UPDATE/CORRECTION I received a correction from a viewer, who is actually a shared owner, explaining that mortgages used to staircase are actually remortgages. For her, this meant that 95% LTV mortgage products were not available. The maximum LTV she could get was 85%, which meant she needed a deposit of 15%. In my example in the video, this would mean that you need a deposit 3 times as much as I've stated to staircase your ownership.
Someone once told me that shared ownership is a scam and I think I believe them....very clear explanation on the topic, thank you. More people need to follow your channel because the level and quality of info you're dropping is gold - great work!
The main problem I've experienced is how fast the value of my shared ownership flat has increased. I've had it 15 years and it's gone up in "value" but 75%. If it had stayed the same I'd probably have been able to afford to staircase by now, as things are, it's as unaffordable for me to pay for 100% as it was 15 years ago.
Another comprehensive video bro. Glad you cleared that up. I agree with all the points you made. I was waiting to see if you would touch on the point about how house price increase which makes it even harder to afford more shares of the property. I feel in many cases it might be best to rent for longer then buy in an area where you can afford. That way you could use the stamp duty exemption as a first time buyer. Shared ownership isn't worth it in my opinion as many of the properties are normally leasehold and there's a lot of service charges and other maintenance fees that you will have to pay 😌 We rented for longer and saved up before moving and buying elsewhere, I can highly recommend it to your viewers. We are now looking to buy another property and we now own our home outright, well once we finish paying the bank back lol Doubt we wou be in a better position if we had gone the shared ownership route.
Thank you Kenroy! That is very impressive, well done for paying off your mortgage! I agree with you, I would prefer not to use the scheme - especially if I thought in the future I'd be able to afford a home without it. I think you make a good point - people should potentially look further out. If this period has taught us anything, it is that you can work from anywhere. And that seems to be the trend at the moment, people are moving further out to get more space - especially outdoors!!
@@SelfInvested so true about working from home. Also the pay gap from cities to more rural areas do correlate to the price of housing so it is still very advantageous, in my humble opinion
Thanks for this video. Every time I am tempted by shared ownership I remember your videos. Honestly, this video really highlights the issue of buying a property as a solo person. You have to earn a lot and consistently earn that high amount for a long time. The game is really set up for 2 people. Is it worth seeing Shared Ownership as a "subsidised rent"? Allowing you to stay in an area that you like but not necessarily owning the property? Also, I can see how the affordability criteria and stagnant wage increase impact homeownership. Would your hypothetical buyer even be able to rent the 400k flat?
My pleasure! Please don't get me wrong, Shared Ownership does work for some people. The main problem I have with the scheme is that there isn't a lot of transparency about how it works, so easy for people to end up disappointed after signing up to it - especially if they buy a small share and think they will be able to pay for the rest of it later. Yes, it can be cheaper than renting in the private market. I personally know a Shared Owner who is very happy with the scheme, and pays less now than she did when renting. The important things, in my opinion, are to: firstly, go into the scheme with your eyes open (understand the restrictions, lease length - what happens it drops below 80 years, the cost responsibilities, etc.); secondly, buy well (good property - house ideally, good location, low service charge, etc.); and thirdly, have an escape plan or, at least, know what you plan to get out of the scheme and make sure it's realistic.
What if I have paid off my mortgage of 25% share already. Say my property is worth now 500,000. If I want to staircase to 100%. How much can I use my 25% share as a deposit and how much loan do I need to take. Thank you so much.
Another informative explication, my main dislike for the part ownership property I see is when you see a 25% share of say £50,000 and you look at the house there's no way it a house worth 200,000
Thank you! Yeah, that's probably because you're looking at new builds which are sold at a premium. You can get better value buying an existing property, whether through Shared Ownership or not...
Great video, loved the logic behind the problem. Would love a video on Right to buy council properties. I feel as Britons we are more likely to buy the houses we grew up in.
Hi, thanks for this great video. Have you made a video on what option would you personally choose when buying a house as a first time buyer? I thought that the scheme where the government owns half of the property would’ve been great until I saw your video that in the long run, the government would own more in value too when they price of the house goes up. So I was wondering what’s the best mortgage option you would personally take when buying a house meanwhile also having 10% deposit saved? Hoping to get a reply. Thank you.
Hi Faz, thank you for your question. I always try to respond. If I was a first-time buyer, my preference would be to buy an existing (not new build) freehold house without Shared Ownership or Help to Buy - especially if I thought it was possibly in the foreseeable future. If I had to choose out of the two, I would probably go for the H2B equity loan (I explain why in this video: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-kkfCOIj60IM.html). Shared Ownership does have a couple advantages over Help to Buy, though. For example, Shared Ownership homes tend to be cheaper than equivalently spec'd H2B homes. Also, you can buy existing resale Shared Ownership homes (so not newly built) which means you could avoid paying the new build premium. Also, check out my videos on freehold vs leasehold: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-B-GZhQ0P48w.html , and new builds vs older builds: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-okjtPNQHdG0.html
Very very informative video. Myself and my husband think that we will be going for the shared ownership scheme. Combined we both earn 50k and have a deposit of 23k, and have been looking for homes around the 300k - 330k mark. Unfortunately due to house prices in our area we just wouldn't be able to get the house we want or could afford in our area without using the scheme (unless we got a home which needs extensive renovation which is costly)Let's say we bought 50% of a share of a property at the higher end of the cost, realistically would we ever be able to afford 100% of the house? Thanks in advance. Roxy :)
What I was trying to show with this video is that it is not as easy as people think it is to staircase to 100% ownership. This doesn't necessarily mean that it can't work for you - even if you don't staircase up to 100% ownership. I just think it's important for people to go into the scheme with their eyes wide open so they don't get disappointed when things don't work out as expected. Generally speaking, with £50k, the maximum mortgage you can get is £225k. With a £23k deposit, that makes £248k. Are there any existing homes in your area that are around that value? Have you spoken to a mortgage adviser to check your affordability? If your combine salaries equal £50k, then at least one of you is earning below the national median average of £30k. The best way to increase your affordability is to increase your salary (which I know is easier said than done).
@@SelfInvested If your objective is, for instance, to access better properties with reasonable rental prices at a desired location, it could be a good option! As property value tends to go up after a few years, it can be an exciting investment when you decide to sell back your 50% share of the property with a 30% appraisal on the overall property value. I guess it depends on what your end goal is. If you wish to staircase up to 100% ownership then there are things to take into account, but if your goal is to benefit from the investment somewhere down the line, then shared ownership could be an exciting option. Wrong?
In terms of owning 75% share, would the mortgage not reduce over the years and equity build? In light of this, you wouldn’t need to take out a £380,000 mortgage. Even if your salary was the same or increased slightly. You would require less of mortgage as your years go on. That’s my understanding.
Hi there! Thanks for the question. Yes, over time your mortgage will reduce and your equity in the property will increase. This is sort of covered in the examples I give for the 5% deposit when you’re increasing to your share from 75% to 100%. Your deposit for your home is initially £15k, this is also equal to the amount of equity you have in your home. Increasing your deposit to £20k is essentially increasing your equity by £5k. I also give the example where you increase your equity/deposit by larger amount from £15k to £40k (an increase of £25k) to buy 100%. In both cases, you need still need a higher salary because you’re taking out a bigger mortgage. I hope this helps clarify things?
I’m in shared ownership which I went into because it was cheaper than renting. Now the lease is 80 years so I either extend the lease or buy the extra 50%. The help the buy scheme is disgraceful
It can easily end up becoming a trap. A similar thing happened to Sue Phillips, who I interviewed (ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-MCXSHGOOOJ0.html). Fortunately, she had already staircased to 100% ownership, but later found out her lease had dripped below 80 years and was affecting her ability to get a mortgage... I hope you can find a way!
Nice video, do you think it is ok to buy a BTL property in a cheaper area as first property rather than shared ownership scheme. With house prices ridiculously high in or around London, that appears to be the only option for people living in London?
Thanks Samra! That's a difficult question to answer. It depends on your situation and what you are trying to achieve... I did have a friend that was living with his parents and owned a property he was renting out, and that was working well for him - so it can work!
You should also specify this only works for houses. With Flats and maisonettes when it’s time to staircase to 100% you will need to put down 15% (including equity) not 5%.
Hey there! Is that true? I didn’t know that. I’ll have to speak with a mortgage broker and confirm. But if it is, that makes staircasing to 100% ownership even more difficult
@@SelfInvested yes. Source Censeo Financial. They were the broker for L&Q. I have heard more recently that Metro bank may be open to 10% but no one is offering 95% LTV on flats at the final hurdle sadly. Also be very careful with the surveyor especially if they are appointed by the housing association. You’ll find when you want to staircase, your property value will be valued higher meaning you need to borrow more money but when you wish to sell the same property it’s valued on the lower end reducing the impact of your equity. Unfortunately you have to disclose which option you’re going for on the application form for the surveyor so it’s hard to outsmart them unless you outright lie. (I don’t recommend)
Another great food. A lot of food for thought. I am in a really stuck position. My salary hasn’t changed in almost 2 decades and I really wouldn’t be able to afford a property outright on my own. So maybe best to keep on renting
So, the video was more to open people’s eyes to the practicalities of the scheme, so people that don’t end up getting disappointed, rather than a warning not to use it at all. The scheme does work for some people, the main thing is to do your homework and buy well so there are no major surprises.
Great video but lets think of a different scenario. Let’s say the shared ownership property is worth 250k and the buyers salary is like 50k. Let’s also say he put down 50% share (12.5k) deposit, wouldn’t that work? To purchase 250k property you need to earn at least 50k which therefore means the buyer wouldn’t need to worry having to earn more to staircase. Giving that he’d be on 50k he’d likely be able to save a lot easier as well meaning that he could potentially stay case within say 2-3 years. In this example would it still be problematic to staircase to 100%?
Thanks, Christian! I say that most people won’t be able to staircase to 100%, not all. On £50k, someone buying a property worth £250k, would be in a good position to buy the property outright without shared ownership because you can generally borrow 4.5 times your salary - so, £225k. With a 10% deposit, you wouldn’t need shared ownership. The main limiting factor in staircasing to 100% is a person’s salary. In the scenario you’ve given, this isn’t such a limiting factor because the property’s value isn’t that high in relation to the salary. If the property was valued at £500k, it would be…
@@SelfInvested Thanks for the reply, and yeah your right; of course somebody in £50k would be in a good position to buy the property outright. However, everyone is different; some people are simply not very good with money and so would struggle to save 😅. And then you get some people who may be a little impatient for whatever reason and would just rather do shared ownership to purchase a house with a smaller deposit knowing than in 2 years because their high salary they’d staircase very quickly. That’s kinda how I see it anyway…but it’s true if you’re on 50k you’d probably be better off just buying outright really.
In that position, I would definitely speak with a mortgage adviser to see what mortgage options are open to you. I think there may be lenders willing to 95% LTV mortgages at 5 times your salary, which means you’d only need a 5% deposit (£12.5k) and you could get a bigger mortgage. Also, you wouldn’t just be limited to shared ownership homes. Have you spoken to a mortgage adviser?
@@SelfInvested no I haven’t, I want to potentially make a purchase next year so thought it would make sense to wait closer to the time. But, I think there’s no harm in just having a word with them tbh.
I would speak to one now just to understand my current position and future options. You can usually speak to one for free. Here’s a chat I had with the mortgage adviser I used: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-wRz_1S9MAUY.html
Hey Usher! It's not that simple. Shared Ownership could work for someone that doesn't expect their salary to increase over time and never staircases. This video is more about expectations. I think many people go into the scheme thinking it's a solid route to 100% home ownership but, in reality, it's not for most. This doesn't mean, however, that Shared Ownership is not the right housing choice for you - many will grow and build equity until they can buy a different cheaper place of their own. Others will be happy being a Shared Owner for the foreseeable future. It's about weighing up your options, looking at your situation and making the best decision for you - with the help of professional advice if needed.
Hi, your videos are really helpful! Do you think it is easy to sell the property with a simultaneous staircasing, then use the proceeds to buy a new property outright?
Hey 👋🏿 Happy to hear you find them helpful :) So, from what I understand, if you sell your Shared Ownership home on the open market (not to a shared owner), then you can staircase to 100% as part of the selling process. I don’t think it’s unusual, but it’s more complex and likely to be more costly, especially if there’s stamp duty to pay. Have a watch of this chat with Alex who sold her Shared Ownership home. I think she sold it outright - ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-Q-nwCcCJ1Bw.html
Thank you so much for the very informative video! I just don’t understand if after you buy 100% of the property, you would be able to sell it in the open market, or only in the shared ownership scheme? Because surely it would be difficult to find a buyer that would qualify to buy 100% and still fit the S.O. requirements (salary up to 90k etc). Thanks again for the video🙏
You’re welcome! I’m glad you find it useful. Once you own 100% of your property, it’s no longer shared ownership so can be sold on open market. Shared owners can also sell on the open market but that’s if the housing provider is unable to find a shared owner to buy under shared ownership
Great Video. Quick question ? Do you think that would be good idea to get let's say 35-40% Shared ownership in London. Then let's say after 5 years property price should go up even a tiny bit as they usually do. After that 5 years period of time my equity plus interest on property price rise, plus some savings could get me a 10% Standard Mortgage somewhere on outskirts where is a little bit cheaper ? Many thanks
Thanks, Telly. That could potentially work. I would probably try to buy an existing Shared Ownership home, rather than new, to avoid the new build premium, which would affect house price grow in the short term (within 5 years). Also, I would try to buy well - good property, good location, good terms (very long lease, zero ground, reasonable service charge)...
The national average (median) salary is around £30-31k . The salaries I mentioned were just based on what you would need for the mortgages shown. Hope that makes sense?
@@toml2951 So, my understanding from GCSE maths (lol!) is that there are three types of averages - mean, median and mode. When reading up on the average UK salary, I learned that the median is usually used , as opposed to the mean, because it is more reliable. Apparently, the mean is skewed by outliers... but please correct me if my understanding is wrong...
@@SelfInvested I think it's more accurate to refer to the average, because the median is really the 'middle' value of some arbitrary range of values, so it would be bemusing if ~30k was considered to be the 'median' (middle) value of all recorded UK salaries. Unless, however, by median, it's the middle value of the range of average UK salaries between the bottom and top tax brackets? I don't mean to be facetious by pointing this out. Really appreciate your content and work rate; let's keep knowledge sharing and continual improving. God Bless bro.
Thanks for the comment. I’ll look into this again, but I remember thinking the justification given for using the the median made sense. Please feel free to highlight anything that you think is inaccurate. If we do not know we have made a mistake, then it is difficult to learn/improve...
I don't understand this. Are you forced to staircase. Why would I want to own more of the property? I thought the whole reason for a shared ownership was to keep costs low?
