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Advice On Shared Ownership

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Hi there

I know shared ownership isnt looked upon favourably on this forum but I would like some advice.

I am currently renting in Gloucester, I have a 2 and a half year old toddler who will be starting school in September '09. I love where I live but the area is quite expensive and wouldn't buy at the moment anyway.

However, I have to be somewhere secure by next September in order to be able to put down a school for her to start. The only option I can think of is shared ownership. There are houses for sale at 50% ownership, £75,000 to buy and about £150 a month rent. I wouldn't consider this until next year anyway because I do want to see how the land lies with more interest rises and the housing market in general. I think we would stand a good chance in obtaining a HA house as we need a stable place to live for school purposes.

What is your view on shared ownership? I will never buy to view as an investment, but just to put down some kind of roots for stability purposes.

Thanks.

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There are houses for sale at 50% ownership, £75,000 to buy and about £150 a month rent.

I'm sure you will get lots of general advice. (If not, there are lots of other threads chock full of comments - use the search facility.

However, I would make the point that while this forum generaly hates shared ownership on moral and inflationary grounds, there is (a little) less consensus on it's suitability to an individual. It depends on the individual, it depends on the deal, and it depends on what happens in the future.

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However, I have to be somewhere secure by next September in order to be able to put down a school for her to start. The only option I can think of is shared ownership.

You do not have to own your own home or even a part of it in order to put your toddler into school, my parents never did. Negotiate long term tenancies where possible.

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What is your view on shared ownership? I will never buy to view as an investment, but just to put down some kind of roots for stability purposes.

Strange, my wife and I were actually talking about this very subject this morning - our observation is that there isn't much of a premium on rents in good school catchment areas, but there is definitely a noticeable markup on property prices.

I'm not sure why it is that you think renting is an "unstable" option? Admittedly, your landlord may vary, but most landlords would be happy to tie you in to a long-term contract, possibly at a discount, because it ensures them a secure income stream. Plenty of families live quite happily in rented accommodation! The idea that you cannot put down roots without purchasing a house is really all in the mind.

What is more "secure": paying a fixed sum to a landlord month after month, or taking on a debt that you could still be paying off in 25 year's time? If security is a big deal for you, remember at least that when renting you have the option of quickly and easily moving to a smaller place if you fall on hard times, to reduce your outgoings. It's much harder to do that if you've just bought a house, and particularly if you overstretched to do it.

As for shared ownership: in my mind it represents the worst of both worlds, and I would avoid it. But without a more detailed knowledge of your personal and financial circumstances, I'd hesitate to make any concrete recommendations.

Whatever you choose to do, the best of luck to you.

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I am an affordable housing office for a council.

Cool. Can I rent you?

Edit: Can someone tell me why my avatar is appearing as one that I deleted some days ago, when the avatar on

the "my controls" panel is showing the new one?

Edited by Timm

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Cool. Can I rent you?

ROFL! :lol::lol:

Can someone tell me why my avatar is appearing as one that I deleted some days ago, when the avatar on

the "my controls" panel is showing the new one?

I saw a raven a minute ago, but now I see a black horse. Try clearing your cache.

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DON’T.

DO.

IT.

Pay 2/3’s the price for ½ the value? Doesn’t make one jot of sense to me. And I should know, I am an affordable housing office for a council.

Who says that 75k represents 2/3rds of the value?

Dumb, dumb rhetoric and potentially bad advice.

No one on this forum is qualified to give the OP advice on his situation outside the following:

Do your reserach, do your sums, talk it over with your family and do what you think is best.

Edited by frozen_out

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I thought shared ownership was when you and the wife went halfers :P

Na great idea to pay half the price for none of the privacy and peace. I'd rather dole it that do that tbh.

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Try clearing your cache.

Thanks. That seemed to work!

Edited by Timm

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Who says that 75k represents 2/3rds of the value?

Dumb, dumb rhetoric and potentially bad advice.

Hmm. Rhetoric possibly, but not dumb. Many new builds have been sold recently on shared ownership schemes where the cost of buying the full share would be less than the cost of buying the appropriate number of shares to make 100%. The OP should be aware of this. OD's post, while indicative only and therefore unlikely to be accurate to the penny, would have been more likely to get the attention of the OP than a carefull and cautious post like this one. It may be that the OP will be saved an expensive mistake as a result.

No one on this forum is qualified to give the OP advice on his situation outside the following:

Do your reserach, do your sums, talk it over with your family and do what you think is best.

Actually, quite a lot of people here are qualified. As to the OP, it is fairly obvious that they want advice from HPCers, seeing as they bothered asking for it. They are being sensible and doing their research.

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Hmm. Rhetoric possibly, but not dumb.

Rhetoric? Yes. Dumb? Yes, as he clearly can not be in possesion of the facts with which he makes his claim.

The OP should be aware of this. OD's post, while indicative only and therefore unlikely to be accurate to the penny, would have been more likely to get the attention of the OP than a carefull and cautious post like this one. It may be that the OP will be saved an expensive mistake as a result.

Perhaps you should credit the OP with a modicum of intelligence, rather than patronising him.

Actually, quite a lot of people here are qualified. As to the OP, it is fairly obvious that they want advice from HPCers, seeing as they bothered asking for it. They are being sensible and doing their research.

Qualified? In what way? People who frequent this forum have as much of a vested interest as anyone on the other side of the fence. This is most definitely not the place to be asking for advice on purchasing a home.

I'll stand by my original statement. Don't listen to these people telling you what to do/what not to do. Do your research, discuss it with your family and make your decision.

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(quote0There are houses for sale at 50% ownership, £75,000 to buy and about £150 a month rent. (/quote)

why cant you just rent the WHOLE house for £300 ?

(this is what used to happen) it was called. council property.

-which is what you have there.

Edited by right_freds_dead

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Who says that 75k represents 2/3rds of the value?

Dumb, dumb rhetoric and potentially bad advice.

No one on this forum is qualified to give the OP advice on his situation outside the following:

Do your reserach, do your sums, talk it over with your family and do what you think is best.

Erm, what?

Not qualified? Before working as a planner, I developed affordable housing financial modelling systems for RSL’s – not qualified?

In this area, initial equity stakes are on average 25% of the total property ‘value’, although for the OP’s area the £75k is about 50% of the OMV. You then pay a residual rent, capped at 2.75% of the outstanding equity stake per annum.

(assumes 7% IR, no deposit, 50% equity stake)

So, cost of owning (£ / pcm) = £1000

Shared Ownership (£ / pcm) = £707

So, you pay 2/3’s the cost of owning the unit outright for ½ of the equity.

The OP asked for advice, I know how these schemes work, so I gave advice.

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Erm, what?

Not qualified? Before working as a planner, I developed affordable housing financial modelling systems for RSL’s – not qualified?

In this area, initial equity stakes are on average 25% of the total property ‘value’, although for the OP’s area the £75k is about 50% of the OMV. You then pay a residual rent, capped at 2.75% of the outstanding equity stake per annum.

(assumes 7% IR, no deposit, 50% equity stake)

So, cost of owning (£ / pcm) = £1000

Shared Ownership (£ / pcm) = £707

So, you pay 2/3’s the cost of owning the unit outright for ½ of the equity.

The OP asked for advice, I know how these schemes work, so I gave advice.

Compared to renting where you could potentially pay 100% of the cost of owning outright for none of the equity. So your point is?

I'll say it again, no harm in constant repetition of good avice:

To the OP. Do your research, talk it over with your family and make your decision.

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(quote0There are houses for sale at 50% ownership, £75,000 to buy and about £150 a month rent. (/quote)

why cant you just rent the WHOLE house for £300 ?

(this is what used to happen) it was called. council property.

-which is what you have there.

It doesn't work like that though does it. The SO houses were specifically built under the guise of affordable housing - for people in a position to cough up some dosh.

Whereas on the list you sit and wait ... and wait.... until you are offered something (I prefer the banding/apply model myself)

So there is not an option on the table to rent the whole.

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Erm, what?

Not qualified? Before working as a planner, I developed affordable housing financial modelling systems for RSL’s – not qualified?

In this area, initial equity stakes are on average 25% of the total property ‘value’, although for the OP’s area the £75k is about 50% of the OMV. You then pay a residual rent, capped at 2.75% of the outstanding equity stake per annum.

(assumes 7% IR, no deposit, 50% equity stake)

So, cost of owning (£ / pcm) = £1000

Shared Ownership (£ / pcm) = £707

So, you pay 2/3’s the cost of owning the unit outright for ½ of the equity.

The OP asked for advice, I know how these schemes work, so I gave advice.

so take a 50k house.

triple it.

sell the buyer 1/3 for the original £50k and rent the rest for 20 years ?

then tell everyone its a great deal.

no wonder only the most misguided, ignorant and desperate take up shared ownership.

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I'll stand by my original statement. Don't listen to these people telling you what to do/what not to do.

So what is your position? Do you think shared ownerships schemes are a good idea? Do you think they are priced fairly? Would you disagree with the proposition that they sometimes provide fractions of a property at a price higher than the corresponding fraction of the current nominal cost of the whole property? Do you have an opinion?

I see you are a bear. Therefore you think the market will fall. Why then do you think it is dumb to advise someone who has asked for your advice, not to buy?

Perhaps you should change to neither

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so take a 50k house.

triple it.

sell the buyer 1/3 for the original £50k and rent the rest for 20 years ?

then tell everyone its a great deal.

no wonder only the most misguided, ignorant and desperate take up shared ownership.

That is basically how it works... but the buyer wouldn't have been able to get themselves a £50k house in the beginning.

For many, this is the only way they can feel "settled".

I know these facts but I'd still consider buying the right one at the right price in the right location for the right reasons.

I've even bought a SO before - and had to buy myself out of it because of negative equity. But it was worth it. I bought it for "stability" - I sold out 6 years later (1997) because my circumstances changed. I took a financial hit - but I understood that.

There was no other way for me to have rented the house I "bought" for the total price I was paying. As for maintenance - it was brand new. I had none in all that time. It was great. I finally had "my own home" - a move up from the caravan I had been living in. And the ONLY way I could have bought.

I could also see that it was well overpriced. But that didn't stop me as my reasons and the TCO added up to me. And you can't put a price on the "security" of knowing you can't be moved on (so long as you pay the mortgage/rent of course).

I would also point out that I owned that SO place through the last market crash - and yes I was on a standard variable rate (less mortgage types back then - and SO wasn't a known model so limited to ONE BS that would lend). Yes my mortgage went up etc. But I coped. It's just a question of financial priorities.

For some, at some points in life, on some houses, for some reasons, in some locations, this works.

Edited by ScaredEitherWay

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there are simply council houses which have been sweetend so the builders have provided.

they are mostly social homes. small. non aspirational in place of the lack of actual social homes.

if you can rent £75k (half) for £150 pcm, why cant you rent the whole for £300pcm ?

NO YOU CANT. that would be naughty and not allowed.

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there are simply council houses which have been sweetend so the builders have provided.

they are mostly social homes. small. non aspirational in place of the lack of actual social homes.

if you can rent £75k (half) for £150 pcm, why cant you rent the whole for £300pcm ?

NO YOU CANT. that would be naughty and not allowed.

Thats been my argument all along on HPC. Shared Ownership is a fantastic deal if you own 0.01% and rent the other 99.99%!!! :lol::lol::lol:

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it seems a simple rip off to me, but if your desperate and its the ONLY option, then perhaps you can be forced into such a bad deal.

otherwise its a non starter.

i rent my social flat for 220pcm. it cant go up above inflation.

they would love me to rent half for £110 pcm and buy the other 'half' for £85k.

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So what is your position? Do you think shared ownerships schemes are a good idea? Do you think they are priced fairly? Would you disagree with the proposition that they sometimes provide fractions of a property at a price higher than the corresponding fraction of the current nominal cost of the whole property? Do you have an opinion?

I see you are a bear. Therefore you think the market will fall. Why then do you think it is dumb to advise someone who has asked for your advice, not to buy?

Perhaps you should change to neither

My position is that shared ownership can provide a reasonable route for people who couldn't otherwise afford to take a stake in their home. So yes, I do think they can be a good idea.

The question of whether they are priced fairly is not one I can answer. The market sets the prices.

I do know that in many cases the shares must be valued by an independant surveyor, and in some cases more than one. I also know that when purchasing a share through a housing association the share can be valued at less than it would be on the open market. I don't advocate snapping up shared ownership at any cost, like I keep saying all you can do is your research. In the same way as renting is not for everyone and buying is not for everyone so it is with shared ownership. Dismissing any option out of hand is more often than not an imprudent approach, particularly so in the current economic climate when there are numerous, clear pros and cons with all options.

On the question of whether they can sometimes provide fractions of a property at a higher at a price than the corresponding fraction of the current nominal cost of the whole property, yes, I'm sure that sometimes they do. However many don't, so what is your point? All I advocate is doing your research. Would you buy a second hand car without checking how much it was worth? If you do and you get ripped off then that is your problem. Caveat emptor as the saying goes. People offering these shares for sale are in business, they're not your friend they want to make money. Just like banks and landlords.

I think it is dumb to advise someone not to buy without being in full possesion of the facts. Sure I'm a bear, I've got a generally gloomy economic outlook but if you can find somewhere you'd like to live for a while and you can comfortably afford to buy it, or a share in it and the figures and the situation stacks up for you then sure, consider making the purchase. You'd have to be an idiot NOT to consider it.

Edited by frozen_out

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it seems a simple rip off to me, but if your desperate and its the ONLY option, then perhaps you can be forced into such a bad deal.

otherwise its a non starter.

i rent my social flat for 220pcm. it cant go up above inflation.

they would love me to rent half for £110 pcm and buy the other 'half' for £85k.

You are lucky to be able to rent a social flat in my experience.

The two places I have lived in my life, the lists for single people were in excess of 20 years... and growing.

Getting social housing is not possible for most people.

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