Shared Ownership schemes..Would you ?..Have you ?

People may not qualify for a 100% mortgage and be able to afford a deposit for a 100%/ purchase - that’s the attraction of shared ownership.

Generally speaking if the buyer has to pay rent for the remaining equity share, then it's to be avoided if possible especially in areas where house values may fall . The total monthly outgoings are often as much as a fixed rate mortgage for 100% share.

The main benefit is for first time buyers buying in a very expensive area and getting on the ladder, with a longer term view of moving to a cheaper area and buying outright with normal mortgage second time round.

There are usually restrictions on the type of buyer that can repurchase an equity share home, and there are a fair number of recent schemes that don't allow ' stair casing ' to the full 100% ownership.. read the small print carefully. The available equity is sometimes capped at max 80%, i.e to keep the value of the home always below market rate, for future buyers.

No, grandtante, that’s not how it works. Usually these properties are owned by housing associations. You buy a share, perhaps 25%, and pay rent on the remaining 75% at a rate below open market rates. You can buy more shares if you want, or not. No other owners or occupiers involved!

Recipe for disaster, unless you have very good legal advice and know how you would be placed if the other party moves and needs to sell their share, what you do, if they prove unbearable to live with on these terms, and what happens in the event of a death.

I imagine these schemes are usually two generations of a family living in a shared property, but honestly do you want the noise of a young family, right next door, and do they want old people who may need care later on sharing with them?

I wouldn't touch it with a barge-pole if I were you.

I bought a shared ownership home with my ex husband years ago. The half that was rent was below the market rental and after a couple of years we were in a position to get a bigger mortgage. We sold the house as a shared ownership because you can get the top price as they so popular and bought a similar house for thousands less. I think they are a wonderful thing, you can’t go wrong. The only downside is that you’re responsible for all repairs but then you would be if you owned outright anyway.

Quite common now especially among youngsters

Late to the party - had family staying for a week and have just recovered!!!
Shared Ownership has been going for decades. The council for which I worked over 30 years ago was one of many who introduced such a scheme to assist those who would potentially need social housing to get on the ownership ladder instead and those who might want to exercise their “Right to Buy” but unable to afford a full mortgage straight away.
The Scheme allowed purchase of additional tranches (I think it was 10% at a time) as things improved for them.

I bought a 50% flat because I liked it and then had the option to buy all of it after 12 months. The big downside was because it was then managed by the same company that owned the other flats ...managed badly. Awful costings. Maybe it was because it a flat but be very careful about buying even a house with a management company attached for maintenance etc. Happens in estates too. Not just flats. Extortionate

I read your post incorrectly. My answer does not fit your parameters.

Asked my husband. His way applies to land only, or land with old 'tear down' buildings. He just expands our grounds by purchase using our solicitor.

Thank you to everyone that has replied. Very interesting and lots of food for thoiught and 'Real' experiences.
Apologies to the poster re it being a thread on Mumsnet, I'm not on there so didn't see that one, but have read it now, Thank you.

Shared ownership was quite new when my daughter purchased her first flat. It may be that things have matured by now. I am only relating her experience so anybody can check the pitfalls.

When I got my last job (now retired) 50 miles from home I bought a 50% shared-ownership 1-bed flat so I could stay there during the week. It served me well for 10 years. The small development was intended for over-50s but at the time there were several flats for sale and no takers, so I got mine okay and the others went to single mums. I paid a monthly rent. When I applied to replace the windows I was told "no need, we are going to do them all next year" but when I wanted a new bathroom I had to pay for that myself. The housing association maintained things like the roof and gutters and the communal gardens.

My friend bought a similar "terraced bungalow" locally when she was in her fifties and newly-divorced with no capital. 50% ownership. Same sort of arrangement as with my flat. She had the benefit of a phone/emergency pull-cord with access to the nearby council carehome staff. She died there early this year having regarded it as her "best" home ever.

Such homes can be a real help to various categories of people, but as always the small-print must be read carefully.

I don't know what my friend's bungalow has sold for, but my flat doubled in price during my tenure so I made a tidy profit (which was not the aim) as well as saving a lot of petrol and travel time.

icanhandthemback

^Personally, I think it is better to buy a 2 bedroomed shared ownership property then at least you can rent a room out to help with payments if needed. ^

You aren't allowed to do this. This was one of the options my daughter explored when things went so badly wrong for her and she was not allowed. She is the sort of person who would never go against the terms of her lease because she was so worried they could terminate it and she would be forced out with the charges being made against her equity.

Many people in leasehold properties are not allowed to sublet but, depending on the wording of the documentation, taking in a lodger - which is not subletting - is achievable.

My son and his fiancée have bought a 2 bedroom flat in a small new block built in an older residential area in this way buying 70% and renting the other 30%. That was 3 years ago and now with a baby on the way they will look to sell and buy a house with a small garden if possible in the next year or so. Other flats in the block have sold quickly and for a reasonable price so he's hopeful - finding a house for a price they can afford though may be a different issue!

icanhandthemback

^Personally, I think it is better to buy a 2 bedroomed shared ownership property then at least you can rent a room out to help with payments if needed. ^

You aren't allowed to do this. This was one of the options my daughter explored when things went so badly wrong for her and she was not allowed. She is the sort of person who would never go against the terms of her lease because she was so worried they could terminate it and she would be forced out with the charges being made against her equity.

Some shared owned schemes will allow you to rent out a room.

All shared ownership schemes vary depending on who is the other partner in the scheme.

That is why it is vital to have professional legal scrutiny of the agreement and to make sure that it is properly understood.

It’s obvious from some of the experiences and comments on here that people didn’t really understand the scheme they were committing to.

Personally, I think it is better to buy a 2 bedroomed shared ownership property then at least you can rent a room out to help with payments if needed.

You aren't allowed to do this. This was one of the options my daughter explored when things went so badly wrong for her and she was not allowed. She is the sort of person who would never go against the terms of her lease because she was so worried they could terminate it and she would be forced out with the charges being made against her equity.

Shared ownership is usually (not always) offered to first time buyers as a way for people to get on the property ladder. When I worked in housing you could buy as little as 25% up to 75%. Whatever % was remaining you paid rent on that percentage. Initially it was very attractive as the rental element was capped but with the introduction of private finance into housing associations the rent element increased making it less attractive. That said it probably still works out cheaper than renting in the private sector and you only need a mortgage on the percentage you buy. Mostly it is available on flats. You will still need to pay a maintenance charge to the housing association so you will need to factor this in but you do benefit on any increase in the property value. Personally, I think it is better to buy a 2 bedroomed shared ownership property then at least you can rent a room out to help with payments if needed. Hope this helps.

I have heard of it especially in places that first time buyers are being priced out of the market, usually new estates and it is run by a housing association but usually housing charities are involved. I don't think they are a bad idea but obviously a good solicitor needs to read through the small print on how to buy the remaining share of what if you want to sell etc.

When I sold my shared ownership property recently, the housing association rules were that it had to be valued by a RICS surveyor and the housing association regarded their valuation as a fixed price. I had no problem selling it, and in fact the first 3 viewers all applied to buy it. Beware of ‘premiums’ - where the seller has added an amount for supposed improvements, and which in effect mean they are trying to sell the place for more than it’s worth.

Yes, I've known lots who've done it, including one of our children. Really though, you have to look at the individual schemes.
Some are at the relatively commercial end - some developers & some councils (councils will sometimes use this system for residents with disabilities or other special needs). Others are with Housing Associations of vaious kinds - some aimed at particular people (key workers for example) others at residents of a particular area, and some are historically associated with various organisations.

Broadly speaking, in a market where houses increase in value (which historically they do) it can work well. My son got a mortgage for 50% of his flat, and so when it was sold for £150k more than the its original value, he took £75k into his new property.
Do check who is doing the valuing and the selling. A reputable Housing Association (and they mostly are) will have access to an independent valuer and a formal process. Certainly none of those I have known have had any quibbles.
I think a lot of people prefer to buy outright, but if you cannot afford a reasonable place to live otherwise, then it can be a sensible option.

Germanshepherdsmum

As I said above icanhandthemback, affordable housing is meant to be just that, not to be sold on for the price a non-shared ownership property would fetch.

Indeed but in the end the only person who prospered was the gentleman who purchased it as a buy to let. If it had been sold to someone who needed affordable housing, I would make no judgement. However, it wasn't only my daughter who lost money through the this experience, the HA was not able to put the extra money to help finance other people who needed affordable housing.

I did go for this option when I discovered that the landlord of the bungalow I was renting wasn't paying his mortgage. Two men turned up at the front door and they were not best pleased that I was living there and they knew nothing about it.

I was a lone parent with two young daughters and was given 6 weeks to leave the bungalow find a home. A friend at work told me about shared ownership and somehow I managed to get a mortgage for a quarter share in a 3 bed house. I paid rent for the rest of the house.

If I had been able to earn enough money this would have been a good move, but the house needed quite a bit of upkeep and I was responsible for it all. Instead of earning enough to buy more of the property, I had to take out 2 extra mortgages for repairs.

Read the small print carefully and take advice from folk who have done it more recently than me. It was 1993.

As I said above icanhandthemback, affordable housing is meant to be just that, not to be sold on for the price a non-shared ownership property would fetch.

My daughter has done this twice. The first time she part owned a flat which was newly built. She loved it and didn't mind the shared ownership at all but when the housing association couldn't sell a lot of the others, they rented them out to problem families and there were more difficulties. They also weren't very good at keeping the lift working so she had to 5 floors to get up and down on which wasn't idea with her disability. However, the worst bit was when she came to sell. The Housing Association determined the price which was much less than the market price and they vetoed a number of buyers which meant it was on the market for a long time. She had had to vacate the property because of her disability but they wouldn't let her rent it out, even though she was happy to allow them to accept all of the rent apart from the mortgage so she was unemployed (due to her disability) and unable to pay for 2 properties. Eventually the Housing Association had to allow her to sell the property outright but still would not allow her to sell it at the market price to recoup her losses on her bit and to get more into their purse for new housing. It was absolutely crazy and she said she would never part own again.
However, due to the new rules about the benefit system for the disabled, she decided she had no choice but to use the equity in her house to part buy a share in a partnership. She could then get the rent paid on Benefits. Any interest payments on a mortgage were repayable in full and would incur interest payments which would mean she was paying interest on interest. This a much better scheme but there are areas where it falls done. It was a new build and she needs support from the HA for any guarantee claims. The front door doesn't fit and lets in cold air (not eco friendly) but the HA aren't bothered. She wanted to move the shed, but she wasn't allowed to and many other small irritating complaints. However, it was needs must so there you go.
I'd buy outright if you can, but if you can't, it's a way of earning at least some equity in order to do so in the future.

All of the things you mention would have been apparent from the documentation before your son committed himself to the purchase Bluedaisy. And not all housing associations operate under the same rules. It is however important that affordable housing remains so, which means capping the price at which it can be resold.