Any downsides of part ownership mortages?

mushtafa

mushtafa

mushtafa

Soldato
Joined
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Location
West Sussex, UK
Single person / single wage.
I'm worried that if I start renting, I'll always be stuck renting and not being able to save to get on the housing ladder.
I've looked at some part ownership properties, and some are affordable. (35%-40% ownership).

Are there any downsides of this? What responsibilities does the landlord have? If any?
 
mushtafa said:
Single person / single wage.
I'm worried that if I start renting, I'll always be stuck renting and not being able to save to get on the housing ladder.
I've looked at some part ownership properties, and some are affordable. (35%-40% ownership).

Are there any downsides of this? What responsibilities does the landlord have? If any?
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No no no stay away, it is a con.
Another way is get two others to buy into the same 2/3 bedroom property.
Yet you are not going to live alone, but you all get to build your ownership.

Shareowner is just bad, worse financial decisions anyone can make. Part rent part mortgage, very bad.

There are a few not many shared ownership that you do not pay rent on which is good But those are very hard to find.
You need to factor in services charges and they are linked to inflation in these properties.
 
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Shared ownership got us onto the ladder about 15 years ago, same as a couple of friends. Basically paid the same as what renting would be but part investment.
But, we started it when house prices were low.
 
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Shared ownership houses (definitely not flats) are good if the total property value is still reasonable. Some of the providers are ruthless profit mongering monsters like Heylo, Sage etc.

If you find a good provider and it’s a house and the financials stack up it’s good. There are a lot of good options in and around Manchester for example.
 
mushtafa said:
Single person / single wage.
I'm worried that if I start renting, I'll always be stuck renting and not being able to save to get on the housing ladder.
I've looked at some part ownership properties, and some are affordable. (35%-40% ownership).

Are there any downsides of this? What responsibilities does the landlord have? If any?
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Would not touch with a barge pole, would sooner carry on renting
 
Shoza said:
Shared ownership houses (definitely not flats) are good if the total property value is still reasonable. Some of the providers are ruthless profit mongering monsters like Heylo, Sage etc.

If you find a good provider and it’s a house and the financials stack up it’s good. There are a lot of good options in and around Manchester for example.
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Yeah, they tend to value the houses very highly and I'm not sure if they will even negotiate on the price.

There can also be rules on who you can sell to, if you have to let the shared ownership company advertise it, etc., etc. to think about.

Also worth finding out how much the rent proportion can rise by each year, is there a service charge, how much that can rise by each year, and so on.
 
Stu999 said:
Yeah, they tend to value the houses very highly and I'm not sure if they will even negotiate on the price.

There can also be rules on who you can sell to, if you have to let the shared ownership company advertise it, etc., etc. to think about.

Also worth finding out how much the rent proportion can rise by each year, is there a service charge, how much that can rise by each year, and so on.
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Can't be as bad as out gov.

amp.theguardian.com

UK public buildings feared to be at risk of collapse as concrete crumbles

Ministers launch inquiry into use of reinforced autoclaved aerated concrete (RAAC)
amp.theguardian.com amp.theguardian.com


The government has an extensive property portfolio, which was valued in March 2021 at £158bn and estimated to cost the taxpayer £22bn a year to maintain.
 
Source: Own 40% of a 1 bed shared ownership flat in London for 7 years now.

There are many downsides, and general recommendation is "if you can afford to, buy on open market".

However if the mortgage limit is the deposit rather than salary, than it might make financial sense.
Positives:
* Since buying, my rent + service charge has gone up by ~220 a month - it (service charge part) varies since its a block of flats but I am thinking this is a lower increase than what most people's rent in the last 7 years.
* Rent + mortgage is lower than most other rental 1 beds in the area.
* Paid off 34k from the mortgage.
* Didn't have to flat share with randoms and live with wife + cat.
* Replaced kitchen and other improvements to the standard I wanted. Usually there is a fee of a hundred or so quid for major works to the housing association for the pleasure.
* When buying there is no price negotiations, you get a visa like list and gotta score more points than other applicants to get first offer. I was actually at least no2 in the list as I was told the person in front of me declined to buy originally. But basically you cannot be over bid by someone with more money.

Negatives:
* You are on the hook for almost all internal repairs - this depends on the contract, my one had a loophole for one repair for example - a window handle broke. Housing association was wholeheartedly refusing to fix it until I quoted my lease agreement that explicitly stipulated that ONLY window glass is my responsibility from the external wall, and after I pointed out that the window handle is attached to the window frame and not glass, its their responsibility. They sent out people to fix it the following week. But the rest is true, you are on the hook for repairs like any other home owner.
* Had the cladding issue, the whole development fought for the cost to be burdened by the original builder + housing association and it seems we are not on the hook for that work any more - not everyone is in the same position.
* There was a weird 8k stipulation (per flat) for some internal re-decorating works would be coming up in a few years time, which is weird because it was agreed before I bought, always make sure to read more carefully than I did about upcoming contractual costs (my solicitors did mention that in their review, but I did not read that carefully enough). Haven't paid that yet as the works were replaced by cladding disaster.
* Rent always goes up by a minimum amount (but see the same point in the positive bit).
* When you sell, there is a 1% admin fee payable on the Total value of the flat, not your share, not yet tried to sell to see what other pitfalls there may be.

Personally, I think it was a good idea for me, because the alternative was to keep renting a room in a flat share with random people and mice. The landlord that didn't want to get professionals to come and fix broken things and pretty sure our deposits were not in the deposit protection scheme.
 
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If you mean shared ownership then i’d say its a good way to get on the property ladder. Had mine for 6 years and the rents only gone up about £10 each year. Will sell it in the next 2-3 years.

Dunno why people are saying its a scam, its cheaper than renting the equivalent flat in my area and i’ll get something out of it when i sell.
 
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Shared ownership flat "owner" here, coming up to 4 years now and it has been both heaven and hell. Especially with new build quality having the reputation it has and who's responsibility it is to maintain the property.

On the estate I am on the price of a 1 bedroom flat was 8x my salary, the rental rate more than 40% of my salary. The combined mortgage and shared ownership rent even with a 60% share worked out at 30% so it was more affordable than renting.

I went down this route as a "reset", I needed my own space and the internal size was perfect for my needs. My mortgage advisor said I could have aimed bigger. Instead my plan was to staircase to own the property outright and then consider selling in the future so I had a fixed 3 year mortgage on 2% with a plan to re-mortgage to buy the rest.

One of the important figures to watch for is the rental percentage rate and how it escalates. Mine was on the high side at 3.5% of the shared property value, but they had undervalued the property when it was first sold so the rent was reasonable. Newer builds have a higher purchase price but the rent rate is only 2.75%. This value doesn't change with the price of the property but with RPI+%, so this year our rent went up 8%. Run the maths and see if it's affordable, how much buffer do you have if prices increase and how would it compare to properties on the open market. When I tried to re-mortgage to buy out the staircase I was getting quotes of 5%+ so it worked out cheaper to overpay my existing mortgage to rock bottom and stay with the shared rent than it was to staircase and take on more debt, with a plan to buy the rest when rates or values stabilise.

If I hadn't gone down the shared ownership route it would have taken an extra 2 years to save up enough deposit and salary bump to be able to afford a much older, smaller flat with a higher mortgage, if I had been 2 years earlier I could have had a 2 bed terrace.

As above, here are some of my points:
* You are responsible for any maintenance or repairs of anything after the structure of the property just like a normal house, including leaks, servicing and damage.
* Your freeholder is "responsible" for repairs and maintenance of the rest of the property, as in they will repair when instructed, but they will apply this repair charge to your maintenance contract. If the gutter falls off, they repair it, the cost gets added on to the maintenance contract and comes out of your service fees. They do not pay for anything.
* Shared ownership properties as they are not "open market" usually have inferior fixtures and fittings compared to the "showhome" developer properties to cut costs such as less tiling, cheaper finishes, kitchen/bathroom etc. The two bedroom flat on our estate the shared ownership property got a walk in wardrobe instead of an en-suite.
* If you're only planning on being there as a starter home, don't staircase. Your property is worth more as a shared ownership than it is as a fully owned flat, as you are finding out the affordability of shared ownership is better than rented or owning fully outright. Two flats here recently went on the market for the same price, the shared ownership one sold within a week and had half a dozen viewings, the private sale had more viewings but after 3 months was pulled from the market as no one would buy it, even though it was the same price and had a better kitchen/bathroom.
* If it's a new build, get a professional snagger in to inspect it when you move in. After 3 years I'm still heavily involved (multiple calls a week) with the Housing Association (freeholder/management), builder, NHBC, Building Control, an acoustics engineer, plumber, another builder, glazing fitters, council, housing ombudsman, another acoustics department and soon to be a solicitor because the house was inappropriately signed off as complete when it doesn't conform to building regulations. (similar situation to cladding, but noise related rather than fire risk). All very keen to blame each other and no one will take responsibility.
* Your share value is linked to property prices, same with staircasing, but the rent is fixed plus RPI on the original sale price. My flat has gone up in value 25% but the rent 10% in 3 years. To staircase I'd have to mortgage the extra increase in value.

I've looked at moving out, but with my funds I can either afford a 2 bedroom flat outright in a worse block, or a 2 bed semi shared ownership on the outskirts of town with smaller rooms. Overall I don't regret going down the shared ownership route but I'm sure housing would be more affordable for all if they didn't keep running schemes to try and make property "affordable".
 
Steeps said:
Shared ownership flat "owner" here, coming up to 4 years now and it has been both heaven and hell. Especially with new build quality having the reputation it has and who's responsibility it is to maintain the property.

On the estate I am on the price of a 1 bedroom flat was 8x my salary, the rental rate more than 40% of my salary. The combined mortgage and shared ownership rent even with a 60% share worked out at 30% so it was more affordable than renting.

I went down this route as a "reset", I needed my escalates. Mine was on the high side at 3.5% of the shared property value, but they had undervalued the property when it was first sold so the rent was reasonable. Newer builds have a higher purchase price but the rent rate is only 2.75%. This value doesn't change with the price of the property but with RPI+%, so this year our rent went up 8%. Run the maths and see if it's affordable, how much buffer do you have if prices increase and how would it compare to properties on the open market. When I tried to re-mortgage to buy out the staircase I was getting quotes of 5%+ so it worked out
mortgage the extra increase in value.

".
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Buy with mates.
 
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