Shared ownership? Trying to get onto the property ladder
Discussion
After some difficult financial periods and some poor decisions on my part, I find myself over 50 in a rented home with high outgoings and very few prospects of being able to buy.
Most challenging part is the deposit for a mortgage. I could get around £15k together at a push, but also need to consider moving costs, solicitors etc so that leaves probably £10k for a deposit. I’m in the south east so prices are high, but near my kids (and need to stay nearby to continue being as much a part of their lives as poss) so relocating somewhere cheaper isn’t an option.
Monthly wise I recon I could manage £1000/month, so I’m looking at a deposit of £10k and £1k a month, and prices for anywhere decent to live look to be around £200k upwards. Salary is around £55k/year.
Whilst looking I’ve seen an option for shared ownership that gets you a pretty amazing place for a small mortgage plus rent:
“This immaculate first floor apartment is being sold chain free. The share being sold is 40% at £108,000 or at the full price of £270,000. The monthly rent is £438.61 and the monthly service charge is £71.78.”
Question is, is this a viable option? I’m thinking could it get me onto the ladder and then with a conceivable increase in value over say 5 to 10 years am I able to sell my share and invest it into a full mortgage?
There are properties around for £180k so I could try and stretch to that, maybe using a small loan, but looking for some advice on the shared ownership route ideally, or any other options with a low deposit.
If I keep renting I can’t save anything as rents are high, so saving up for a deposit just isn’t an option.
Most challenging part is the deposit for a mortgage. I could get around £15k together at a push, but also need to consider moving costs, solicitors etc so that leaves probably £10k for a deposit. I’m in the south east so prices are high, but near my kids (and need to stay nearby to continue being as much a part of their lives as poss) so relocating somewhere cheaper isn’t an option.
Monthly wise I recon I could manage £1000/month, so I’m looking at a deposit of £10k and £1k a month, and prices for anywhere decent to live look to be around £200k upwards. Salary is around £55k/year.
Whilst looking I’ve seen an option for shared ownership that gets you a pretty amazing place for a small mortgage plus rent:
“This immaculate first floor apartment is being sold chain free. The share being sold is 40% at £108,000 or at the full price of £270,000. The monthly rent is £438.61 and the monthly service charge is £71.78.”
Question is, is this a viable option? I’m thinking could it get me onto the ladder and then with a conceivable increase in value over say 5 to 10 years am I able to sell my share and invest it into a full mortgage?
There are properties around for £180k so I could try and stretch to that, maybe using a small loan, but looking for some advice on the shared ownership route ideally, or any other options with a low deposit.
If I keep renting I can’t save anything as rents are high, so saving up for a deposit just isn’t an option.
Edited by anonymous-user on Sunday 8th September 09:27
The issue with these I think is that the purchase price is high, and the rent is also high for the property concerned.
That said, can you pure rent a better place for less? That’s what you need to compare against
There will be other non cash factors too - there may be limits to rent rises on this, plus I assume it’s brand new so will be in good nick. The maintenance is down to you which may be a plus or a minus
That said, can you pure rent a better place for less? That’s what you need to compare against
There will be other non cash factors too - there may be limits to rent rises on this, plus I assume it’s brand new so will be in good nick. The maintenance is down to you which may be a plus or a minus
The issue you have is your age, you are 50 and most lenders will not lend past 70. Personally if you are going to do it I would do it now as it will only get more and more expensive as the length of the mortgage they are prepared to lend against reduces.
As someone who owns a BTL I personally think renting is just throwing money away and paying for someone else's retirement. Also you have to pay rent forever, so how do people afford the rent when they are retired? Or as I suspect will they be working in some capacity until they drop down dead?
One thing with shared ownership apartments is they often don't have parking spaces or access to things like gyms whilst the non shared ownership ones do.
As someone who owns a BTL I personally think renting is just throwing money away and paying for someone else's retirement. Also you have to pay rent forever, so how do people afford the rent when they are retired? Or as I suspect will they be working in some capacity until they drop down dead?
One thing with shared ownership apartments is they often don't have parking spaces or access to things like gyms whilst the non shared ownership ones do.
I don’t like shared ownership. Too many complications in my view, and a poorer investment long-term.
My 2p:
Speak to a mortgage broker. Get an idea of the absolute maximum you can borrow, and balance that against the maximum of what you feel you can afford.
Some lenders will lend up to 75, so you could in theory get a traditional 25-year mortgage, or close to it. You don’t have to stick it out for the full 25 — you can always sell up, remortgage etc.
Stretch yourself a little (obviously don’t go crazy), but without knowing more about your financial situation, I’d suggest that upping your £1k p/m towards £1,200 or even closer to £1,500 could give you a lot more options.
And don’t forget about 95% mortgages. The rates aren’t terrible — about 5% — and, if you’re lucky, when you come to remortgage, if the market has moved on you may be able to remortgage at 90% or lower.
Also, I think you may be overestimating your moving costs. The only real cost is a solicitor (should be less than £1k). Providing you’re living in a 1-bed or similar at the moment, surely you could move all your stuff in a couple of van loads? Do you know anyone with a Transit?
Just my views. YMMV. Good luck with it all. You're definitely making the right move by buying, even if you opt for shared ownership.
My 2p:
Speak to a mortgage broker. Get an idea of the absolute maximum you can borrow, and balance that against the maximum of what you feel you can afford.
Some lenders will lend up to 75, so you could in theory get a traditional 25-year mortgage, or close to it. You don’t have to stick it out for the full 25 — you can always sell up, remortgage etc.
Stretch yourself a little (obviously don’t go crazy), but without knowing more about your financial situation, I’d suggest that upping your £1k p/m towards £1,200 or even closer to £1,500 could give you a lot more options.
And don’t forget about 95% mortgages. The rates aren’t terrible — about 5% — and, if you’re lucky, when you come to remortgage, if the market has moved on you may be able to remortgage at 90% or lower.
Also, I think you may be overestimating your moving costs. The only real cost is a solicitor (should be less than £1k). Providing you’re living in a 1-bed or similar at the moment, surely you could move all your stuff in a couple of van loads? Do you know anyone with a Transit?
Just my views. YMMV. Good luck with it all. You're definitely making the right move by buying, even if you opt for shared ownership.
My daughter is in the process of buying a share of a shared ownership property in Docklands
The purchase cost at 100% is less than comparable new-build properties in the surrounding boroughs. The rent is also very reasonable. She has quite a bit of savings, so won’t be borrowing much, but the total monthly cost will be much lower than renting nearby. That’s for a new build with high quality fittings, views of the river, good facilities in the building. Very long leasehold. No stamp duty for a first time buyer. Conveyancing for shared ownership seems a bit more expensive than outright purchase - https://www.sharetobuy.com/solicitors/
Constraints are that annual income has to be less than £90K and already a resident of the borough, but other than that it seems a decent option, with less cost and none of the restrictions of renting
The purchase cost at 100% is less than comparable new-build properties in the surrounding boroughs. The rent is also very reasonable. She has quite a bit of savings, so won’t be borrowing much, but the total monthly cost will be much lower than renting nearby. That’s for a new build with high quality fittings, views of the river, good facilities in the building. Very long leasehold. No stamp duty for a first time buyer. Conveyancing for shared ownership seems a bit more expensive than outright purchase - https://www.sharetobuy.com/solicitors/
Constraints are that annual income has to be less than £90K and already a resident of the borough, but other than that it seems a decent option, with less cost and none of the restrictions of renting
My daughter is in her 2nd shared ownership property.
The first got her on the property ladder and as her and her partners income increased they bought a greater and greater share until they owned something like 80%, then sold and had enough equity to put a good deposit down on another much larger shared ownership property in a nicer area with a plan that as their income increases they’ll increase their share.
These have both been in commuter distance in Surrey so not somewhere they could afford on their own and both work on the assumption that they’ll earn more next year than this as their careers move on.
So it can work if you’re sensible and disciplined so worth investigation.
The first got her on the property ladder and as her and her partners income increased they bought a greater and greater share until they owned something like 80%, then sold and had enough equity to put a good deposit down on another much larger shared ownership property in a nicer area with a plan that as their income increases they’ll increase their share.
These have both been in commuter distance in Surrey so not somewhere they could afford on their own and both work on the assumption that they’ll earn more next year than this as their careers move on.
So it can work if you’re sensible and disciplined so worth investigation.
I'm trying to find something to buy at the moment. I offered 10% below asking on a shared ownership property - my intention being to buy 100% - but the vendor said they couldn't accept less than the asking price as they'd have to take the hit on, not only their portion of the house, but also on the portion owned by the housing company. So that's one to look out for - it's all rigged in the favour of the company providing the shared ownership scheme. Also, when you calculate the full value of the property from the amount being asked for the share that you can buy, they appear to be comically overpriced. Finally, mortgages on shared ownership seem to be a whole percentage point higher. It basically appears to be a load of vultures all wanting a bit of flesh from those who can't afford to buy their own homes.
That said, I'd like to buy the house that's two doors down from the one I'm currently renting but without 25% off I can't afford to, so I was wondering if it's possible to get a shared ownership deal set up on any property or if it has to be one that's being marketed as shared ownership in the first instance. I could buy the other 25% later as I'm in a new profession and my salary should jump by 60% in a couple of years when I'm fully up to speed.
That said, I'd like to buy the house that's two doors down from the one I'm currently renting but without 25% off I can't afford to, so I was wondering if it's possible to get a shared ownership deal set up on any property or if it has to be one that's being marketed as shared ownership in the first instance. I could buy the other 25% later as I'm in a new profession and my salary should jump by 60% in a couple of years when I'm fully up to speed.
I've just bought out 100% of my flat that was originally shared ownership.
The upsides are you can get 'on the ladder' in expensive areas in the south east on a single modest wage.
For mine the build quality is much better than similar 'private' new build flats - it is ridiculously over insulated - I didn't have to put the heating on once last winter.
We were also lucky with the housing association that is the freeholder spending millions on replacing the insulated after a post-Grenfell inspection - I know many private leasehold flats are having to pay thousands out of their own pocket.
The other advantage of 'social housing' is that the local councillor and borough council will also help residents with issues with the leaseholder.
Downsides are you still pay 'rent' which goes up each year, there's also a monthly service charge (but you'd get that with private properties).
You also have to pay 100% of any repairs, no calling on a landlord to fix things even if you are 'renting' a large portion of the property.
My property hasn't increased too much over the several years I've been there, but that's the issue with owning on the first rung of the ladder, you are mostly limited on what first time buyers can borrow to buy such properties.
The upsides are you can get 'on the ladder' in expensive areas in the south east on a single modest wage.
For mine the build quality is much better than similar 'private' new build flats - it is ridiculously over insulated - I didn't have to put the heating on once last winter.
We were also lucky with the housing association that is the freeholder spending millions on replacing the insulated after a post-Grenfell inspection - I know many private leasehold flats are having to pay thousands out of their own pocket.
The other advantage of 'social housing' is that the local councillor and borough council will also help residents with issues with the leaseholder.
Downsides are you still pay 'rent' which goes up each year, there's also a monthly service charge (but you'd get that with private properties).
You also have to pay 100% of any repairs, no calling on a landlord to fix things even if you are 'renting' a large portion of the property.
My property hasn't increased too much over the several years I've been there, but that's the issue with owning on the first rung of the ladder, you are mostly limited on what first time buyers can borrow to buy such properties.
MitchT said:
Is there a mechanism for calculating the rises? Linked to CPI/RPI/etc? Or can they put it up as much as they want?
It is linked to inflation (can't remember which metric) rather than the local rental market, so somewhat better than open market renting.The service charge seems to be a free-for-all though.
Mrs RJ went into a shared ownership prior to us meeting.
She went from paying rent on a flat, to owning 50% of a brand new 3 end bed town house with small garden and her own off road parking in a nice village.
The combined mortgage and rent were about 50 pounds a month less than her then rent - basically dead money to her and simply paying off someone else's mortgage for them.
She lived in the house for 5 years.
Come the time to move on, the housing association did their own survey, saw the interior decoration etc and new flooring. which they valued at 1500 pounds ( it had cost her about 1800 ) and added that onto her side of the valuation so she the got 50% uplift plus the1500 value of the work.
When sold, she got 50% of the uplift which at the time was around 35K in her pocket, plus the housing association basically sold the house on at the agreed value - their value and an estate agent Mrs RJ commissioned with the final value being the average.
All of the sale procedures were dealt with by the HA, they had a waiting list for her village
The first person to see it took it at the price stated, no haggling or messing - 4 weeks from I want to move to sale agreed.
Intermediate rent rises were linked solely to CPI, yes she maintained it herself but as a new build which had been very well snagged by the HA prior to her moving in there were no issues other than normal decoration to deal with.
She even today cannot see a downside and says it was the best financial decision she ever took.
She went from paying rent on a flat, to owning 50% of a brand new 3 end bed town house with small garden and her own off road parking in a nice village.
The combined mortgage and rent were about 50 pounds a month less than her then rent - basically dead money to her and simply paying off someone else's mortgage for them.
She lived in the house for 5 years.
Come the time to move on, the housing association did their own survey, saw the interior decoration etc and new flooring. which they valued at 1500 pounds ( it had cost her about 1800 ) and added that onto her side of the valuation so she the got 50% uplift plus the1500 value of the work.
When sold, she got 50% of the uplift which at the time was around 35K in her pocket, plus the housing association basically sold the house on at the agreed value - their value and an estate agent Mrs RJ commissioned with the final value being the average.
All of the sale procedures were dealt with by the HA, they had a waiting list for her village
The first person to see it took it at the price stated, no haggling or messing - 4 weeks from I want to move to sale agreed.
Intermediate rent rises were linked solely to CPI, yes she maintained it herself but as a new build which had been very well snagged by the HA prior to her moving in there were no issues other than normal decoration to deal with.
She even today cannot see a downside and says it was the best financial decision she ever took.
It must be worth looking at this another way... Your salary is enough to get you into the available ~£200k flats. Start looking at what you'd need to do in order to service a ~£180/190k mortgage. There are definitely lenders who will allow mortgage terms beyond 70. If you pull this off, at least you will actually stand a chance of owning something outright by the time you stop working.
I recently bought for the first time and my mortgage payments are pretty close to 40% of my basic net income.
ETA: Speak for free to a mortgage advisor. You'll know where you stand then.
I recently bought for the first time and my mortgage payments are pretty close to 40% of my basic net income.
ETA: Speak for free to a mortgage advisor. You'll know where you stand then.
Edited by Hustle_ on Monday 9th September 10:05
Also on your salary you could make a big impact on your deposit if you took some pretty unpalatable but temporary measures. Any friends or family you could lodge with for fee or at a low cost? I don't say it lightly and this is hardly a nice place to be, but there are people living in cars and showering at motorway services etc. Bloody horrendous situation to be in but if doing that for a matter of months gets you into your own place...
We have a 3 bedder shared ownership with a 25% ownership. Im 56 and I was 47 when I took on the small mortgage and I paid it off just after Christmas. All I am interested in is security of tenure for us and for our kids after I have passed away. They are all autistic so have a hard time getting a job. The lease will outlast them so I know they will have somewhere secure to live and Universal Credit will pay the rent, if needed.
Rent rises are capped at CPI+0.05%, however, when inflation was at 10%, the HA only raised by 5%. Of course, I assume that didn't happen with many HA's.
The estate management company seem to be quick in responding to issues, certainly the ones I have reported.
Getting this house is one of the best things I have done. New house, expensive(ish) area, fast resale if needed plus rent and mortgage far lower than private renting, without any of the hassles.
Had I been younger, I may have staircased but the extra cash that I didn't have to pay on a full mortgage means that we are quite comfortable, even though I am low paid.
Rent rises are capped at CPI+0.05%, however, when inflation was at 10%, the HA only raised by 5%. Of course, I assume that didn't happen with many HA's.
The estate management company seem to be quick in responding to issues, certainly the ones I have reported.
Getting this house is one of the best things I have done. New house, expensive(ish) area, fast resale if needed plus rent and mortgage far lower than private renting, without any of the hassles.
Had I been younger, I may have staircased but the extra cash that I didn't have to pay on a full mortgage means that we are quite comfortable, even though I am low paid.
Please please please don't go down this route.
I had massive issue selling my parents home when they passed away.
One conversation with them was quite honest where they admitted they are going to make it very difficult for me to sell the home becasue "its pure profit " for us.
very long story. 2 bed bungalow £128K value, mam and dad owned 25%, I had to sell it to someone who only wanted 25% in the first place (a very small audience) new buyer had to meet their criteria. We eventually found a buyer and he pulled out becasue the company were making it difficult for him to proceed.
Eventually 9 months passed and it was sold on total due to me was £32k. I walked away with £23k after fee's, backdated rent, ongoing maintenance, council tax, gas/electric, water..... Mam and dads immediate neighbour who had the other half of the semi sold in 2 months
Please think carefully before you enter this route. Good Luck
I had massive issue selling my parents home when they passed away.
One conversation with them was quite honest where they admitted they are going to make it very difficult for me to sell the home becasue "its pure profit " for us.
very long story. 2 bed bungalow £128K value, mam and dad owned 25%, I had to sell it to someone who only wanted 25% in the first place (a very small audience) new buyer had to meet their criteria. We eventually found a buyer and he pulled out becasue the company were making it difficult for him to proceed.
Eventually 9 months passed and it was sold on total due to me was £32k. I walked away with £23k after fee's, backdated rent, ongoing maintenance, council tax, gas/electric, water..... Mam and dads immediate neighbour who had the other half of the semi sold in 2 months
Please think carefully before you enter this route. Good Luck
Edited by 996owner on Monday 9th September 15:07
Thanks for the advice and info so far,and will take note the downside of trying to sell after passing on although I’m still keen on the scheme in my circumstances.
I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
Misanthroper said:
Thanks for the advice and info so far,and will take note the downside of trying to sell after passing on although I’m still keen on the scheme in my circumstances.
I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
Its not just when you pass on its when you try and sell.I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
Ask :
Can I buy the freehold (you become 100% owner free of ties), if yes make sure its completely tie free ie you can sell to whoever you want.
About selling fees (research sinking fund)
Ask how long the lease is and future extension costs, mam and dads house only had 60 years remaining, it took months to get it extended, you usually can't get a mortgage on a property with less that 75 years remaining, this was one of my many issues.
Find out about yearly lease hold fees.
Ask about the cost of the home insurance, the company mam and das had (was part of the rent) was expensive and provided very basic cover.
If/when you do wish to sell how long do they have to act as agents before you can go to a regular estate agent.
I hope it works for you
Thanks for the advice and info so far,and will take note the downside of trying to sell after passing on although I’m still keen on the scheme in my circumstances.
I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
I have a viewing set up for Thursday and a call with an independent mortgage advisor on Wednesday, so I’ll have a better feel for the figures following this.
I will also look at the route of buying a £180k place via the traditional mortgage route, but I do like the area and much higher standard of property the shared ownership approach gets me.
I bought my first house as shared ownership back in 1984.
It was a Milton Keynes Development Corporation new build, so probably very different to some if the private schemes these days.
I was already in an MKDC flat (relocated with an employer, and "council" flats were part of the deal), which I tried to buy. They declined, but offered me a 3 bed semi on shared ownership. The price was discounted by a few grand because I was already a tenant.
I started out with 30%, plus 70% of the "normal" rent. The purchase price of further shares was fixed, but the rent would go up each year.
I bought a further 30%, then the final 40% (and the freehold), each time I got a payrise that covered the additional mortgage.
It worked well for me.
It was a Milton Keynes Development Corporation new build, so probably very different to some if the private schemes these days.
I was already in an MKDC flat (relocated with an employer, and "council" flats were part of the deal), which I tried to buy. They declined, but offered me a 3 bed semi on shared ownership. The price was discounted by a few grand because I was already a tenant.
I started out with 30%, plus 70% of the "normal" rent. The purchase price of further shares was fixed, but the rent would go up each year.
I bought a further 30%, then the final 40% (and the freehold), each time I got a payrise that covered the additional mortgage.
It worked well for me.
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