Stamp duty dilemma

huntersc

ad9898 wrote: »

Hi kam, I have just registered on here after a long time lurking, I am an independent FA.....my advice STOP, in the last 3 weeks the price of the average house as dropped by £2500, at current rates average prices are falling at just over £100 a day !!,

Offer about £125000, you will then protect yourself from the worst of housing markets capitulation.

I'm not sure this is great advice, you don't know the situation, where the house is, how much it could have sold for last year, there are so many factors to consider that a general "STOP" is silly.

To the OP, if you are CERTAIN that the £180k price is good (taking into account further price drops etc and long term affordability of the mortgage, don't forget you can't say you will live there forever, you might HAVE to sell) then you should go ahead but see if you can drop he offer by £5k to save the SDLT.

Alternatively the owner might be prepared to offer you the £1800 as cashback if yo buy at the £180k price, that's a nice compromise because he gets more than £175k and you save the £1800.

As for my opinion, I would be careful about buying right now. If you have to live somewhere and this is the dream home and you have tons of cash then no problem. However if you think you will be annoyed if you could buy the same property in 6 months for 10% less then you need to think about it carefully.

ad9898_3

swaninn wrote: »

ad9898 we had an offer accepted at £130,000 with stamp duty paid, should we now pull out or get the price reduced? (It was on the market for £140,000)

In my honest opinion, I could not recommend anyone to buy at this time, however I do understand some people HAVE to move, if thats the case, negotiate the price down. Sentiment has changed and GB's fiddling yesterday has done nothing except draw attention to what is happening, the market will not recover for some time.

ad9898_3

kam0570 wrote: »

our situation is this:

in a two bed flat with baby and teenager, we're kipping on air bed in living room (baby has taken over our bedroom) because OH gets up at crack of dawn for work (alarm would wake baby etc etc).

desperate for a third bedroom basically and a house to boot, current rental cost approx £800+ for 3 bed in central colchester (lexden) - house mortgage would be £150,000 (house price £180,000 - have £30,000 deposit), at a cost pcm of £794 on a 6.39% 3 year tracker (not actual deal but just as an example)

with all that in mind - what do you reckon?

I'm not familiar with the area, you must look at what price you can rent a 3 bed house for. If the numbers don't add up then you are really in the bracket of someone who "has" to move. Negotiate though like your life depended on it.

huntersc

kam0570 wrote: »

our situation is this:

in a two bed flat with baby and teenager, we're kipping on air bed in living room (baby has taken over our bedroom) because OH gets up at crack of dawn for work (alarm would wake baby etc etc).

desperate for a third bedroom basically and a house to boot, current rental cost approx £800+ for 3 bed in central colchester (lexden) - house mortgage would be £150,000 (house price £180,000 - have £30,000 deposit), at a cost pcm of £794 on a 6.39% 3 year tracker (not actual deal but just as an example)

with all that in mind - what do you reckon?

Okay, with all that in mind, personally, I wouldn't buy. Your deposit is not large enough to cover you if things go wrong. What if you or your OH lose your job and the house is only worth £125k when you have to sell?

Your current situation is obviously not ideal, you need a new place but buying doesn't have the be the answer.

Also, don't forget the costs of buying and owning a house. It may be circa £100 cheaper a month but it doesn't work out like that. There are many costs that you'll incur owning that house. Furthermore, what if the BOE rate jumps to 6%? or 7%? Can you still afford the mortgage?

I would think very carefully about putting your hard earned cash into a house right now. If you can't afford to lose it then relax, wait for the market to settle and rent a nice place instead.

But ultimately you need to do what you're comfortable with.

penguine

kam0570 wrote: »

desperate for a third bedroom basically and a house to boot, current rental cost approx £800+ for 3 bed in central colchester (lexden) - house mortgage would be £150,000 (house price £180,000 - have £30,000 deposit), at a cost pcm of £794 on a 6.39% 3 year tracker (not actual deal but just as an example)

with all that in mind - what do you reckon?

You've got about 17% deposit for this property (if you get the price lowered to £175k which I should think would not be a problem, I'm sure the sellers would expect you to ask unless they don't pay attention to the news).

Prices have fallen an average of 11.5% over the last year -- more in some places and for some types of property than others, but all the indications are that they will continue to fall, that this is just the beginning of a crash as the rest of the economy is not doing well. So if prices fall at the same rate for the next few years you could be in negative equity in less than 2 years -- round about the time you may be looking to remortgage.

If you're comparing monthly rental costs to monthly mortgage payments you need to separate out the interest and principal part of your payments. Rent is often referred to as "dead money" but so is the interest you're paying the bank on your mortgage.

Personally I would look to rent rather than buy at the moment. We live in a 2-bed flat with a 5 year old which is not ideal, but after almost being tempted into buying earlier this year we have now decided to wait. There have been 3 previous crashes since the 1970s, each time the market fell for several years before stabilising so you will have plenty of time to jump in. For many people this will be a once-in-a-lifetime chance to get a good property at a good price and make your life easier financially for years to come -- if you can wait it out.