Last year when we were house hunting, we found a pocket of properties we could afford to buy without a mortgage in an area where we’d like to live. We would also have been happy to pay the asking price on some of them rather than try to ‘knock them down a bit’.
The vendors were keen, if not desperate, to sell, but we were not allowed to purchase their property.
Because either there was an agricultural restriction on it (make a living off the land or previous family connections) or we hadn’t lived in the area for 5 years, neither had we worked in the area for three.
Thus, people needed to sell but there were no local buyers because, well, they couldn’t afford to as they also needed to sell due to lack of work or financial difficulties.
Outsiders, even if they were positively loaded with dosh (not us by the way, but we had enough), weren’t welcome thanks to Local Authority bureaucracy.
Roll on a few months, and the situation there hasn’t changed much and has actually overflowed into another area on the South Coast, but now there is a new bit of red tape and legislation stopping people like us from getting back on the property ladder.
We discovered by accident the meaning of their ‘Help to Buy’ schemes.
In the 90s, Shared Equity was a way to get into the property market. We were aware of several young people who became our neighbours that had signed up for this scheme before the market crashed putting most of us into Negative Equity.
We had a mortgage of £45000 on a property worth only £35000, but the poor souls with the Shared Equity schemes were way worse off than us.
One lad in his twenties had a 50% share in his one bedroom flat which was valued at £38000 when he bought it in 1990. He took out a mortgage for £19000 and paid rent on the rest.
Negative Equity put him in a property now valued at just £17000, but he had the financial debt of £38000, and if he sold, he would still have to pay his landlord £19000.
However, if property prices had risen and he sold at a profit, he would have been expected to pay 50% of the selling price (not proceeds) to his ‘landlord’.
He ended up moving back in with his parents and renting the flat out until he could sell at a more realistic price.
The ‘Help to Buy’ scheme would appear to be the new Shared Equity, as you can purchase 25, 40, 50, or even 75 per cent of a property and pay rent on the remainder.
‘Affordable Housing’ is another name for it, where properties are being built, but none will be sold to purchasers outright and ‘owners’ only have a share.
Win Win for the builder and mortgage companiesLose, Lose for people like us.
We got excited seeing a new property advertised for £117,000, when older and larger houses in a five mile radius were selling for £150k plus.
Hubby went in, and was inside the estate agents for some considerable time.
When he came out, he was hovering about 3 inches off the ground, he was that angry.
For said £117000, you could purchase a 28% share in a new two bedroom terrace house, and pay rent on the remaining 72%. That makes the property price almost £418,000.
(watch your blood pressure, dear Reader)
But it doesn’t stop there.
Apparently, you have to apply to the selling agent for eligibility to buy.
If you get through round one, you will then be put forward when details of the plots are released and have to go on a waiting list to see if you will be allocated a property by the builder. Again you will be processed for your eligibility to buy.
If you want a mortgage, this has to be arranged through the selling agents who ‘will be happy to act on your behalf’, for commission of course, but there are no guarantees you will be successful.
Time factor involved?
About six to nine months, for properties not even built yet.
And just to get your name down, you have to pay a deposit. This does not secure or confirm anything, not even the purchase price.
You still have to engage a solicitor, and their fees for purchase are around £1000, plus ‘disbursements’ costs for local authority searches, water and drainage, environmental and commons registration if applicable, mining rights, land registry and personal credit checks. (All done on the internet from the comfort of their chair in the office with coffee and biscuits to hand, and subject to 20% VAT of course.)
Some will even charge double the bank fee for a same day funds transfer and add VAT to that as well (our bank charged us £20 when we bought the boat, our solicitor charged us £35 plus VAT for remitting funds when we sold the house).
We’ve looked into Flats, Retirement Apartments and Complexes for the over 55s, as well as Park Homes, which in many areas are more expensive than damn houses!
And even then, you have to jump through hoops and fork out through the nose.
Apart from the eligibility crap, you have to think about additional costs on top of local taxes, utility bills and property insurance:
Maintenance fees, Ground rent and/or Lease, Warden fees, Service Charges (even if you don’t need them). These can add up to in excess of £3000 a year.
If you find a property and you need a mortgage to purchase it, there are even more restrictions in respect of applicants age, length of mortgage required, available deposit and percentage required to value, management/arrangement fees, insurance, fixed rate periods, and we mustn’t forget income.