Help!Clueless first time buyer!

1st_time_buyer_3

Myself and my partner are buying our first house we have found a house worth £160,000 the company who have just built it have set us up with a 75% mortgage 25% loan we pay the mortgage for £120,000 and £40,000 sits for 10 years intrest free. If the £40,000 hasn't been paid in 10 years we just remortgage and pay it.
My family all tell me to go for it and it's a great way to get on the property ladder but my boyfriend's family keep telling us to hold off for 8 months to buy and then we can buy if a recession hits.
Who is right?
Please can someone help?

ziknik

Boyfriends family are more right.

Have a read of this

http://www.moneyweek.com/file/49715/why-the-mortgage-drought-is-good-for-first-time-buyers.html

saveallmymoney

Boyfriends family are right.

sympatex

I don't know the ins and outs of these gifted deposits, that aren't really deposits at all. this is essentially a 100% mortgage just split into two debts and i would have thought there was enough news about even on GMTV to suggest this is a bad idea. save a deposit together, if you're still together after you've saved 10% take the next step. The longer you wait the less debt you'll have to take on.

minimike2

These scenarios are different from gifted deposits. Its called shared equity.

On the other hand its 25% of your mortgage interest free.......overpay on the mortgage to the equivelant payment of the full balance and watch that balance drop......even better, if you have a mortgage with a borrow back facility, once the overpayments reach the amount of the 25%, you can borrow it back, pay off the builders and then continue with the mortgage at the same level as you were originally paying (and of course the balance on that part will have dropped too if you are on repayment) - and then you could continue to pay the higher amoutn also and get it paid even faster!

I love shared equity schemes - set up right and *if* the price is right in the first place they can be brilliant schemes for anyone - not just FTBs.

beecher

Would you be able to afford the payments on a £160,000 mortgage? If not, then don't touch this with a bargepole. Also, are you sure you're going to be staying in it for 10 years - big commitment for your first house as who knows what can happen in that time. If you sell within the 10 year period I take it you have to pay back the £40,000 - what happens if you're still in negative equity then?

JimmyTheWig

House prices are probably going to fall.
If you can avoid buying at the moment it is probably best to avoid it.

Falls are likely to be biggest in new-build places.

Are you currently renting together? Is this cheaper than your mortgage would be? If so, put the difference (and more, if you can) into a high-interest savings account.
If you're not currently living together then you have a slightly harder choice. Can you cope not living together for a while? Or can one of you move in with the other?
The only reason I would say buy this place now is if you _really_ want to be living together and your only alternative would be to start renting a place - with all the hassles and expense that entails.

If you do decide to buy make sure that you are happy with the place you are buying, you can afford the mortgage (even if rates go up) and (especially in today's climate) you are happy living there for the next 5+ years. If you have children in the next five years, for example, will this place be big enough?

The concern with buying it is that you have no equity (i.e. you you will owe the full value of the property as you have no deposit). If prices go down (which they are expected to) then you will be in "negative equity" (i.e. you will owe more than the value of the property).
Negative equity is _only_ a problem if you want to move, remortgage or can't afford the mortgage repayments.
In the long term (that's where the 5+ years come in) prices are almost bound to rise again, taking you out of negative equity.

So as long as you can sit it out for that sort of timescale then there is no real problem buying now.
But if you wait you will probably get an equivalent property much cheaper. Or a much better property for the same price.

wymondham

Boyfriends family are right. The link earlier gives a very good insight into the current position (http://www.moneyweek.com/file/49715/...me-buyers.html) and all first time buyers should read and take careful note.

Pobby

Certainly heed what your boyfriends family are saying. I have been telling some of my own family to hold off right now. My nieces friend has gone ahead and bought some months ago, already in negative equity on a £200k shoe box.

neverdespairgirl

minimike2 wrote: »

I love shared equity schemes - set up right and *if* the price is right in the first place they can be brilliant schemes for anyone - not just FTBs.

In a lot of cases, though, the "value" of SO places is ridiculous. There was a thread about an SO flat, 1 bed, in Dalston of all hell-holes, for almost £300k!

mpsavuk

These schemes are a just a desperate way for home builders to try to maintain their profits and keep house prices propped up.

Wait a year or so and then snap one up for 30% less. It will be worth the wait.