1st time buyer req,s 100% mortgage

lauraaurora

I'm glad that Sarah has posted on this topic with her experience and thoughts. I am sick to the back teeth of people (I'm afraid meanmachine especially) telling all us FTBs to get at least 5% deposit. It is that kind of ignorant and hurtful comment that upsets a lot of us. I have been renting for 2 1/2 years at £600 a month, and with all my utility and council bills I am paying £1000 a month. Add on top of that £200 a month to feed, clean, clothe, drive and entertain myself (books, dvds - I can't afford to go down the pub very often) I have very little to save when I get £1300 a month salary. Especially when I have presents and other things to buy most months. PLEASE tell me where I am expected to get a 5% deposit in the near future when I am having to buy a 50% shared ownership property with a mortgage of £94,000 plus £3000 for fees?? It is not my parents place to help when I am 27 years of age, nor would I ask them.
What I would ask is that people stop and think before they bowl in telling everyone how bad 100% mortgages are, and how we need to be better people and save. All relevant suggestions and thoughtful comments are, however, gratefully received.

madfrenchgirl

Laura, unless you are Clive... If your rent and bills are so high, what about just renting a room as a lodger? thats what OH and I are doing... We might have the special situation of living wiht friends and getting a reduced rent (350 for both of us) but even if they ask you for the same rent as a private flat, you still won t have to pay for bills and extra crap tax... Of course I dont know your situation, but a ground just for a place to live is very high, I must agree with that, and I applaude you for living on 200 pounds a month (tho i did about 100-125 when I was a student with 200 for rent as a lodger). :-p

sarah_elton

To madfrenchgirl - I think it's great what you're doing, I really do. But isn't this then about lifestyle choices? I choose to rent alone instead of being in a house share, because I like my own space. And yes it costs me more, but I opt to spend my money like that.

As I see it, by getting a 95% instead of 100% mortgage, the benefits would be a better interest rate, and a lower risk of negative equity.

Is that right? What I'm getting to is, I want to understand exactly why 100% mortgages are seen as so "bad".

I don't disagree that your way of lodging first makes more financial sense, but I want to understand why people are so anti 100% mortgages, to see if there are reasons I haven't yet considered, and OP's son may not have considered...

lauraaurora

I am Laura!
A good point, but we are in a two bed flat which, although it is spacious, it is (literally) falling apart, and our 95yr old almost blind landlord cannot see the problems, and therefore believes there are none. No-one in their right mind would become a lodger in our freezing, damp and mouldy flat. Why do we not move? Because it is £650pm min for a one bed flat in our area, and we would therefore not only have to downsize drastically, but pay more for the privilige too. So, rather than pay moving costs etc. to do the latter, we have decided to bite the bullet and get a shared house together. But thank you for your kind and considered response.

Robert_Sterling_3

"I am sick to the back teeth of people (I'm afraid meanmachine especially) telling all us FTBs to get at least 5% deposit."

People often dislike the medicine but you should not blame the doctor ... in this case meanmachine.

"It is that kind of ignorant and hurtful comment that upsets a lot of us."

It may be hurtful but it is not ignorant.

"I have been renting for 2 1/2 years at £600 a month, and with all my utility and council bills I am paying £1000 a month. Add on top of that £200 a month to feed, clean, clothe, drive and entertain myself (books, dvds - I can't afford to go down the pub very often) I have very little to save when I get £1300 a month salary."

Agreed

"Especially when I have presents and other things to buy most months."

It should follow from that that you get presents most months too


"PLEASE tell me where I am expected to get a 5% deposit in the near future when I am having to buy a 50% shared ownership property with a mortgage of £94,000 plus £3000 for fees?"

"It is not my parents place to help when I am 27 years of age, nor would I ask them."

Often, though not invariably, parents do help their children
but you seem to have ruled out that possibility.


"What I would ask is that people stop and think before they bowl in telling everyone how bad 100% mortgages are"

OK I have stopped and thought and in general I do think it is a bad thing in most cases.

"and how we need to be better people and save."

Well surely the people who do save have more chance of getting a house than those who do not save.

"All relevant suggestions and thoughtful comments are, however, gratefully received."

Postponement of pleasure is perhaps a sign of maturity.

Live now and pay later

or

Save now and live later

may be the choice.

I feel as if I am in imminent danger of joining meanmachine in the doghouse.

Perhaps when people ask a question we should not tell them what we really think but what we think they would really like to hear.

lauraaurora

Well done again, Sarah. I too am waiting for a proper explanation as to why 100% mortgages are so bad. The penalty of having to pay a higher rate is obvious, and the negative equity has been explained, but we are aware of the issue, and choose to ignore it. I don't see that these two things make it such bad option compared to chucking money at our landlords instead of investiting it in property in the only we we have available to us.

madfrenchgirl

Sarah, I guess it has to do wiht me being a lone lonely bullied child who did not have any friends and whose parents were raising the hard way... Honestly, i dont know but I far prefer living in a crowded house than in the studio i was rneting for very cheap in France when i was a student. i like having noise and people around and having improntu video nights and stuff, of course you have to find the right people to live with (I have lived with people I hated to death), but it can be fun... Even thoguh it means that my winter clothes are packed in the loft instead of in numerous wardrobes...

Laura, I do understand what you mean, it is true that if you have a load of stuff to take with you, it is not easy. I have the advantage (or misfortune) to have had to spare with most of the stuff when my parents got divorced (my mom moved out first, could not take everything with her, and my dad paid someone to take the "crap" away). The rest of it is at my mom's who borrows it (even though she keeps on waiting for me to get my house so she can have all her cupboard space). Everyone and everything is different... I am just a born doomed saver! (mind you my mom is a pure expert, and i had learnt to spare space as been moving 15 times for the past 5 years between France and UK).

As for the explanation: charcolonline.com, just carry out a comparison between having a deposit or not... I dont mean to tell you that a 100% is absolutely evil, it depends on your situation, but OH and I have the luxury of extra reduced rent so we thought it was worht to wait (I prefer helping my friends paying up their mortgage rather than coughing up to the bank that much).

sarah_elton

Having said all this about rates, I noticed one poster mentioned Northern Rock.

HSBC are offering me fixed rate of 4.99%, while NR will do a horrific 5.8%, so I'd recommend they shop around a bit more depending on what's been offered...

meanmachine_2

lauraandclive wrote:

I too am waiting for a proper explanation as to why 100% mortgages are so bad. The penalty of having to pay a higher rate is obvious, and the negative equity has been explained, .

Oh those two trifling little things! Fffft!

Yes, neither of those are good reasons to forego a few pleasures for a year or two, skip a holiday for a few years, and don't get blotto every Friday night.

The two reasons you gave are extremely good reasons of course.

And the fact that you don't recognise the fact tells me all I need to know about WHY you don't have a 5% deposit.

Think about it - why is it important to have the lowest rate possible? Hmm...why could that be? Nope! Can't think of a reason.

Sorry to be harsh, but I AM in your position, I am waiting to buy a place, and I'll be able to come in with a much larger deposit, a much lower rate and beat you to it. That's why.

Imagine: You're on a 100% mortgage and you want to buy a 200K property.

That'll be, say, £1300 @ 5.5%

Whereas I'd pay around £900 @ 4.4% on an 85% mortgage.

See the difference?

Now imagine prices drop by 5%. I'm still OK, I've got my equity buffer, so if I lose my job I can still sell the property. If you lose your job and you need to sell you'll be in trouble.

On every score I'm better off and you're worse off.

Does that help?

sarah_elton

meanmachine: yes it does, thank you.

With my specific situation, and figures, if I wait till I have a 5% deposit my mortgage would be approximately £80 per month less on the same property. (this is all conjecture as are your figures - interest rates could have gone up while you save your deposit so you end up paying the same anyway - not saying it's likely in fact I very much doubt it, and if it did of course prices would go down, but the point is nothing in life is certain, as a later post points out)

However, in the time it takes to get that deposit I will have spent around £13,000 on rent (I could do house share and cut that figure - as I said above it's a choice I'm not making).

At spending £80/month more than I "need" to on a mortgage, it'll be a long time till I've wasted the amount I am on renting. And I'm looking into early redemption penalties so I have the option to move the mortgage once it's down.

I take seriously your point about negative equity, risk of job loss etc. On balance, looking at the period for which mortgage repayment insurance covers me, and knowing my history of the time it's taken me to find work and the options I have for temp work, I consider it a low enough risk to be worth taking.

I appreciate you and madfrenchgirl explaining - as I said earlier what I wanted was to know exactly why people were anti 100% so I could make a personal choice about the risk I am taking.