Hoskin Mortgages

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Shared ownership

10 tips to help you on your way

1) Manage your expectations, because housing associations are not charities. If you default on rent or a mortgage, your home may be repossessed. The association will not bail you out if your home falls into negative equity or if you struggle to find a buyer down the line.

2) You may be banned from subletting. This could mean no lodgers or live-in partners, and no earning a quick buck on Airbnb. Check before you buy.

3) You may need to pay stamp duty. Most buyers opt to pay just on the portion of the home they will own and, if this is less than £125,000, you will be exempt. If it is above, you will be hit with a bill, and if you buy an increased share of the property, you might have to pay extra stamp duty too- and you will need a solicitor to do your conveyancing.

4) Rents usually increase annually, based on the Retail Price Index, plus one per cent. Over a year, this will add about £100 to £150 to the running costs of a £250,000 property (full price).

5) Don’t get seduced by the idea of fabulous extras, such as swimming pools. Shared owners are usually, and rather unfairly, excluded from using them. They also often have to use a different front door to people who have bought on the open market. “Poor doors” segregate lower-income residents, and are widely considered a scandal.

6) Shared owners often also get shunted to the worst part of a development – overlooking railway lines, a busy road, or on lower floors with no views. Ask to see a model, and certainly detailed plans, of the entire development.

7) As with any new home, you must find out how long the development around you is going to take to complete. Shared-ownership sections often get built early, which could mean years of building noise. And what if you want – or need – to sell up within a year or two.

8) Take a cool-headed look at potential price growth. If new transport links are planned, it will be a good bet. If it is in a run-down location with no sniff of regeneration, then you will be the first to be hit when any downturn happens.

9) When you want to sell, you might not be able to take full advantage of the market. The housing association will first offer the property to buyers on its waiting list for a set price (based on an independent estimate) and will not get into any bidding wars. On the plus side, there’s no gazumping or gazundering. If it does not sell, you will be able to pitch it on the open market.

10) You aren’t likely to become a property millionaire. If you buy a 50 per cent share of £500,000 flat and its price rises by 20 per cent, when you sell, you will make £50,000. However, you have to pay a fee to the housing association if it markets the property. If you sell through an estate agent, you will pay a fee of up to 3.5 per cent of the entire selling price. This could knock as much as £21,000 off your profit, so shop around for agents with lower rates.

For more help and advice please do not hesitate to contact us @HoskinMortgages


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