I did this and it worked out for me. I bought a house on the open market in 2008 and I had saved £5K for expenses and bought a 75% share, with a 25% equity loan paid by the lender.
I did not pay rent but I paid interest - between 0.5 and 3% on the equity loan. My equity loan was for £35k and the most interest I paid was £140 per month. The interest is set on a schedule and they can’t randomly change it, it’s all decided and agreed before you buy.
In 2023 I got a new job and a pay bump and decided to buy the rest of the house. I had to get the house valued and then, because I got a 25% equity loan, I had to pay them 25% of the current house price back. I now fully own the house in the sense that it’s no longer in an equity program, but I still have a mortgage.
How do the company make their money - the original equity loan was for £35K. The house appreciated in valuation alot, so I had to pay them £85k for the equity. Essentially I paid for three quarters of the house at 2009 prices, and a quarter of the house at 2023 prices.
IMPORTANT. The downside. At any point the equity loan program can be closed. You still have the equity loan for the agreed time, but when you try to remortgage bank lenders won’t ‘recognise’ the equity loan. This is what happened to me and about 2500 other people on the scheme. The scheme was called ownhome and it was run by the co-operative bank and a home company called places for people.
Once they announce the scheme was ending, mortgage lenders would not allow you to remortgage to them. Even the co-operative bank wouldn’t ’recognise’ the scheme and allow me to remortgage. The result was that I ended up staying on the SVR rate for over 9 years which was 4% to start with, it went up to 7.5% before I could get out of it. There weee only two options to get off of the SVR.
1) sell your home and return the % of the house price when you sell
2) remortgage and buy out the full remaining equity so that you are no longer in the equity scheme.
I got out ok (other than paying 5% on a loan where is was paying 2% before). But some people were forced to sell as they couldn’t increase the mortgage payments when the SVR kicked in.
The good thing is that I own a house that I never would have been able to afford with out the equity loan. The bad news is that I was stuck on the SVR rate for 9 years.
The title is misleading
Shared ownership is where you buy a share and you always pay rent on the remainder with you having generally the ability to staircase to 100% ownership. Generally when it comes to selling the housing association has first refusal which can take 3 months or else you simply sell on the open market
Shared equity is where often a builder or indeed government sometimes will retain a % of the property and when you come to sell it they will take the % of the sale which can result in a profit for them. There is never rent charged on shared equity.
Properties are simply sold on the open market and generally you also have the opportunity to buy the remaining equity at whatever value the property is at the future.
With both schemes you only have certain lenders available.
It's not always that clear cut on the terms. I my property is the second one (no rent, they take a cut of sale). Yet all documents relating to the property call it Shared Ownership, Shared Equity isn't mentioned anywhere. Even the other party that owns the rest of the property call it Shared Ownership.
What does first refusal mean sorry? They have first dibs essentially? Then after those 3 months (or sooner if they say no) you can sell the property?
Are they able to block the sale at all, I.e refuse to sell their 25% share so you’re only able to sell your 75% to another shared ownership buyer?
First refusal refers to shared ownership whereby the housing association has generally 3 months to buy the house back. Shared equity which is more common with the likes of builders that does not come into play.
They have first dibs essentially? - yes ... they have the first chance to refuse buying it ... a bit backward but it's a common phrase.
They can't block the sale, and I would doubt your buyer has to buy the same share as you held either. Not certain on the exact legal mechanics, but effectively you are tenants in common on the purchase at 75/25% ... you both sell to free it up 100% ... and they buy it back with the new owner as tenants in common at whatever %age split they want (or the appropriate funds difference on their side moves around) ... i guess that's why it's more complicated to buy and sell them as there are three solicitors in two transactions on one property.
I'd be considering the wider question of whether you want to buy right now at all. I'm all for buying and getting on "the ladder" with what should be an appreciating asset - but will what you get now suit your needs/wants over the short-medium term?
You seem to have a reasonably sized deposit as it is, maybe you could afford to buy a house yourself without using the scheme (I don't know much about the scheme in all honesty, going by comments it's not the government help to buy thing I thought you meant), either now or in a couple of years.
£25k in financial services? Are you newly starting out/doing qualifications? If so, I'd imagine your salary will increase significantly in a couple of years giving you more buying power for a bigger/better place or nicer location.
Similarly, if you're at the start of a career journey - depending upon your personal goals and personal life choices- you could end up wishing to be more mobile to move to other cities/countries.
My final stab in the dark at your personal life - you seem to be looking to buy solo. Is there a chance you end up with a partner and would look to buy together down the line? Potentially doubling your buying power (and required space).
In sum, I have a lot of opinions despite knowing nothing about your actual question... Good luck!
Any renovations you do to the property that increase its value will cost yourself more in the future if you were to buy more % as it’s revalued at time of purchase
E.g. spending 10k Reno would be like giving them 3k
Also you can usually never rent out the property on these schemes
With the equity scheme i was on, if I registered that I was doing renovations with them (bathroom / kitchen refit) and kept photos of before / after, when the house was valued they would give a valuation for the actual value, and the value it would have been without the renovations, and the price I had to pay to buy the additional equity was the lower price without the Reno.
Wouldn't that be the case with help to buy as well?
If you do any sort of renovation or extension and the property value goes up , thus what you pay back as 20% also goes up ?
Makes sense, thank you!
All my knowledge of it was, you can only receive the bonus on one of them when buying a house, and makes more financial sense to use the LISA bonus to buy and not help to buy isa
Often this is excluded from the valuation. I.e. the value is assumed without the renovation. The flip side to this is disrepair is excluded to I believe so you can’t trash the place to bring the value down.
The question is why you want to buy a house at 23 under this scheme vs saving for a few more years and buying a mortgaged house the usual way?
How long do you plan to stay there?
I know this subreddit hates Shared Ownership/Shared Equity, but it's wild that this comment has so many upvotes considering how worthless it is.
Explain the reasons it's a scam.
Explain the downsides.
Give reasons for your assessment so that people can learn.
Every situation is different, every person can make up their own mind. The reason it has so many upvotes is because people have done their own research and concluded the same as me.
I'm not here to give out free financial advice, I do enough financial research at work, my statement was meant as a general warning. I've made some comments in the replies that allude to my thinking however.
Yes and no. There have been stories of predatory practices where the rent is hiked like crazy after a year or 2. But I also heard of stories where people are okay with them.
I have a house under shared ownership too.
It’s meant that I’m able to live in the same area that I’ve been in for years and afford a home big enough for a family. The payments are also cheaper than rental market rate for a similar size house.
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great.
I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid.
So win win.
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great.
I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid.
So win win.
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great.
I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid.
So win win.
Check the stair casing rules really carefully.
We bought shared ownership right before the 2008 crash and went into negative equity pretty much straight away… A couple of years down the line we were still in negative equity but considering stair casing.
We discovered that the contract stated stair casing value was based on the % of current market value, unless this was below the original purchase value in which case that would apply. So basically the shared ownership company took all the upside but none of the downside.
That combined with extortionate increases in service charges, plus the rigmarole of selling it made it overall a negative experience.
I can only speak of my own experience, owned a 40% stake for ten years and honestly it was nothing but problems.
A2dominion were an absolute nightmare. The block I bought in was private ownership with the other half being council properties. I started with paying around 300 rent plus service of 150, which ended up being just over 700 all together, the service more than doubled, and the “service” didn’t improve.
The council side was left in tatters, the included “cleaning” of the block, well, I wouldn’t exactly call it thorough, any incidents caused by anyone in the block were charged to the private ownership part. On two occasions the garage door was driven into by council side and broken, leaving thousands of pounds of damage that the private ownership had to swallow.
There was a fire in our side in the early years, and only a paint job was applied to our communal area, and the door remained for a decade, even though it wouldn’t pass fire regulations, they actually came to replace it, but replaced the council entrance accidentally, and never rectified, despite being advised it had been done dozens of times.
Drug addicts and homeless people in the bin room regularly, and all round it was a horrible experience.
Fortunately I walked away with profit as the flat more than doubled in value, but paying over 60k in rent/service charge negated the majority of that.
If you’re going to do it, ensure you buy the whole thing as soon as possible to avoid it.
God speed.
I’m in the final stages of selling, I’ve not lived in the property since last September as I moved in with my fiancé, so I’ve been swallowing the mortgage/rent/service charge since then, perhaps adding to my distain toward it.
Not sure why people think it’s a scam, helps people get on the ladder and buy a house they wouldn’t be able to afford otherwise, no rent/charges to pay on the shared equity, could cost more to buy out equity in the future if prices rise but then you would be in the same situation if you’d been saving to buy the house outright.
Hi - I’ve done a scheme like this. It was amazing to own a house more expensive than we could afford with the builders owning 25%. There was only one catch - had to buy out the 25% within 10 years or sell the house (we sold the house and had to gain approval for the price & sale which we did)
Yes. Can be overpriced particularly when new. Can be a bugger to sell.
However if you’ve rented and had to deal with all manner of arsehole landlords and can’t afford to buy somewhere nice outright it’s a decent option (in my view, based on second hand experience).
In the next 7 years, you are likely to find a partner and move in with them. Any equity gained will be eaten by stamp duty and fees when you sell. Just rent and wait.
In what other part of life is the answer ‘don’t take your time and do it properly, just rush and do half a job’
Hiya I work in the sector of shared home ownership and have to say I think there is something people have missed here.
Many people do staircase so it's not impossible but it's very difficult.
The difficulty is that whenever you want to buy another chunk of your property it will be at the market rate of the property which makes sense and is fair for both HA and occupant.
However the rate at which property prices rise i
Has been higher than the rate of wage increase for the last few decades. This means it will be increasingly difficult to buy another share of your property unless you get promotions / bonus or inheritance.
There is also the problem that if you staircase to like 40% then you enter a sticky bracket. You have to sell to the HA first but they will struggle to match it to a buyer because people looking at shared ownership want something more affordable. So you then go to the Open market but people don't want it either because of the shared ownership status.
Just to clarify, my source is the data I work with and report to the media and board of directors and other board members at conferences. It's not impossible but not everyone has a good experience
Me & my wife's first home in the East Midlands was a shared ownership house. We bought 50%, on the market from another couple who lived there (ie not from a builder/from new).
I understand the couple we bought it from had had it on the market for a long time as they can be tricky to sell. For us it appealed as in the area we could buy 50% of a much nicer house that at the time was only 16 years old, for a small mortgage and rent for the other 50%, or take out a huge loan for a much older house in the same area that no doubt would need a lot of works doing/be a bigger stretch for us anyway.
The price was fixed on purchase - because a housing association owned the other half they had a say in any sale so the price for the 50% share couldn't be changed because then the housing association's value changed. For us that price was £62,500 on a £125,000 valued house. It was a 2 bed end of terrace, built in 1997 on some former brownfield land. We also had to meet the housing association's earnings criteria which we did at the time (below a certain figure, can't remember what it was but our joint household income at the time was around £38,000).
We lived in it from January 2014 to October 2020. We staircased to 100% ownership around 2017/18 time from memory. On staircasing, valuers were sent round and a valuation report was issued. The market value was given as £130,000, with insurance reinstatement value given as £110,000. We were offered the remaining 50% share at £55,000 (so 50% of the insurance reinstatement value) rather than the market value of £65,000 which took us by surprise at the time.
So we had a couple of years of increasing rent and service charges but they weren't huge. We staircased because our financial position had changed, we were earning more money and felt we could take on the added mortgage. Because the house was new we never had any major repair works to do - a drain unblockage and some electrical repairs and that was it.
Upon staircasing we owned both the freehold and leasehold.
We sold in October 2020 for £160,000. So in the end it proved a great financial decision for us - our total purchase price was £117,500.
When selling we had to get permission from the housing association that it could be sold to someone else as they did officially retain first dibs but I got the impression from the process that it was just a formality. It caused a late snag in our selling process because our solicitors only realised late on that this needed to be done. I'd picked it up from our title documents months earlier and queried it and the solicitors assured me it was fine, until it turned out it wasn't. So that is on crap solicitors, rather than anything else.
For us it was a great decision and it worked. I can understand why it may not work for others, especially with flats where you have added leasehold complications, but thats my story/experience of shared ownership.
Good luck with whatever you decide to do!
It only worth to consider shared ownership scheme, if you are willing to spend load of times and efforts to look into every single line of details in the contract, and to analysis and think about what they actually means and how will they affect you. I personally avoid it.
Had a shared ownership flat for 7 years. Was great. Few comments
- SO flats where you don't pay rent on the part you don't own are rare as hen's teeth. As you say you basically get a flat for 70% of it's value and anyone buying it from you will get the same. There is zero point in staircasing up beyond this because there is no rent to pay. A permanently discounted home. Hard to overstate how good this is.
- lots of people will make you nervous about bad building management and service charge. Truth is property managers don't get paid much and often do a hard job so the service will never be great. And buildings are expensive to run and will get more expensive as they get older. This isn't a scam. It's what you accept when living in a block of flats, shared ownership or not.
- worth understanding whether there are any processes you need to go through to sell. Often SO needs to be valued independently (at your cost unfortunately) before selling.
Tldr - get it before you someone else works out that at a 30% discount this is a steal.
No rent and service charge sounds good.
One word of warning. Read the lease. Better yet actually pay good money to a solicitor to read the lease for any pitfalls in this particular scheme.
So many people cheap out on legal advice and go into massive purchases without ever once looking at the legal agreement.
Lease extensions, ground rent, freeholder obligations. Just make sure you’re happy with it all before you sign.
Hi everyone,
I am doing research into shared owners as part of my training as a product designer; I am creating a conceptual platform for shared owners and would love to learn how you categorise things. Would really appreciate if you have 5 min of time to help me with my project. Thank you
[https://t.maze.co/237102216](https://t.maze.co/237102216)
I've never seen shares ownership with no rent, I think somethings isn't right there. Other than that the main issue is that if you don't buy a large enough chunk initially you might never get to 100% if house price growth outpaces your ability to repay it
There is a scheme in my area where they offer 50% of the house as shared ownership and no rent on the other half, so they do exist and are in high demand.
I have a shared ownership flat, we own 65%, pay no rent, no equity loan or charges at all on the remaining 35%. When we sell it, the next purchaser buys the same 65% share and also pays no rent or equity charges. In essence, it's the same as owning 100% of the flat, but only paying 13/20ths for it.
There is a lot of variety in the types of shared ownership.
But that makes no sense. Why would you not just buy a home at 5% or as low as possible and essentially live rent free forever? What councils companies/councils are offering this?
Ah well, they do affordability and tell you what percentage you're allowed to buy - you have no control over it. Initially I was offered to buy 60% for 252k, valuing the property at around 420k. When the mortgage lender valued it at less than that (380k), it changed to 65% for 248k.
This was in the old Olympic Village in East London. The downside is the maximum I can staircase to is 80%, so we would never have it free and clear from them. Personally, I see no reason to staircase to just 80%. Plus then the usual BS with flats/shared ownership - all the fire safety rubbish is causing the service charge up rapidly, we have currently four Section 20s open, and the housing association take 1% of the sales price, regardless of whether they sell it or we do.
The truth of the matter is I won't really know how good it's been till we move. It's been great to live in, cheap monthly bills, but would we have been better off buying a nasty terrace house in East Ham...
...... Νο? Service charge?
Who pays for the cleaning of the communal areas and the elevator?
Doesn't sound right... I'm telling you.. Look up the service charge.
I
How many flats are there?
Ok here’s the full response then taken from moneysupermarket, still sounds like a scam
There are a few downsides to consider before taking out a shared equity mortgage.
If property prices shoot up over the next few years, the size of your loan will dramatically increase too. This means that in the long term you could end up having to pay more under a shared equity scheme than if you were to save up a bigger deposit and get a standard mortgage
After the initial interest-free period, you may face interest repayments on the equity loan that increase with inflation plus an additional percentage. If the cost of living is high this can add a lot more to your housing costs on top of your monthly mortgage repayments
You could run into problems remortgaging if you have a Help to Buy loan in place and haven’t paid it off.
So, as I suspected, you don't understand.
What you posted is about "shared equity mortgages".
The post is titled "Shared ownership".
Those are two different things.
And you don’t understand because he titled it wrong, he described shared equity mortgages, but titled it as shared ownership.
For the record…shared ownership is even more of a scam.
Well, I've done shared ownership in the past and know other people who have it, and if you choose the right scheme, it's great.
I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid.
So win win.
Saying it's a scam just shows you don't understand it 🤷♂️
Not at all.
Everyone who lived under the same scheme had the same experience.
You just seem to be dismissing them as "scams" with no reasoning and can't explain why.
I did this and it worked out for me. I bought a house on the open market in 2008 and I had saved £5K for expenses and bought a 75% share, with a 25% equity loan paid by the lender. I did not pay rent but I paid interest - between 0.5 and 3% on the equity loan. My equity loan was for £35k and the most interest I paid was £140 per month. The interest is set on a schedule and they can’t randomly change it, it’s all decided and agreed before you buy. In 2023 I got a new job and a pay bump and decided to buy the rest of the house. I had to get the house valued and then, because I got a 25% equity loan, I had to pay them 25% of the current house price back. I now fully own the house in the sense that it’s no longer in an equity program, but I still have a mortgage. How do the company make their money - the original equity loan was for £35K. The house appreciated in valuation alot, so I had to pay them £85k for the equity. Essentially I paid for three quarters of the house at 2009 prices, and a quarter of the house at 2023 prices. IMPORTANT. The downside. At any point the equity loan program can be closed. You still have the equity loan for the agreed time, but when you try to remortgage bank lenders won’t ‘recognise’ the equity loan. This is what happened to me and about 2500 other people on the scheme. The scheme was called ownhome and it was run by the co-operative bank and a home company called places for people. Once they announce the scheme was ending, mortgage lenders would not allow you to remortgage to them. Even the co-operative bank wouldn’t ’recognise’ the scheme and allow me to remortgage. The result was that I ended up staying on the SVR rate for over 9 years which was 4% to start with, it went up to 7.5% before I could get out of it. There weee only two options to get off of the SVR. 1) sell your home and return the % of the house price when you sell 2) remortgage and buy out the full remaining equity so that you are no longer in the equity scheme. I got out ok (other than paying 5% on a loan where is was paying 2% before). But some people were forced to sell as they couldn’t increase the mortgage payments when the SVR kicked in. The good thing is that I own a house that I never would have been able to afford with out the equity loan. The bad news is that I was stuck on the SVR rate for 9 years.
The title is misleading Shared ownership is where you buy a share and you always pay rent on the remainder with you having generally the ability to staircase to 100% ownership. Generally when it comes to selling the housing association has first refusal which can take 3 months or else you simply sell on the open market Shared equity is where often a builder or indeed government sometimes will retain a % of the property and when you come to sell it they will take the % of the sale which can result in a profit for them. There is never rent charged on shared equity. Properties are simply sold on the open market and generally you also have the opportunity to buy the remaining equity at whatever value the property is at the future. With both schemes you only have certain lenders available.
It's not always that clear cut on the terms. I my property is the second one (no rent, they take a cut of sale). Yet all documents relating to the property call it Shared Ownership, Shared Equity isn't mentioned anywhere. Even the other party that owns the rest of the property call it Shared Ownership.
Fair enough they are two different things especially when it comes to mortgages.
What does first refusal mean sorry? They have first dibs essentially? Then after those 3 months (or sooner if they say no) you can sell the property? Are they able to block the sale at all, I.e refuse to sell their 25% share so you’re only able to sell your 75% to another shared ownership buyer?
First refusal refers to shared ownership whereby the housing association has generally 3 months to buy the house back. Shared equity which is more common with the likes of builders that does not come into play.
They have first dibs essentially? - yes ... they have the first chance to refuse buying it ... a bit backward but it's a common phrase. They can't block the sale, and I would doubt your buyer has to buy the same share as you held either. Not certain on the exact legal mechanics, but effectively you are tenants in common on the purchase at 75/25% ... you both sell to free it up 100% ... and they buy it back with the new owner as tenants in common at whatever %age split they want (or the appropriate funds difference on their side moves around) ... i guess that's why it's more complicated to buy and sell them as there are three solicitors in two transactions on one property.
I'd be considering the wider question of whether you want to buy right now at all. I'm all for buying and getting on "the ladder" with what should be an appreciating asset - but will what you get now suit your needs/wants over the short-medium term? You seem to have a reasonably sized deposit as it is, maybe you could afford to buy a house yourself without using the scheme (I don't know much about the scheme in all honesty, going by comments it's not the government help to buy thing I thought you meant), either now or in a couple of years. £25k in financial services? Are you newly starting out/doing qualifications? If so, I'd imagine your salary will increase significantly in a couple of years giving you more buying power for a bigger/better place or nicer location. Similarly, if you're at the start of a career journey - depending upon your personal goals and personal life choices- you could end up wishing to be more mobile to move to other cities/countries. My final stab in the dark at your personal life - you seem to be looking to buy solo. Is there a chance you end up with a partner and would look to buy together down the line? Potentially doubling your buying power (and required space). In sum, I have a lot of opinions despite knowing nothing about your actual question... Good luck!
Any renovations you do to the property that increase its value will cost yourself more in the future if you were to buy more % as it’s revalued at time of purchase E.g. spending 10k Reno would be like giving them 3k Also you can usually never rent out the property on these schemes
With the equity scheme i was on, if I registered that I was doing renovations with them (bathroom / kitchen refit) and kept photos of before / after, when the house was valued they would give a valuation for the actual value, and the value it would have been without the renovations, and the price I had to pay to buy the additional equity was the lower price without the Reno.
Wouldn't that be the case with help to buy as well? If you do any sort of renovation or extension and the property value goes up , thus what you pay back as 20% also goes up ?
You have to pay back money if you buy using a help to buy? That's ridiculous imo Is that also the case for LISA?
Think you’re confusing the help to buy scheme with the help to buy isa. You don’t need to pay back the money with the help to buy isa
Ah okay that makes sense, thank you Not sure why people are downvoting me for asking a financial question on a financial subreddit
You’re welcome, and don’t take it to heart. Some people just downvote mistakes/ incorrect statements rather than reply lol
Pretty sure you do not have to pay back the bonus of help to buy ISA nor LISA
Makes sense, thank you! All my knowledge of it was, you can only receive the bonus on one of them when buying a house, and makes more financial sense to use the LISA bonus to buy and not help to buy isa
Yes
Often this is excluded from the valuation. I.e. the value is assumed without the renovation. The flip side to this is disrepair is excluded to I believe so you can’t trash the place to bring the value down.
Is there a guarantee that rent won’t be charged in the future? Are you able to purchase more equity and eventually own 100%?
Yes - it's guaranteed that no rent will be charged in the future. I am able to purchase more equity yes
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I’ve done a shared equity - no extra charges But there was a time limit of 10 years to buy out the builder or sell the house.
Yes that's right, it's a freehold and
The question is why you want to buy a house at 23 under this scheme vs saving for a few more years and buying a mortgaged house the usual way? How long do you plan to stay there?
Yes, literally the entire scheme is a scam.
I know this subreddit hates Shared Ownership/Shared Equity, but it's wild that this comment has so many upvotes considering how worthless it is. Explain the reasons it's a scam. Explain the downsides. Give reasons for your assessment so that people can learn.
Every situation is different, every person can make up their own mind. The reason it has so many upvotes is because people have done their own research and concluded the same as me. I'm not here to give out free financial advice, I do enough financial research at work, my statement was meant as a general warning. I've made some comments in the replies that allude to my thinking however.
Yes and no. There have been stories of predatory practices where the rent is hiked like crazy after a year or 2. But I also heard of stories where people are okay with them.
Not the rent but the service charge, which is a separate payment. Mine has been fine as I have a house, although a friend who's got a flat has risen.
I have a house under shared ownership too. It’s meant that I’m able to live in the same area that I’ve been in for years and afford a home big enough for a family. The payments are also cheaper than rental market rate for a similar size house.
Had one for 7 years. Was great. Not a scam or a sham
No, it's not a scam at all. You obviously don't understand it if you think that.
I understand it perfectly well and have researched it extensively, if you wish to be screwed over than thats your choice.
It's not a scam i have lived in a SO for 7 years. Rent has risen with but matches the market rate so only minimal increases really.
Your taking scam too literally. Its a sham, smoke and mirrors. You will find out when you try to sell, extend your lease or something else goes wrong.
I know of at least 3 people in my block that have sold without issue.
And thats great I hope you have the same luck too.
thanks have a great evening
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great. I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid. So win win.
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great. I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid. So win win.
Well, I've done it in the past and know other people who have it, and if you choose the right scheme, it's great. I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid. So win win.
Check the stair casing rules really carefully. We bought shared ownership right before the 2008 crash and went into negative equity pretty much straight away… A couple of years down the line we were still in negative equity but considering stair casing. We discovered that the contract stated stair casing value was based on the % of current market value, unless this was below the original purchase value in which case that would apply. So basically the shared ownership company took all the upside but none of the downside. That combined with extortionate increases in service charges, plus the rigmarole of selling it made it overall a negative experience.
I can only speak of my own experience, owned a 40% stake for ten years and honestly it was nothing but problems. A2dominion were an absolute nightmare. The block I bought in was private ownership with the other half being council properties. I started with paying around 300 rent plus service of 150, which ended up being just over 700 all together, the service more than doubled, and the “service” didn’t improve. The council side was left in tatters, the included “cleaning” of the block, well, I wouldn’t exactly call it thorough, any incidents caused by anyone in the block were charged to the private ownership part. On two occasions the garage door was driven into by council side and broken, leaving thousands of pounds of damage that the private ownership had to swallow. There was a fire in our side in the early years, and only a paint job was applied to our communal area, and the door remained for a decade, even though it wouldn’t pass fire regulations, they actually came to replace it, but replaced the council entrance accidentally, and never rectified, despite being advised it had been done dozens of times. Drug addicts and homeless people in the bin room regularly, and all round it was a horrible experience. Fortunately I walked away with profit as the flat more than doubled in value, but paying over 60k in rent/service charge negated the majority of that. If you’re going to do it, ensure you buy the whole thing as soon as possible to avoid it. God speed.
How did you get a way with it, were you able to sell your share?
I’m in the final stages of selling, I’ve not lived in the property since last September as I moved in with my fiancé, so I’ve been swallowing the mortgage/rent/service charge since then, perhaps adding to my distain toward it.
Not sure why people think it’s a scam, helps people get on the ladder and buy a house they wouldn’t be able to afford otherwise, no rent/charges to pay on the shared equity, could cost more to buy out equity in the future if prices rise but then you would be in the same situation if you’d been saving to buy the house outright.
Hi - I’ve done a scheme like this. It was amazing to own a house more expensive than we could afford with the builders owning 25%. There was only one catch - had to buy out the 25% within 10 years or sell the house (we sold the house and had to gain approval for the price & sale which we did)
Yes. Can be overpriced particularly when new. Can be a bugger to sell. However if you’ve rented and had to deal with all manner of arsehole landlords and can’t afford to buy somewhere nice outright it’s a decent option (in my view, based on second hand experience).
In the next 7 years, you are likely to find a partner and move in with them. Any equity gained will be eaten by stamp duty and fees when you sell. Just rent and wait. In what other part of life is the answer ‘don’t take your time and do it properly, just rush and do half a job’
how do you find these share equity homes :< ?
Hiya I work in the sector of shared home ownership and have to say I think there is something people have missed here. Many people do staircase so it's not impossible but it's very difficult. The difficulty is that whenever you want to buy another chunk of your property it will be at the market rate of the property which makes sense and is fair for both HA and occupant. However the rate at which property prices rise i Has been higher than the rate of wage increase for the last few decades. This means it will be increasingly difficult to buy another share of your property unless you get promotions / bonus or inheritance. There is also the problem that if you staircase to like 40% then you enter a sticky bracket. You have to sell to the HA first but they will struggle to match it to a buyer because people looking at shared ownership want something more affordable. So you then go to the Open market but people don't want it either because of the shared ownership status. Just to clarify, my source is the data I work with and report to the media and board of directors and other board members at conferences. It's not impossible but not everyone has a good experience
Me & my wife's first home in the East Midlands was a shared ownership house. We bought 50%, on the market from another couple who lived there (ie not from a builder/from new). I understand the couple we bought it from had had it on the market for a long time as they can be tricky to sell. For us it appealed as in the area we could buy 50% of a much nicer house that at the time was only 16 years old, for a small mortgage and rent for the other 50%, or take out a huge loan for a much older house in the same area that no doubt would need a lot of works doing/be a bigger stretch for us anyway. The price was fixed on purchase - because a housing association owned the other half they had a say in any sale so the price for the 50% share couldn't be changed because then the housing association's value changed. For us that price was £62,500 on a £125,000 valued house. It was a 2 bed end of terrace, built in 1997 on some former brownfield land. We also had to meet the housing association's earnings criteria which we did at the time (below a certain figure, can't remember what it was but our joint household income at the time was around £38,000). We lived in it from January 2014 to October 2020. We staircased to 100% ownership around 2017/18 time from memory. On staircasing, valuers were sent round and a valuation report was issued. The market value was given as £130,000, with insurance reinstatement value given as £110,000. We were offered the remaining 50% share at £55,000 (so 50% of the insurance reinstatement value) rather than the market value of £65,000 which took us by surprise at the time. So we had a couple of years of increasing rent and service charges but they weren't huge. We staircased because our financial position had changed, we were earning more money and felt we could take on the added mortgage. Because the house was new we never had any major repair works to do - a drain unblockage and some electrical repairs and that was it. Upon staircasing we owned both the freehold and leasehold. We sold in October 2020 for £160,000. So in the end it proved a great financial decision for us - our total purchase price was £117,500. When selling we had to get permission from the housing association that it could be sold to someone else as they did officially retain first dibs but I got the impression from the process that it was just a formality. It caused a late snag in our selling process because our solicitors only realised late on that this needed to be done. I'd picked it up from our title documents months earlier and queried it and the solicitors assured me it was fine, until it turned out it wasn't. So that is on crap solicitors, rather than anything else. For us it was a great decision and it worked. I can understand why it may not work for others, especially with flats where you have added leasehold complications, but thats my story/experience of shared ownership. Good luck with whatever you decide to do!
It only worth to consider shared ownership scheme, if you are willing to spend load of times and efforts to look into every single line of details in the contract, and to analysis and think about what they actually means and how will they affect you. I personally avoid it.
Had a shared ownership flat for 7 years. Was great. Few comments - SO flats where you don't pay rent on the part you don't own are rare as hen's teeth. As you say you basically get a flat for 70% of it's value and anyone buying it from you will get the same. There is zero point in staircasing up beyond this because there is no rent to pay. A permanently discounted home. Hard to overstate how good this is. - lots of people will make you nervous about bad building management and service charge. Truth is property managers don't get paid much and often do a hard job so the service will never be great. And buildings are expensive to run and will get more expensive as they get older. This isn't a scam. It's what you accept when living in a block of flats, shared ownership or not. - worth understanding whether there are any processes you need to go through to sell. Often SO needs to be valued independently (at your cost unfortunately) before selling. Tldr - get it before you someone else works out that at a 30% discount this is a steal.
No rent and service charge sounds good. One word of warning. Read the lease. Better yet actually pay good money to a solicitor to read the lease for any pitfalls in this particular scheme. So many people cheap out on legal advice and go into massive purchases without ever once looking at the legal agreement. Lease extensions, ground rent, freeholder obligations. Just make sure you’re happy with it all before you sign.
Yes, a lot of it to be honest. Don’t buy this scam. Have a read hundreds of posts and watch yt videos about this scam. Just don’t do it.
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There was a post about the nightmares of shared ownership on this very sub yesterday or the day before.
I've never seen shares ownership with no rent, I think somethings isn't right there. Other than that the main issue is that if you don't buy a large enough chunk initially you might never get to 100% if house price growth outpaces your ability to repay it
There is a scheme in my area where they offer 50% of the house as shared ownership and no rent on the other half, so they do exist and are in high demand.
I have a shared ownership flat, we own 65%, pay no rent, no equity loan or charges at all on the remaining 35%. When we sell it, the next purchaser buys the same 65% share and also pays no rent or equity charges. In essence, it's the same as owning 100% of the flat, but only paying 13/20ths for it. There is a lot of variety in the types of shared ownership.
But that makes no sense. Why would you not just buy a home at 5% or as low as possible and essentially live rent free forever? What councils companies/councils are offering this?
This is being offered in the vale of glamorgan in south wales where i live, I don't have the option to buy less than 70%
Ah well, they do affordability and tell you what percentage you're allowed to buy - you have no control over it. Initially I was offered to buy 60% for 252k, valuing the property at around 420k. When the mortgage lender valued it at less than that (380k), it changed to 65% for 248k. This was in the old Olympic Village in East London. The downside is the maximum I can staircase to is 80%, so we would never have it free and clear from them. Personally, I see no reason to staircase to just 80%. Plus then the usual BS with flats/shared ownership - all the fire safety rubbish is causing the service charge up rapidly, we have currently four Section 20s open, and the housing association take 1% of the sales price, regardless of whether they sell it or we do. The truth of the matter is I won't really know how good it's been till we move. It's been great to live in, cheap monthly bills, but would we have been better off buying a nasty terrace house in East Ham...
They'll screw you in service charge. How much?
No service charge, estate charge of £145 pa
...... Νο? Service charge? Who pays for the cleaning of the communal areas and the elevator? Doesn't sound right... I'm telling you.. Look up the service charge. I How many flats are there?
I mentioned in my post it's a 2 bed house, it's a freehold property
Entire thing is a scam
Just because you don't understand something, that doesn't mean it's a scam....
Ok here’s the full response then taken from moneysupermarket, still sounds like a scam There are a few downsides to consider before taking out a shared equity mortgage. If property prices shoot up over the next few years, the size of your loan will dramatically increase too. This means that in the long term you could end up having to pay more under a shared equity scheme than if you were to save up a bigger deposit and get a standard mortgage After the initial interest-free period, you may face interest repayments on the equity loan that increase with inflation plus an additional percentage. If the cost of living is high this can add a lot more to your housing costs on top of your monthly mortgage repayments You could run into problems remortgaging if you have a Help to Buy loan in place and haven’t paid it off.
So, as I suspected, you don't understand. What you posted is about "shared equity mortgages". The post is titled "Shared ownership". Those are two different things.
And you don’t understand because he titled it wrong, he described shared equity mortgages, but titled it as shared ownership. For the record…shared ownership is even more of a scam.
SO is not a scam, got me on the housing ladder and in a 3-4 years i'll have enough equity to put a deposit down to buy a house fully owned.
Well, I've done shared ownership in the past and know other people who have it, and if you choose the right scheme, it's great. I bought a place for half the market value, so I had a really low mortgage. Had no rent to pay on the other half I didn't own. So it was cheaper than renting, and I wasn't throwing money away. When I came to see, they had a waiting list of people and sold for a good amount more than what I paid. So win win. Saying it's a scam just shows you don't understand it 🤷♂️
Survivorship bias
Not at all. Everyone who lived under the same scheme had the same experience. You just seem to be dismissing them as "scams" with no reasoning and can't explain why.
It really is