To anyone in the know about mortgages etc out there...
Been looking at places to buy first home. Found somewhere outside London stating the buying part is £70k, and I only need £3.5k for the deposit. It is for 40% of the property.
The question I have, is the remaining 60% will be rented from the association. But I'm trying to find out if it's possible to estimate the monthly rental value? As I know how much the mortgage of £70k minus deposit, would be, as I have enquired about that.
Does anyone know how the rental side works????
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It is a bloody nightmare.
No matter what your solicitor tells you there are very few that understand the technicalities of the process - that cost us a lot of money in the long run.
Selling is a horrible process. The valuation has to be done by the Housing Association and the general rule of thumb is that it has to be valued every 3 months - you have to pay for that "service".
The Housing Association will have a period where they try and sell it for you. Generally they fail so its a waste of 6 months. You are then in the hands of estate agents who don't understand the process and upteen buyers who don't understand what you are selling.
Took us 18 months to sell our flat on the Royal Arsenal. After all the related costs we made about 5k - we had lived there for 5 years and the market was bouyant.
As for the rent charge. It will be based on an " affordable" market rent. Remember if it is a flat you will have to add service charges as well. The original price of our flat was 205k and we started with 30% ownership. The rent on the remaining 50% (we bought an extra 20% whilst we were there) was circa £460.00 when we moved out. It will go up each year, probably based on the retail price index.
As a matter of interest, who are the Housing Association?
It says 'Property Eagle or Sentinel Housing Assiciation'.
That's the thing that irritates me, all these hidden costs! I thought they were supposed to make it easier and affordable to buy a new home?!
Both of us are on good money, but for us to save for a deposit and buy a house outright, we would be saving for 2-3 years.
This isn't an issue, just thought I would look at all options available, including Help2Buy.
Tough thing to do but I dont think there is an easy way. I know things are different now to 25 years ago but thats how my wife and I did it, banked one wage and lived off the other.
Add in that between rent and mortgage interest, 90% of what you pay a month isn't coming off the mortgage, and the fact that you have to pay for any improvements (rather than a landlord if you rent) but get 40% of the benefit and you're practically better off renting.
The Help to Buy sounds a much better bet.
Agree the help to buy scheme would be the better option
Someone I know got caught by that and ended up selling back to the Housing Association at a loss!
Luckily she had a friend who was looking to rent a room somewhere and as it was two bedrooms she could move in and cover my half of the rent mortgage and didn't mind keeping it informal. Then a year later another boyfriend who could do the same, otherwise we were looking at a big hit on the sale at the time.
Which leads me onto my next question...
The house involved is valued at 175k, new build, 2 bed.
The Help2Buy enables you have a 5% deposit, and hopefully a 95% mortgage from a bank.
OR
You can have 5% deposit, 20% equity loan from govt and mortgage if 75%.
So let's say I have £8750 now. And I get a mortgage from either of the above.
Will the owner of the this property, which is listed as S/O sell to me, if I offered the right amount? Or is there a certain quota of S/O Homes???
If it is "as new" and you are effectively the first owner, as far as I can recall the majority of Housing Associations would not allow you to take 100% equity with the first purchase.
If an owner is selling you would have two transactions. You'd buy whatever percentage the owner has from them and the remaining amount from the HA. A legal minefield if ever there was one! The HA would also have to agree.
Personally, I don't think shared ownership is as bad as some people on this thread are making out, but you do need to know what you're getting yourself into. The buying and selling process can take a long time, and most associations have restrictions on sub-letting, but that's to make sure that people aren't profiteering on what is essentially social housing. So if you need to move around a lot for work, or are planning on expanding your family sooner rather than later, then it's not for you. But if you're settled in a particular area and are unlikely to need more space in the next 5 or 6 years, then I'd say it's worth considering.
For me, it's a good halfway house between the insecurity of private renting (unregulated rent increases, short tenancies meaning I might have to move every year, having to deal with dodgy landlords and letting agents) and the risk of overextending myself on a mortgage to buy a place outright, particularly if interest rates start going up. Personally, I've avoided staircasing (increasing the % I own) and just concentrated on making overpayments to my mortgage when I could afford to. The higher percentage of the property you own, the trickier it is for the HA to find someone on their own books who can afford to buy it, and the more likely you are to have a long drawn out process if you do need to sell. Also, the larger proportion of the equity you take on, the larger the proportion of the negative equity that is your problem if the market slumps.
One way I did get lucky is that because my shared ownership was a "resale" and not a new build, the lease is such that my rent is designated as a "fair rent" rather than "affordable rent". That means that the housing association has to apply to the Valuation Office every couple of years, rather than just setting it at a level up to 80% of the market rent. This means that I'm only paying £215 a month rent & service charge on the 40% I'm renting, which is why it's worth asking about how the rent is set before you rule it in or out.
(For the sake of openness, we are currently having issues with the landlord, but that's a consequence of being a leaseholder in a Grade II listed building that needs updating, not a shared ownership issue per se.)
It seems I need to move to deeper Kent, or Hampshire.
I think I may need to save a bit more and then reassess the situation in a years time!