Should we pull out of house buy

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Excellent post dopestar ^^^^^^^

wymondham

pinkshoes wrote: »

My parents bought their current house in 1988, at the peak of the market just before the crash. 20 years on, they're mortgage free and still very happy. Negative equity didn't affect their lives in any way whatsoever, so it's not always something that matters.

It only affects those that want or need to sell.

I was talking in terms of the OP, they have a choice as they have the facts to hand that if they purchase it will occur. It's irresponsible to encourage people into a financial situation that could ruin them (a bit like what the Government are doing at present with the stamp duty holiday).

wymondham

pinkshoes wrote: »

Well it's a helluva lot better than being stuck in a rented 2 bed that's costing me more in rent that in the interest on the mortgage, and I can't even paint my bedroom or hang up a picture hook without getting vast quantities of my deposit deducted!! Oh, and then there's those S21 things that get issued when a landlord decides they want to sell or something, so just 6 or 12 months after you moved in, you have to move out again.

Negative equity may not be ideal, but being stuck in one place for 10 years yet having my own home is quite appealing compared to the above! I have no kids, and we've got enough space for two, so I guess I'll just have to hope I don't have triplets in the next 10 years.:D

With respect I don't think you can compare not being able to paint your room, with being trapped in negative equity. If you rent, you can walk away, if you are in negative equity you are saddled with a huge debt if you have to sell. God forbid this occurs, but if it does it is crippling.

Northants_Simon

I see a lot of negativity about the Homebuy schemes. I'm buying a 4 bed detached using a 15% equity loan from Homebuy.

It depends on your circumstances, but for me it will cost the same to buy a house as it does to rent. I already have 3 kids, so need 4 bedrooms. Looking at this in the long term, I'll be paying £1k a month on a mortgage rather than £1k on rent. In ten years time I'll still be paying £1k on my mortgage (unless I can pay more), rent would have gone up considerably.

I'm 40 years old, so am running out of time for a 25 year mortgage. If I wait 2 or 3 years for the market to settle down, it will be too late for a 25 year mortgage.

Renting with a family is not great. You get your kids settled into a school and then your landlord chooses to sell his house, you then have the hassle of moving and if you can't find something in your area then your kids have to change school. That's not good for their education, the possibility of moving every couple of years.

You can't have pets in most rental properties, you have a nosy estate agent come around every six months to look at the house, you can't decorate or remove the woodchip wallpaper, you can't personalise the garden with your choice of plants, you can't work from home (I'm self employed).

With the Homebuy scheme you borrow 15% to 50% (15% in our case). You then pay a very low amount of interest on that loan. When you sell you pay back 15% of the house value, this could be more or less than you borrowed. You can also pay off the loan in full or part at any time (subject to the 15% valuation). The advantage is that if house prices continue to fall you will pay less back than you borrowed, so it's probably best to try and clear the loan when house prices hit rock bottom. It gives you some protection against negative equity.

We intend to stay in the house long term, maybe 10 or 15 years. At some point prices will go back up.

Chris2685

Thanks Simon, you just perked me back up... I've been feeling gloomy all morning about our purchase, especially after the estate agent said some snide remark about him putting the property back on the market (i'd like to see him sell it within the time it will take him to wait for us now ) and have been giving some thought to pulling out of the homebuy scheme and going to rent... I went and had a look at rented 2 bed places though, and pretty much everything in the area we live is around £800 a month or more, which is roughly the amount we will be paying on mortgage + homebuy interest (aka rent).

I just really hope we get it after all this time... It is just taking so long and I feel like no one who is supposed to be acting for us in a professional capacity actually know what they're doing!

GDB2222

There's no question that there are big advantages in buying your own place, as you have said Chris and Simon. However, there are also big advantages in postponing a purchase if house prices are going to fall a lot in the near future. The pundits are forecasting further large falls. (It varies, but 10% to 30% generally, and the poll here came out at 22%.)

Of course, if you stay in the place you buy long-term, and you are able to pay the mortgage, you can survive any foreseeable future drop. However, is that the right way of looking at it? If you wait and prices drop say 20% in the next 2 years, your mortgage will cost you 20% less. You need to balance that long-term advantage against the short-term advantage of getting settled in your new place sooner.

You also need to include in your considerations the risk that you can't stay in your new place long-term for some reason. Negative equity makes life difficult if you have to move.

I will just add that these points are at the heart of the debate between the bulls and the bears here, at the moment.

dopester

Chris2685 wrote: »

I went and had a look at rented 2 bed places though, and pretty much everything in the area we live is around £800 a month or more, which is roughly the amount we will be paying on mortgage + homebuy interest (aka rent).

You are aware just how much house prices are dropping every month?

Over the past six months, house prices on the Halifax index have fallen by an average £2,900 a month

That is more than 300% your rent or new mortgage repayment.

How would you feel if this trend continues - as many believe it will significantly?

Did you cop a load of Nationwide's Chief Exec in his television interview the other day? The -25% interview. Whilst keeping in mind they've been very doveish, and only are now admitting to some negativity... whilst others see considerably more downside.

Still I know you are desperate to buy and you see the price returning in due course of 10 years or whatever so feel free to disregard this post. GL. Not like you to feel gloomy btw. We've crossed swords a few times now and you were clear and focussed about not renegotiating your position or asking for a reduction.

Chris2685

dopester wrote: »

Still I know you are desperate to buy and you see the price returning in due course of 10 years or whatever so feel free to disregard this post. GL. Not like you to feel gloomy btw. We've crossed swords a few times now and you were clear and focussed about not renegotiating your position or asking for a reduction.

Hey dopester, I am far from clear and focussed, hence why I post and lurk here!
I am very much open to the idea of renting, and keep considering pulling out in order to rent.

The most important benefits of renting for us at the moment would be:
-Increased liquidity - I will be able to keep all of my savings, and living costs will be per month, rather than having to stump up 20k in advance.
-Better mobility - could move very easily if the fancy took us

That is pretty much the only 2 benefits at the moment though. There is no cost benefit, because even if house prices do drop, the rent per month on a 2 bed place in this area is around £800. The per month payment for the 3 bed place we are buying is just over £800 per month... Seems to me to be a much better option financially, even if prices did drop.

I don't see rent payments dropping really, or is this forecast too?

I am seriously interested in hearing all sides of the coins, but no one yet has made me see a folly in paying £800 per month to buy a larger place than the same money would rent me...

Edit: Put another way,
Can anyone tell me in really basic costing terms how I am better off paying £800 per month to a landlord instead of paying £800 a month to clear a mortgage? I understand that if I wait 2 years I could get a better price on the property, but the fact is we have to move before November as the baby is due in December, and we can't stay where we are.

dopester

Chris2685 wrote: »

I don't see rent payments dropping really, or is this forecast too?

This is from June, but I imagine a new update for August / September will be coming out soon. And I think you have to allow a bit of time for the contagion to spread.

First you get higher demand pushing the prices up, then you've had so many people who can't sell who've begun letting their own homes.

That said, do keep in mind I predict much higher unemployment, paycuts, and less revenue intakes for the Government where it might be forced to cut back on many things, including what it pays in housing benefits, as it recalculates those figures with property valuations falling.

http://www.propertysecrets.net/article/uk_property_investment_rent_levels_head_downwards_but_the_data_may_be_skewed/2055.html

Despite positive data over the last few months, the latest statistics suggest rents in the UK are now dropping at an alarming rate.
This is yet more bad news for buy-to-let investors and particularly those trying to outrun storm clouds in the property market.
In a dramatic turnaround of fortunes, the Association of Residential Letting Agents (ARLA) has just released its latest survey report, which shows rents have tumbled by around 7 per cent in the UK over the last three months. This is despite the demand for rented property by willing tenants being at an all time high.

However - up to you to use take all data and any projections you see the economy going in making any decision.

dopester

Chris2685 wrote: »

Put another way,
Can anyone tell me in really basic costing terms how I am better off paying £800 per month to a landlord instead of paying £800 a month to clear a mortgage? I understand that if I wait 2 years I could get a better price on the property, but the fact is we have to move before November as the baby is due in December, and we can't stay where we are.

I'll leave that to someone else to try and answer. GL.