Please think very, very carefully about shared ownership before you commit. The mortgages are really high rates compared to standard market rates because you are seen as a sub-prime borrower, and you either need to pay rent on the portion you don't own, or save up alongside the mortgage to pay a second lump sum usually 10 years down the line or when you sell of 25% of the value as that is the portion the builder still owns. In the worst case scenario you have a monthly loan payment to the builder, a mortgage, and rent - all at above market rates!
In addition even if you only own 50%, you are responsible for 100% of maintenance costs, and most of these contracts the % the housing authority/builder owns is fixed if the market falls, but not if it rises (ie if you buy at £120,000 they own £60,000 of house, if you come to sell and it's worth £100,000 you are going to have to find £10,000 to pay off the money still 'owed' to them. If it rises you don't have this worry but there are higher fees associated with selling the house than if you sell it on the open market). And just for kicks if you are on one of these schemes you can not sell on the open market, and any valuation has to be done by the housing association who owns the rental part - it's in their interest to value it on the safe side and it usually comes out pretty low. Completely aside from what any of us with our magic balls may think is going to happen to the UK housing market in the next few years new houses are like new cars, they loose a chunk of value as soon as you move into them as people pay for the newness factor as well as being able to choose their own carpets, kitchen, bathroom, expect to drop around 10-15% the day they hand you the keys.
In most areas of the UK the interest portion you pay on your mortgage is comparable to rent. Your mortgage will be higher than rent will be and you'll only be paying a tiny amount off the capital per month. For example our house is valued at £190,000, our mortgage is £132,000 so our rate is quite good as we own a decent percentage. In the first year of our mortgage our payments were £845 a month, at the end of the year our statement said we had paid off £1105 off the capital balance - the other £9035 was interest to the bank! The house in the cul-de-sac opposite us recently came up for rent, exactly the same size as ours although has a bit of a cheap kitchen, and that is up to rent at £600 a month. Financially we'd be a lot better renting that one and sticking the extra £245 a month into a savings account as we don't pay that much off the capital balance each month.
I had a colleague who joined one of these things when her little boy was due as she didn't want to be renting, 6 years later despite both of them earning above average salaries and living in a below average (even for the North East) area they were still struggling to make the payments and couldn't have a second baby as it wouldn't fit in the house and they couldn't save up enough to pay off the fall in value and selling fees. They only moved a few months ago as she was left a house as inheritance and selling that enabled them to move to somewhere more family friendly. These schemes are not low cost to the person buying the house, they are a way of enabling buyers who could otherwise not afford to to 'own' (and I use that term very loosely) their own home.
Please also consider what you would do if you were to split and jointly owned one of these properties - how would you pay back the loan? I'm not casting any aspersions on your relationship, just asking you to consider all possibilities when making a decision as finances have to be done with the head not the heart. Could you afford the fees and any fall in value to sell it through the housing association if you were a part buy-part rent scheme? You can't remove either parties name from the mortgage unless your provider agrees that it is within your income multiple (usually no more than 3.75) to afford it alone. The housing association also has to agree to the other person ceasing to pay, which personally I find a huge invasion of privacy and would hate to be told my ex couldn't move out - but they take the contract out with both people so have the right to control who lives there.
I applaud your attitude personally of trying to provide for your baby, but I would go into a scheme like this with your eyes wide open - if you have a strong chance of your earning potential being a LOT higher in a few years than it is now or you don't expect to want to move for the next 20 years, and you expect to be able to afford to buy your way out when the time comes maybe it's a different issue, but for my money personally I'd just rent somewhere as small as possible to try to save up to buy later. It's pretty much unheard of to walk away from these things with a single penny of what you put in unless the housing market has gone through a huge boom, and I wouldn't like to bank on that. If the house hasn't gone through a boom then you'll need to save a deposit for the next one quite aside from paying off loans and moving costs.
My Oh and I have just bought a house and will be moving in in the next couple weeks. Obviously the market at the moment if very favourable for buyers, particularlt first time buyers. But it depends how much of a deposit you can get together. Obviously the more money you have the easier it will be in terms of mortgages.
I would suggest renting epwhere you are at the moment,getting a good deposit together and getting your dream house. It will be better in the long run. Good luck.x
I can relate in some ways to your situation, we rent but want to buy. However, when we look at the figures we need to keep saving!!
Basically, we rent a lovely 3 bedroom barn conversion, we're definitely growing out of it, as the 3rd bedroom is used as my office and guest room, we want to start trying for baby number 2 soon, so will need a four bed. Unfortunately we have become accustomed to living in nice places, (always rented) for cheaper than what we would have to live in if we had a mortgage. So the houses that we can afford to buy, eurghh, I don't want to waste my money, in my opinion their still over priced!!
Obviously I don't fully know your financial situation or how much your OH earns, but Ive been doing some mortgage research, and this is how it works out for me. I earn just over £36k, we have saved 40k, the mortgage we can get is around £145k.. so we're looking at a house thats £180kish. The houses where we live that are up for sale at £180 aren't worth moving too and putting our hard earned cash into, in my opinion! So we're saving until we can step up a price brand. Hubby also has a good job, and does earn more than me, but he is self employed, which makes it more tricky for mortgages, and we want to use his wage for savings, bills and holidays! so because of this, we're staying put!
I suggest you start looking at mortgage calculators so you get a rough idea of figures! see what you can buy for your hard earned cash!!
@Dinsh your reply definatly gave me food for thought n OH doesnt wanna do shared ownership anymore ... we didnt know you had to make up the loss of value yourself :/
@Annabel your house sounds lovely and yes it sounds like were saving up for now gonna take us a while though how long did it take you to save if you dont mind me asking???
just praying that I can get a job after I finish studying
Its taken us, since August 2010 to save that money, however, 9k of that was from savings that my parents put together when I was little, so technically 31k since August 2010. We will reach the 40k mark in April, havent got there quite yet, but thats what I was doing the mortgage calculations on, as we planned to seriously start house hunting/mortgage etc in the spring when we hit our target, but looking at what we can get for that money, we need to save double what we have! I just hope I come through on the lottery!!
One thing we did look at was new builds. We were looking at a Bovis home, first time buyers only needed a 5% deposit, and its a government scheme where they (Im not going to explain this properly) but from my understanding of it was, the government and developer pay 20% (equity loan) of the property price, so, the house we were looking at was £185k, take 20% off that, the house price was £145 - 40k deposit = £105 mortgage. You then have your house re-valued after 5 years, and you have to pay the equity back.. http://www.bovishomes.co.uk/firstbuy/
It does look like a really good deal, its wasn't shared ownership scheme that you talk about above. I was loving the showhouse, but then the sales woman showed me around a home that had just been finished and the family were moving in the next day, and I just didn;t like it!! gutted, as it probably would have been the best move for us, but my heart wasn't in it!
Wow thats impressive weve barely got anything to put aside at the mo but i suppose every little helps ... Im totally with you on the lottery thing seems like its the only way well ever get there.
Im not too fond on new builds myself I know that there are some decent sized ones out there but most of them just seem tiny to me and i dont like the way they all look the same iykwim??? Im no good at working out these things but yh thats does sound like a good deal and the show house always looks better than the rest of the houses so its lucky you got to see one of the others before hand I wouldnt feel bad for not liking it if your spending soo much money then its best to know you got your moneys worth
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