial advisor may help, I'd cynically assumed they are motivated to push products (going by friend's experiences).

Flat prices are crazy around here. 5 years ago I thought it was nuts. It's cheaper to rent my flat - it goes up 2% above inflation every year. But a pension won't cover it. I wonder if 20 years investing in an index fund could supplement the rent. Or, push all out and try to buy it now, taking on a 2k pension and work till I drop!

Share this post


Link to post
Share on other sites
11 minutes ago, rickycockroach said:

Flat prices are crazy around here. 5 years ago I thought it was nuts. It's cheaper to rent my flat - it goes up 2% above inflation every year. But a pension won't cover it. I wonder if 20 years investing in an index fund could supplement the rent. Or, push all out and try to buy it now, taking on a 2k pension and work till I drop!

It's so hard to know, because over 20 years so much can happen.

If you do want to invest in index funds, have you considered taking out a pension as the vehicle for doing so?  If you are employed (as opposed to self-employed) your employer is obliged now to contribute towards a pension and if you are self-employed but a higher rate taxpayer pensions can also be tax efficient.  (Pensions are less attractive if you're self-employed and a basic rate taxpayer because then the tax breaks are only modest, and yet you are tying the money up for years.)

Share this post


Link to post
Share on other sites
13 hours ago, rickycockroach said:

It’s much cheaper to rent than to buy.

I would rent then. And if it gets cheaper to buy than rent, then that's the time to buy. In the event that the rent and price have gone up so much you can't afford either, cash in your chips and move somewhere cheaper.

Share this post


Link to post
Share on other sites
14 hours ago, rickycockroach said:

Hello HPC! I’ve a quandary that led me to this site which I’ve been following for many years now. I’m still stuck on what to do, so here’s my first post. Thoughts very welcome.

10 years ago I took on my first mortgage for 30% of a shared ownership flat - full value back then was 252k. This year I paid off my mortgage, so I’m left paying rent + service charge for the 70% at £670 a month (an increase of £200 since I moved in). I live alone, I’m single, 44. I wish to stay here, potentially retire here as I love the flat and the area, it’s my home. I’ve been saving to buy the rest of the flat. The problem is it's now valued at 550-600k and I can’t afford it. Buying part of it (say another 20-30%) would double or triple my outgoings and lower the rent only a little. It’s much cheaper to rent than to buy.

I’m happy to rent for the rest of my days but worry about covering it on a state pension. For years I’ve been trying to figure out what to do whilst waiting for the crash/correction that seems will never come. I’ve explored suggestions ranging from buy-to-let to generate an income stream (makes me uncomfortable), to buying 100% and seriously over-stretching myself for the rest of my life (living in stress, risk and fear). What with stamp duty, a bank recently told me I simply can’t afford 100% anyhow, suits me as I don’t want to take on that kind of debt. A friend of mine went 100% a couple of years back and recently got made redundant. He is 50+ in age, and has had a nightmare getting another job - he’s had to take a 50% pay cut to keep working. With a seriously big mortgage debt, things don’t look good. 

I’m very aware of job insecurity with age and taking on massive mortgage debt. I’m ok with renting, it’s just retirement - how the hell would I cover that kind of projected rent? What can I do now to help times ahead? I can’t find anything worthwhile to do with my savings (50k), maybe I’m better off ploughing it into the flat, buy another 10% than it being eaten by inflation. Or stick it in an index fund? Is it too late for that? Too risky? Markets look surreal and overwhelming to me.

Overall, I’m happy and have nothing to complain about, things could be worse and I’m very grateful for what I have. But it feels a little frustrating to have so far been independent, sensible and planned ahead and now see that won’t work anymore. The only answer I can see is to leave the flat one day and go live somewhere much cheaper, alone and far away from my roots and community - the thought of which caves me in. I wonder if others in shared ownership are in this predicament. Obviously, it’s easier if in a couple to buy more over time, but I'm on my own with this.

Thanks for reading if you got this far!

 

 

You got shared ownership in 2009 just after the crash ???  why exactly ?  

 

Share this post


Link to post
Share on other sites

Personally my first priority would be to start saving for a pension. I'm assuming you're on average earnings if you only bought a 75k share 10 years ago. Bit of a rock and a hard place. 

I'd probably move out of London. Bank the 180k and move somewhere more affordable, where I can live mortgage and service charge free. 

Share this post


Link to post
Share on other sites
16 hours ago, rickycockroach said:

......

10 years ago I took on my first mortgage for 30% of a shared ownership flat - full value back then was 252k. This year I paid off my mortgage, so I’m left paying rent + service charge for the 70% at £670 a month (an increase of £200 since I moved in). I live alone, I’m single, 44. I wish to stay here, potentially retire here as I love the flat and the area, it’s my home. I’ve been saving to buy the rest of the flat. The problem is it's now valued at 550-600k and I can’t afford it. Buying part of it (say another 20-30%) would double or triple my outgoings and lower the rent only a little. It’s much cheaper to rent than to buy.

....

 

 

Show me a shared/social housing flat, built  in the last ~20 years, thats selling for ~550k and Ill believe your story.

 

 

Share this post


Link to post
Share on other sites
4 hours ago, scottbeard said:

Hi there!  It's not possible to directly answer your questions without that amounting to giving financial advice, which I can't do as I'm not authorized to do so. 

Why do people always say this on the web? I have seen it on so many Youtube videos. Is it illegal without some sort of certification? Are professional financial advisors really so much better than the rest of us that we need to keep giving that disclaimer? And can you get sued for giving your opinion on a stock going up etc? 

Share this post


Link to post
Share on other sites

Prices are coming down in London so I'd hang on paying rent and keep reviewing whether or not it's a good time to buy. I certainly wouldn't put all my eggs in the property basket; as you say it would be very worrying to have to pay much more each month on a bigger mortgage and you don't then have any choice as to what to do with your money when it's all being eaten up by a mortgage.  Also if you buy now and really struggle think how you'll feel when prices fall and you're stuck paying through the nose. 

I think I'd I'd put any spare cash into a SIPP.  Also when you come up to retirement or circumstances change you may change your mind about London and be happy to sell and move somewhere cheaper in another part of the country.

Share this post


Link to post
Share on other sites
35 minutes ago, lombardo said:

Why do people always say this on the web? I have seen it on so many Youtube videos. Is it illegal without some sort of certification? Are professional financial advisors really so much better than the rest of us that we need to keep giving that disclaimer? And can you get sued for giving your opinion on a stock going up etc? 

Firstly, you need to be clear on what "financial advice" is.  Advice includes not just factual information or opinion but also a recommendation.  If I were to say to you "I think Tesco shares are going to go up this year" that isn't financial advice.  If I were to say to you "I recommend that you buy Tesco shares" that *is* financial advice.  You can't be sued for voicing an opinion, but it is possible to be sued if you provide unsuitable financial advice.

That's why anyone trying to provide guidance or opinions on the internet should be very clear that they are NOT providing advice, as I was above.  I'm not actually sure whether it's illegal as such unless you actually went as far as saying that you're authorized to provide financial advice when you aren't.

Authorised financial advisors undergo training that helps them understand all of the questions they should be asking people before presenting a recommendation.  You need to understand a lot about someone's financial and personal situation before you can make a recommendation.  For example, you need to understand their appetite for risk, all of their various potential income and outgoings, their tax position, their family situation etc etc.  As you probably gather, whilst I'm not a financial advisor I do work with them, and one thing they will always tell you is that the advice is much more about understanding the person's situation than understanding the financial marketplace i.e. on many occasions something that is bad advice for one person is good advice for another person (a classic example being, "should I transfer out my DB pension?").

And of course financial advisors will take out PI insurance so that if they are sued they potentially have cover, whereas random internet posters will not.

Share this post


Link to post
Share on other sites
1 hour ago, scottbeard said:

Authorised financial advisors undergo training that helps them understand all of the questions they should be asking people before presenting a recommendation.

And I'd hope that's why they could potentially get sued for providing inaccurate or misleading (instead of just unlucky) advice but some random person on the internet could not be. There needs to be some due diligence on behalf of the person taking the advice about how informed they expect the giver to be.

Of course that's entirely my view, I'm not saying that's how the law would behave; personal responsibility for your own actions is out of fashion.

Share this post


Link to post
Share on other sites
19 hours ago, rickycockroach said:

10 years ago I took on my first mortgage for 30% of a shared ownership flat - full value back then was 252k. This year I paid off my mortgage, so I’m left paying rent + service charge for the 70% at £670 a month (an increase of £200 since I moved in).

...

The problem is it's now valued at 550-600k and I can’t afford it. Buying part of it (say another 20-30%) would double or triple my outgoings and lower the rent only a little. It’s much cheaper to rent than to buy.

 

6 hours ago, rickycockroach said:

It's cheaper to rent my flat - it goes up 2% above inflation every year. 

I am sorry to point out the obvious, but the game is rigged against you.

They can increase the rent since you are captive due to owning a share, with compounding effect. 

  • As there been any year they have not applied this automatic above inflation increase?
  • Can they be forced to buy your share at the same valuation they are telling you it is worth atm?

Share this post


Link to post
Share on other sites
4 hours ago, spyguy said:

Show me a shared/social housing flat, built  in the last ~20 years, thats selling for ~550k and Ill believe your story.

3

These are shared ownerships, not social housing...

50% at £300k https://www.rightmove.co.uk/property-for-sale/property-70852693.html

35% - full value 530k https://www.rightmove.co.uk/property-for-sale/property-61104717.html

65%, full value 560k https://www.sharetobuy.com/properties/53970/

An old one here, a shared ownership flat going for a million ££  https://www.theguardian.com/money/2015/aug/24/affordable-shared-ownership-flat-hackney-1m
 

Share this post


Link to post
Share on other sites
1 hour ago, Freki said:

I am sorry to point out the obvious, but the game is rigged against you.

 

Yes, this is how it feels!
The above inflation rent goes up every year. However, compared to my renting years when increases were literally hundreds overnight - it feels mild in comparison. 
Yes my share has increased in value too, is considered at current valuation. 

Share this post


Link to post
Share on other sites
4 hours ago, janch said:

Prices are coming down in London so I'd hang on paying rent and keep reviewing whether or not it's a good time to buy. I certainly wouldn't put all my eggs in the property basket; as you say it would be very worrying to have to pay much more each month on a bigger mortgage and you don't then have any choice as to what to do with your money when it's all being eaten up by a mortgage.  Also if you buy now and really struggle think how you'll feel when prices fall and you're stuck paying through the nose. 

I think I'd I'd put any spare cash into a SIPP.  Also when you come up to retirement or circumstances change you may change your mind about London and be happy to sell and move somewhere cheaper in another part of the country.

Thanks, sounds sensible! I'll explore the world of SIPPs

Share this post


Link to post
Share on other sites
6 hours ago, spyguy said:

Show me a shared/social housing flat, built  in the last ~20 years, thats selling for ~550k and Ill believe your story.

 

 

 

On the share to buy site where help to buy/shared ownership properties are advertised by local authorities there are shared ownership properties valued at nearly £1 million in zone 1-2 new builds.

One such two bed flat is advertised in Kings Cross. For a £13,000 deposit you can apparently buy a 25% share for £250k and then pay £2,600 a month (including £1000 a month ‘social rent’ and £250 service charge and £1,350 as a mortgage).

And that property is under offer! This is modern day ‘affordable’ housing!

£550k is cheap for shared ownerships in London now!

Share this post


Link to post
Share on other sites

I wouldn't buy more; prices are topping out. And beginning to drop. 

Even estate agents seem to have run out of reasons to buy now. 

Share this post


Link to post
Share on other sites
1 hour ago, rickycockroach said:

These are shared ownerships, not social housing...

50% at £300k https://www.rightmove.co.uk/property-for-sale/property-70852693.html

35% - full value 530k https://www.rightmove.co.uk/property-for-sale/property-61104717.html

65%, full value 560k https://www.sharetobuy.com/properties/53970/

An old one here, a shared ownership flat going for a million ££  https://www.theguardian.com/money/2015/aug/24/affordable-shared-ownership-flat-hackney-1m
 

Barge pole.

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 295 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.