Advice again on affordability and OwnHome scheme

londongirl

Thanks Masaillo for explaining. That is how it works. The only bit i'm not sure about is whether the interest you pay after 5 years is on the amount you borrowed or on the amount their 40% is now worth. I think i need to call them tomorrow to check (though it prob won't make me change my mind). I really like the property having been to see it again - a 1 bed flat in same area (or slightly worse area) is at least 50k more which is just impossible.

Lynzpower and others who think i should wait - if you do think i should wait what do you think i should realistically do? If i moved into a shared house i would be saving about £125 to £175 a month on what it would cost me to buy. Yet at the end of it i'd have nothing and would not have my own space - also even £175 a month is going to take me a very long time to save up any more of a deposit to make a big enough difference.

No-one has any advice on mortgage though - tracker or fixed? Lets say i go for it (and i know its against a lot of peoples advice) what mortgage would be best? I know fixed for security but don't know whether to take a gamble on tracker knowing i would have money in the bank to bail myself out if the gamble went a bit wrong.

lynzpower

Ok,

it definately seems that you are deadset on buying which is fine. I personally would buy at this stage too if I could afford it, and i needed somewhere as it seems you do.

I tihnk the government knows ( or do they!) that the reason why the housing market is stalling, is because there is not the liquidity to lend. this has absolutely nothing to do with bank of england base rates, its totally wrapped up in Libor. I think that the days of ultra low 4.99% rates are GONE, and lenders are saying the same. they cannot foresse how they can continue to offer "loss leading" rates.
I dont think there will be a release in libor, for a couple of years at least, which is what the FT/ IMF/ numerous economic think tanks etc.

I would be tempted too by the tracker, but I also see how tight your budget is. £2 monthly for dentist- is that a mistype? A clean and scale & check up will set you back 40 quid - nhs prices- that would clean out your 24 quid saving, and thats not needing anything else ( fillings etc) Im staggered you only spend £2 a month on toiletries (unless you get a lot of vouchersw or work for glaxo etc) we spend that on 2 tubes of toothpaste a month, so I really fear your estimates are out? you dont have anything written in for maintainence and your 15 per motnh for major purchases could be wiped out with the need for say a new washing machine. You dont say what you earn tho, will you be also putting money away in savings accounts for these sort of costs ( redecorating/ wiring/ boiler etc)

I would also say that in this market do not pay anywhere near AP for the studio flat. Are you also looking at one beds above your budget? the market is telling us that the studio flat is the least sellable so I certianly wouldnt pay anywhere near AP for it.

Id see the only way that this is viable is to get something well under what your mortgage is for, and take out less debt & risk .

tootiefrooties

londongirl wrote: »

Thanks Masaillo for explaining. That is how it works. The only bit i'm not sure about is whether the interest you pay after 5 years is on the amount you borrowed or on the amount their 40% is now worth. I think i need to call them tomorrow to check (though it prob won't make me change my mind). I really like the property having been to see it again - a 1 bed flat in same area (or slightly worse area) is at least 50k more which is just impossible.
...

No-one has any advice on mortgage though - tracker or fixed? Lets say i go for it (and i know its against a lot of peoples advice) what mortgage would be best? I know fixed for security but don't know whether to take a gamble on tracker knowing i would have money in the bank to bail myself out if the gamble went a bit wrong.

I think you're right to be using the OwnHome scheme: I've looked into it in detail and it seems a great idea for ftb. We're hoping to apply at the end of the year (fingers crossed). The co-op do a mortgage where the interest rate is 5.45% for 3 years and then 6.99%. That one seems pretty good to me. I would be tempted to go fixed rate or discount rather than tracker, given how unpredictable the economy is right now. As long as you work out you can afford the payments on a fixed rate mortgage, there's no reason to kick yourself if the Bank of England rate goes down because it's still the most reliable way of borrowing - plus, the BoE goes up as well as down.

I think the interest is on the sum you borrowed, otherwise technically they would have to fork out for a valuation every month to get the current market value. I think they only reassess what 40% is worth after 25 years or when you sell up - whichever is sooner.

Good luck with it all!