First time buyers screwed

pazdad · 18 October 2008 at 10:22AM

Hi all - I need some help and advice please.
My son and his girl friend managed to get together £10k towards a deposit on a property. They then find the house that looks right for them with a 10% deposit required.
They eventually sort out a mortgage for £100K and go ahead with the search etc.
After the search, which shows a number of problems, the vendor suddenly pulls the property off the market. So so far they have just wasted the money on the search. They then go back to the bank to whom they had already paid £600 for an arrangement fee (HSBC) and inform them what has happened. They are informed that the mortgage offer is still ok and that they would keep it open for them - so far not too bad.
My son decides that they are now better looking at new properties as these will have no search problems. Well last week they found a brand new show home which they managed to get reduced from £150K to £120K (plus a 5% contribution to the deposit from the developer) with most of the show home items in the price. They are over the moon go back to the bank who now say that they need a 25% deposit and that they have lost the £600 fee as well!!!!! Why the increase in deposit you ask - well it appears that for new homes they are not prepared to take the same risk as for properties well over a hundred years old with major structural problems.
As of today this means that they have lost well over £1000 with no results at all.
Any help or advice would be much appreciated.
Cheers
Pazdad

Kez100 · 18 October 2008 at 10:46AM

Generally new builds are more over priced and also expected to be subject to higher losses in this market. That is the banks concern and the reason why they want such a large deposit. You could consider it protecting your son.

Our first home purchase fell through. We had paid for a survey, search fees and some solicitor costs when it turned out that we had been lied to and the extension hadno planning permission or been built to agreed building regulations.

Our first attempt at a second home purchase also fell through when we lost a buyer due to the lower chain breaking. That cost us a survey, searches and some already incurred legal costs too.

It is annoying but these things happen all the time during house buying.

squirts_mum · 18 October 2008 at 11:05AM

pazdad, I fully sympathise with you, my 19yr old daughter & 21 yr old boyfriend are in a similar position. We're also at a loss what to do. They have applied and been accepted on a shared ownership scheme. The house they want is available at a 30% share for £38,000, they've approached the abbey and been told they must find 25% £9,000 if they want a mortgage which is absolutely ridiculous, the vendor is putting 5% down and at a push we can find another 10%. Any ideas out there would also be gratefully accepted as we're at a loss what to do. it seems really unfair on young couples starting out.

Kez100 · 18 October 2008 at 11:11AM

Why is it unfair when there is a falling market?

What is worse - and this happened to me in 1991 -

We got a 95% mortgage on our first home. We thought the market had bottomed out but it hadn't- as soon as we moved in it carried on falling. When we moved in 1994 for work reasons, due to having got a 95% mortgage, we were in negative equity. We at the time were lucky to have two good jobs so we scrimped and saved every possible penny (as well as paying our 13% interest mortgage) to raise the £6000 we needed to move. If we couldn't have raised that money wewould have been stuck in that house and location.

I know the move from recent lending practices to old fashioned ones is going to seem difficult but it is a good thing.

I suggest they save and save for a deposit to meet the banks requirements whilst, hopefully, watching prices fall.

Cat695 · 18 October 2008 at 11:11AM

squirts_mum wrote: »

pazdad, I fully sympathise with you, my 19yr old daughter & 21 yr old boyfriend are in a similar position. We're also at a loss what to do. They have applied and been accepted on a shared ownership scheme. The house they want is available at a 30% share for £38,000, they've approached the abbey and been told they must find 25% £9,000 if they want a mortgage which is absolutely ridiculous, the vendor is putting 5% down and at a push we can find another 10%. Any ideas out there would also be gratefully accepted as we're at a loss what to do. it seems really unfair on young couples starting out.

I have to say it sounds like the bank have saved your DD and BF. Shared ownership is a con and seeing as prices are going down they would be in trouble pretty quick. They should continue to save and then buy outright. and certainly not a new build!!

space_rider · 18 October 2008 at 11:45AM

I got to agree that although they have lost 1,000 it could have been much worse. I live in the East Midlands and my nearly new house has lost £35,000 of the 60,000 equity I put in just under 2 years ago. Had I got a 90% mortgage I would already be in negative equity. It`s not up for sale but I had a valuation done for remortgage.