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Shared ownership?
I'd quite like to be a homeowner one day, but being one of those impoverished creative types, no one would give me a £300k mortgage. I've started looking into shared ownership.
Has anyone had any experience with it? There doesn't seem to be anything in the area. I really don't want to live in a new build. A friend bought a one-bedroom in Camden. It looks like the house that Ikea built.
It's all very discouraging.
Has anyone had any experience with it? There doesn't seem to be anything in the area. I really don't want to live in a new build. A friend bought a one-bedroom in Camden. It looks like the house that Ikea built.
It's all very discouraging.
Comments
Shared ownership is a good idea for the following reasons:
1. It's a more affordable way of getting your foot on the property ladder. But be realistic, unless you have a lot of money, choice will be limited, and most first time buyers will not purchase the ideal flat as a first step. You have to play the long game and remember that this is a first step of (hopefully) many. Shared ownership schemes mostly involve new build developments which will be small, but it won't be forever.
2. Indeed, you will have to pay rent on the portion of the property you don't own. Nevertheless, look at it this way - property prices in London have been growing at a rate that far outstrips most people's ability to save a substantial amount of money to put down on a property (obviously). BoE base rates remain pathetically low, so saving will take forever. Shared Ownership schemes allow you to build up enough equity in a property to be able to move on to the next step much quicker...
3. These schemes give you the opportunity to show mortgage lenders that you are a reliable borrower, able to balance payments on the relatively small amount you've borrowed, as well as the rental portion you will be responsible for. You are much more likely to be given a larger mortgage if you can prove, after perhaps 3 or 4 years (depending on the terms of your agreement with the lender), that you are a less risky proposition for lenders.
BUT, be wary:
If you can avoid buying a shared ownership property in a large development, this will improve your ability to be able to sell when the time comes to move on.
Something in a development of less than 50 flats is best. Look at it this way - if you buy a SE scheme flat in a large development, so are 100+ other people. You are most likely on the same terms as the other buyers. When it comes to buying your next flat, you will be selling at the same time as a lot of other people with identical properties.
Anyway, I think SE schemes are a great idea. Just be careful and considered in terms of where you buy.
Hope this was helpful.
1. It'll be rubbish living there, but it's not as if you'll be trapped there forever
2. it's good because property prices always go up
3. mortgage lenders will like you if you do it
to respond:
1. but if it's a crap development, you might not be able to sell it and not what you paid for it
2. please see greece, ireland, spain.
3. there's no mortgage liquidity in the market for anyone with less than 40% equity, so whether or not you've been a goody-two-shoes, this doesn't matter
So the only thing we agree is the first part of 1 - "it will be rubbish living there". I guess you pays your money and takes your choice.
Even if this isn't a bad idea for all time, it's certainly a bad idea for right now. But I'm a pessimist and putting all my money into Swedish Krone.
Here's what I was thinking:
Not all shared ownership properties are new builds. Just as an example, I've found a listing for a resale property in Upper Holloway. It's a Victorian conversion. You have to buy 50%. The site quotes an estimated monthly cost of £1,329. This includes mortgage, rent and service charge. How much would it cost to rent a 2-bedroom flat in that area? I doubt it's a lot less. And this way you get to build up at least some equity.
From what I understand, the rent you pay on the portion you don't own is well below market value. In this case, it's £255 a month. You'll never find a flat in Holloway for £510 a month.
What am I missing here? It sounds like a good deal. The 'full market value' of the flat is £350,000. I don't know what sort of salary you'd need to get that kind of mortgage, but I'm never going to reach it. With shared ownership, we'd need a family income of £52k. That's much more doable.
@Donna - The deposit isn't really the problem. I can "borrow" it from my lovely, generous parents. They desperately want grandchildren, and I'm not keen to start breeding while living in a tiny, shitty flat. But no bank will give us a large mortgage at any kind of a reasonable interest rate. Over the past four years, I've worked part-time/freelance/profit-share/unpaid. It's hard enough to get a mortgage when you're self-employed, but when your income varies as much as mine does, it's all but impossible.
Most of my friends are in the same boat. They're all creative-types (actors, directors, writers). No one can get a mortgage, even if they're not doing all that badly.
The idea that an employee is a more reliable borrower than someone who's self-employed is outdated. It comes from a time when you had a job for life. When you take out a 30-year loan, can you guarantee that you'll be gainfully employed all that time? Are you really a safer bet than someone who's managed to find his own work year after year?
A couple of friends bought a flat (not through shared ownership) a few years back. Both are self-employed. To get the mortgage, he took a 9-5 day job just long enough for it to count on the application. He then went back to being a freelancer (pays better/more flexible). They still have the flat, so I'm assuming they've kept up with the payments.
When you say that I should save up for a bigger deposit, how much are we talking about? What would I need to put down to get a mortgage on a £250k property? 10%? 20%? 30%? That's not easy to do while making rent payments that cost almost as much as a mortgage. By the time I've saved up £50k (ha!), the same flat will cost £400k.
Shared ownership clearly has a whole lot of drawbacks. It's probably not a brilliant investment. But you can't expect someone to just give you a flat for a fraction of what it costs. There's always going to be a catch. But if the monthly costs are less than what it would cost to rent, it still sounds like a reasonably good deal.
If only the new builds weren't so damn hideous...
The point that hasnt been raised is that if the flat goes up in in value so does the value of the % owned by the builder/housing association.
eg flat bought for £200k own 50% = £100k. Flat doubles in value six years from now to £400k you own 50% = £200k but the builder/HA is owed £200k if you want to sell up or increase your % share.
I know its hard to save for a deposit with day to day living costs but that really is the best way to then obtain a mortgage and buy outright.
Good luck rainbow c with whatever decision you make.
Thank you, again, to everyone who took the time to give advice. You guys rock.