First time buyer at 51 years old
August 25, 2015 1:35 AM Subscribe
I need a bit of advice on the wisdom of buying a shared ownership property at the age of 51 years old. I live in London.
I'm 51 and currently rent privately in London, UK. I rent a tiny 1 bedroom flat for £700pm. It's really a glorified studio flat, but I like it. It is a flat in the Landlord's house. She is fine, but it sometimes feels oppressive living in their house, despite having my own quarters and front door. Recently my adult son has moved in with me, so it has become cramped. I have been thinking of trying to get on the property ladder for a while now, and until recently that was just a pipe dream. However, my dad passed away last year and left me some money in his will. It's allowed me to consider buying. The main thing against me is my age, as I can only get a 15 year mortgage.
I have been offered a shared ownership property near where I currently live. I will be buying 25% of the share and renting the rest. Altogether my monthly payments will be approx £950.
I feel I can probably cover this. My wages are 35k a year and I'm in a secure job which I've been in for 20 years.
My alternatives are:
1. Go for this, but use up my 30k savings on deposit. It's a nice flat, but not exactly a great investment as I only own 25%, and I can't envisage ever earning enough to buy more (which I'd have the option to do). However, it gives me security, is much bigger and better then my current flat and keeps me in London near to work and friends, family etc.
2. Try to buy outside London. I may be able to afford to buy 100% of a property outside of London. But I will have to move away from family and friends, regularly face a daily long commute and the expenses this incurs and settle in an area I don't know.
3. Stay put, renting my small flat, which I like, but is too small and not secure as the landlord could always decide to put the rent up or ask me to leave. I'm lucky to only pay £700, as rents in London for a 1 bed flat can reach £1k a month.
Any advice greatly appreciated.
I'm 51 and currently rent privately in London, UK. I rent a tiny 1 bedroom flat for £700pm. It's really a glorified studio flat, but I like it. It is a flat in the Landlord's house. She is fine, but it sometimes feels oppressive living in their house, despite having my own quarters and front door. Recently my adult son has moved in with me, so it has become cramped. I have been thinking of trying to get on the property ladder for a while now, and until recently that was just a pipe dream. However, my dad passed away last year and left me some money in his will. It's allowed me to consider buying. The main thing against me is my age, as I can only get a 15 year mortgage.
I have been offered a shared ownership property near where I currently live. I will be buying 25% of the share and renting the rest. Altogether my monthly payments will be approx £950.
I feel I can probably cover this. My wages are 35k a year and I'm in a secure job which I've been in for 20 years.
My alternatives are:
1. Go for this, but use up my 30k savings on deposit. It's a nice flat, but not exactly a great investment as I only own 25%, and I can't envisage ever earning enough to buy more (which I'd have the option to do). However, it gives me security, is much bigger and better then my current flat and keeps me in London near to work and friends, family etc.
2. Try to buy outside London. I may be able to afford to buy 100% of a property outside of London. But I will have to move away from family and friends, regularly face a daily long commute and the expenses this incurs and settle in an area I don't know.
3. Stay put, renting my small flat, which I like, but is too small and not secure as the landlord could always decide to put the rent up or ask me to leave. I'm lucky to only pay £700, as rents in London for a 1 bed flat can reach £1k a month.
Any advice greatly appreciated.
Need more info to give an informed option.
What is the *total* cost of the 25% share?
I thought you meant you would be sharing the property, but do you mean you would be renting it, but only own 25%? Would that rent increase over time? What happens if they decide to sell?
Where do you want to be living in 20 years, and if you have health problems, and are 70, would either of them be a suitable property to live in?
posted by Elysum at 2:31 AM on August 25, 2015
What is the *total* cost of the 25% share?
I thought you meant you would be sharing the property, but do you mean you would be renting it, but only own 25%? Would that rent increase over time? What happens if they decide to sell?
Where do you want to be living in 20 years, and if you have health problems, and are 70, would either of them be a suitable property to live in?
posted by Elysum at 2:31 AM on August 25, 2015
Best answer: In response to billibee's suggestion, the tax changes coming on on buy-to-let properties is unlikely to result in the OP having anything left over to go towards renting a more expensive flat. There's also the risk of tenants moving in and not paying any rent. This happens more than you might think and it's a difficult, drawn-out, expensive process to get them out. BTL isn't for the fainthearted, and shouldn't be used to pay for your main residence. Worst case scenario, one set of bad tenants, the mortgage goes into arrears, you can't pay your rent and you end up having the BTL repossessed and get evicted from your new rented home, plus your credit is ruined.
If you can afford the rental element of a shared ownership property into your retirement once you've paid off the mortgage, I think the security of owning even only 25% is far better than being at the mercy of a private landlord. I'm assuming the shared ownership landlord is a housing association, so you will have a measure of security beyond that offered in the private sector.
I say go for it.
posted by essexjan at 3:52 AM on August 25, 2015 [1 favorite]
If you can afford the rental element of a shared ownership property into your retirement once you've paid off the mortgage, I think the security of owning even only 25% is far better than being at the mercy of a private landlord. I'm assuming the shared ownership landlord is a housing association, so you will have a measure of security beyond that offered in the private sector.
I say go for it.
posted by essexjan at 3:52 AM on August 25, 2015 [1 favorite]
Response by poster: In the UK, shared ownership is a way for people to get onto the property ladder who may not otherwise be able to afford it.
Yes the landlord is a housing association. The value of the property is approx 280k, and my share would cost 71k. I have 30k in savings, so that means my mortgage will be 40k.
The rent will go up, but not at the levels of the private sector.
My son is 23, and is working, so he can contribute towards bills. He's only on a low wage as he's an apprentice, but he should be able to help in some way. However, I'm not budgeting with that in mind as there is always the likelihood that eventually he will move out, though not sure how he would afford it living in London.
posted by blokefromipanema at 4:05 AM on August 25, 2015
Yes the landlord is a housing association. The value of the property is approx 280k, and my share would cost 71k. I have 30k in savings, so that means my mortgage will be 40k.
The rent will go up, but not at the levels of the private sector.
My son is 23, and is working, so he can contribute towards bills. He's only on a low wage as he's an apprentice, but he should be able to help in some way. However, I'm not budgeting with that in mind as there is always the likelihood that eventually he will move out, though not sure how he would afford it living in London.
posted by blokefromipanema at 4:05 AM on August 25, 2015
Best answer: The shift in buying property to provide a home to seeing property ownership as an investment has skewed the public perception (at least in the UK) of the value of getting onto the ladder through shared ownership. I can't see any disadvantages to you buying a shared ownership property in your current situation. A social housing tenancy is the holy grail these day. Unlike the private rented sector, you can only be evicted for rent arrears or anti-social behaviour, and you won't be at the whim of the private sector in respect of rent increases, or short-term assured shorthold tenancies.
The tax changes I mentioned above are also likely to put the squeeze on the BTL market. Smaller BTL landlords will be looking to exit the market, and the big investors with portfolios of hundreds of properties will swoop. This is likely to result in rent increases in the private rented sector if fewer properties are available and/or large corporate landlords buy up the majority of the BTL market.
Shared ownership is not without its pitfalls, it's not the same as buying outright, but if your only other option (other than moving away from job, family and friends) is staying in private rented accommodation, shared ownership is definitely the option I'd choose.
posted by essexjan at 4:28 AM on August 25, 2015 [1 favorite]
The tax changes I mentioned above are also likely to put the squeeze on the BTL market. Smaller BTL landlords will be looking to exit the market, and the big investors with portfolios of hundreds of properties will swoop. This is likely to result in rent increases in the private rented sector if fewer properties are available and/or large corporate landlords buy up the majority of the BTL market.
Shared ownership is not without its pitfalls, it's not the same as buying outright, but if your only other option (other than moving away from job, family and friends) is staying in private rented accommodation, shared ownership is definitely the option I'd choose.
posted by essexjan at 4:28 AM on August 25, 2015 [1 favorite]
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posted by billiebee at 2:27 AM on August 25, 2015 [2 favorites]