big risk or not

huntersc

kerryi27 wrote: »

does anyone else have any views on this, ie the market, will it be in better shape in 5 years, what about this supposed 25% hike

Three things.

1. Investing money is a great idea, but is it wise to invest in a market that is in it's worst decline in 20 years?

2. Don't go interest only, go for repayment and find a house that has a mortgage your mum can pay in full. Thinking that you'll overpay is unrealistic, you won't, will you? Really? Long term? Course you won't

3. Forget the financial issues for a moment. I promised myself many years ago never to do business with a friend or lend money to a relative. I will give money but entering into an arrangement with a close relative can often end in tears. No matter how much you love your mum it could very easily go belly up. What if you can no longer afford to subsidise her rent? Or you need to sell up to pay for an emergency? Will you make her homeless? Will she understand? so many things can go wrong.

poppysarah

Your mum might not get HB.
Being your mum makes a bit of difference to how they look at it.

Why not build an extension and have her live with you?

andrewmp

Put your money into an ISA account at least until the housing market has bottomed out. Buying a house right now as a home is risky enough, buying as a "pension" is currently stupid.

kerryi27

well, the similar propertys were worth 115k last year at their peak, so we thought getting it at 77k was a good deal cos thats already a 30k drop. The owners did want 95k originally

kerryi27

sorry meant 30% drop, which is what most people predict them to fall. The area i am buying in is Gateshead, Tyne and Wear

Catblue

kerryi27 wrote: »

well, the similar propertys were worth 115k last year at their peak, so we thought getting it at 77k was a good deal cos thats already a 30k drop. The owners did want 95k originally

But you realise that this particular property could drop again? £38K in one year sounds to me like it is the type of property that would take a disproportionate loss in any future downturn. Is it ex council?

I'm confused when you say that you have "about 70.00 per month on secured loan against our property".

Does that mean that you have a loan secured against your own house? As well as a mortgage?

If this is the case, shouldn't you be prioritising paying off your secured loan?

Do you really want to take on a third secured debt when even you acknowledge that the interest only part of the new house's mortgage will not be covered by the rent?

Sounds like total carnage to me, sorry.

kerryi27

hi , yes it is excouncil and is a 3 bedroom house. I dont think they can fall really much less than that.

we have a pretty small mortgage ourselves and are gonna borrow the 8k deposit on a secured loan against our property,we have this on 3 yr fixed which for 17 year which we will tie back in to our mortgage when we need to remortgage again. this will put our mortgage up by £70 pound a month which we can easily afford.

Also, after hearing peoples comments on here we have decided we are gonna take the mortgage on repayment instead of interest only.

we currently save £100 a week which we could use to pay off the mortgage easily.

our main concerns are not if we can afford it, but what will the market be like in the future and will be in a years time be wishing we waited as the prices have timbled down even more

speedbird1973

I thinik property is a GOOD investment for a pension. Prices will rise again, even if not in the short term. The trend is always up though.

Shares/traditional pension plans are in my unqualified opinion much more volatile than house prices right now.

If you do go mortgage only why not be traditional and start an ISA as well with a view to paying the balance off.

mlz1413

I can see what your hoping for: buy house mum and dad pay the IO mortgage, they will maintain it so in 16 years when your mum retires (maybe before) you and hubby will have a house you can sell for (hopefully) more than the £77k mortgage still left on it.
Also as no profit - rent doesn't cover the outgoings, no tax to pay
Also doing parents a favour in with the security.

ALL investments come with a risk and yours is two fold 1) if your parents can't pay the rent / you & hubby can't pay the mortgage. 2) will it be worth more than £77k in 16 years time.

I think your biggest problem with renting to Mum and Dad will be the commitment - could you ever move them out? In your heart of hearts will you EVER be able to evict them? So you have to wait until they die or go into a home to get to your pension fund. Maybe you could put a date on when you need the house back by? Remember it will need a new kitchen/bathroom/updating after 10+ years.

Also I'm assuming as your child gets older the need to collect them will stop and therefore you won't be getting a service from Mum worth £80 pm, but you also won't be getting the money.

Its a tough one and I wish you the best with your decision, but for me unless I could afford to leave the house for my childs benefit I would not be entering into this plan.

Catblue

kerryi27 wrote: »

hi , yes it is excouncil and is a 3 bedroom house. I dont think they can fall really much less than that.

we have a pretty small mortgage ourselves and are gonna borrow the 8k deposit on a secured loan against our property,we have this on 3 yr fixed which for 17 year which we will tie back in to our mortgage when we need to remortgage again. this will put our mortgage up by £70 pound a month which we can easily afford.

Also, after hearing peoples comments on here we have decided we are gonna take the mortgage on repayment instead of interest only.

we currently save £100 a week which we could use to pay off the mortgage easily.

our main concerns are not if we can afford it, but what will the market be like in the future and will be in a years time be wishing we waited as the prices have timbled down even more

Am I being thick here? Always possible.

You say that you save £100 per week, but have no savings for the deposit on the new house?

And because you have no deposit for the new house, you are going to take on two additional secured debts (a loan secured against your own house and one mortgage for the new house). And you freely acknowledge that the rental income from this house will never even cover the interest only part of the new mortgage?

Have you explained all this to a mortgage advisor?