FTB, making an offer on new build tomorrow - advice needed please!

pete96

morg_monster wrote: »

Having said that, though, I do want to now give my opinion!

My fiance and I are pretty desperate to buy at the moment. We are both 27, been together for 7 years, been working for 4 years or so in London (I know, therein lies the problem!), and living together in a 1bed flat for 2 and a bit years. We are getting married next july and want nothing more than to come back from our honeymoon to our own house. Based on prices at the moment in the kind of areas we are interested in, we have a 15-20% deposit for a 2or 3 bed terraced house and would "only" be looking at a 4x salary multiple on my OH (I am about to start a PhD, and actually my take home salary will be circa 18k, but noone will take that into account!). Pretty affordable, but still the current situation is making us hesitant, and we have been dreaming of this for at least a year, and are ready to settle somewhere we can start our family in a few years. Trust me, we are desparate, well I am at least, but the thought of our hard-saved cash being wasted through nequity makes me go cold.

Forgive me if I'm wrong but it seems that you have just begun thinking about this recently (I mean thinking seriously - obviously most people would like to have their own house) because a friend has done it. It just seems like such a huge, huge step to take if you haven't been mulling it over for a while. Do you live together currently? Where is the harm, seriously, in waiting even 6 months to do this? You can't honestly say it would impair your quality of life that much?

Finally - if I had followed my friends over the last couple of years who have bought, I would be sitting in a cramped flat which was worth exactly the same or less than when I had bought it, wishing I could move somewhere bigger to move on to the next stage of my life but knowing that it would probably be impossible for a good couple of years at least. I'm really glad I didn't follow their lead! I bet if you told your friend some of the things you have learned on this thread, he would turn white...

Me and my partner currently lodge in my brothers 2 bed flat. So all we have had for the last 2+ years is a tiny room, with a large PC desk for my studies, and we have all our stuff just in this one room, can you imagine how cramped we feel? I had alway planned (from about 3-4 years ago) that i would buy somewhere when i finish uni. Though, having heard what was happening to the market pretty much from the biggening of the year made me somewhat optimistic of actually affording a nice HOUSE (3-4 years ago i invisaged just about affording a measly studio or 1 bed flat when leaving uni). Because of this i looked into buying more seriously around june time, guaging the sorts of things we could afford. I then came accross this new gorvernment loan thing and applied in June, but still with the intention of waiting untill next summer to buy anything. A few weeks later our loan application was approved, and didn't think much of it. Then a few weeks ago i spoke to this guy at work as already said - almost at the same time it seem like i was beeing bombadded with info/messages from everywhere (people i know, TV, media) saying how the time is so good for first time buyers, so many bargains are to be had right now, this is such a buyers market etc etc.... and it was then we decided, hey let see what we can do!!

and thats the story!

penguine

Pete, did you read post #79 by Kez100? Because if you're really determined to buy now, and considering you have virtually no deposit (£1000 is nothing in the current market) I think you need to be sure that you really understand what negative equity would mean for you and your girlfriend's future.

Kez100

You don't have to lodge in one room. You could rent a one bed flat. Buying isn't the only option.

GDB2222

pete96 wrote: »

Me and my partner currently lodge in my brothers 2 bed flat. So all we have had for the last 2+ years is a tiny room, with a large PC desk for my studies, and we have all our stuff just in this one room, can you imagine how cramped we feel? I had alway planned (from about 3-4 years ago) that i would buy somewhere when i finish uni.

I can imagine how cramped you must be. Reading rapidly through this long thread, I can see you've had the arguments presented: 'must be crazy to buy new-build' 'house prices still very high, bound to come down some more'. I actually believe both of those, by the way.

Is there no half-way house between borrowing (almost) as much as you can to buy a new place, and continuing to live in your tiny cramped room? Maybe, rent somewhere for a bit, or buy a second-hand property, or buy a smaller place so your financial commitment is smaller?

Kez100

If any of us take our incomes and look at the very maximum house/castle we could manage each month we'd all get that happy,fuzzy feeling. Fact is though, if we went with that feeling, hard reality would soon set in when we had to live to that level.

What if interest rates rise? Property values continue to plummet? Utilities next year cost twice this year? One of you is made redundant? Food prices increase by 25%?

Don't look at rightmove prices as an indication of what the few that are selling are actually going for. Much as you may not believe it, the house I am now sitting in was on the market for £120,000. I bought it for £75,000.

penguine

We live in a flat my OH bought in 1998 for £55k. In January we were told it could probably sell for £180k if we priced it realistically. (Obviously if we decided to sell now it would be worth less, assuming we could even find a buyer.) That to me is not an indication of what a wonderful investment property is -- but of how ridiculously inflated it has become over the past decade. With seemingly more bad news about the economy emerging every day, it is starting to look like prices could fall much further than they have done in the past year. First time buyers with little or no deposit who are buying now (or have bought in the past few years) are the ones at the most risk in the current property market.

pete96

penguine wrote: »

Pete, did you read post #79 by Kez100? Because if you're really determined to buy now, and considering you have virtually no deposit (£1000 is nothing in the current market) I think you need to be sure that you really understand what negative equity would mean for you and your girlfriend's future.

Yes i did read that. As i understand negative equity, its only really a terrible thing if/when you need to sell or remortgage your property, is this right? I really cant see us wanting/needing to move in the next 5 years, and assuming we can get a 5 year fixed rate mortgage, and afford the repayments (which we have calculated and can afford) then we're really reluctant to hold out on buying, as you can tell!

Speaking or remortgaging, can someone please run through some examples in context of why one would want/need to remortgage please?

Thanks

pete96

GDB2222 wrote: »

I can imagine how cramped you must be. Reading rapidly through this long thread, I can see you've had the arguments presented: 'must be crazy to buy new-build' 'house prices still very high, bound to come down some more'. I actually believe both of those, by the way.

Is there no half-way house between borrowing (almost) as much as you can to buy a new place, and continuing to live in your tiny cramped room? Maybe, rent somewhere for a bit, or buy a second-hand property, or buy a smaller place so your financial commitment is smaller?

We have considered this too. Only problem is at the moment we pay relatively insignificant rent payments. If we were to rent a 1/2 bed flat as you suggest, the increase in monthly out goings would be so comparably huge that a) we would barely have enough to save money at any reasonable rate and b) the rent would possible be nearly as much as a mortgage.

Buying a smaller place is a good suggestion, but that i feel that would just compound the problem 3-5years down the line when we want to start a family/need somewhere bigger. A 2 bed house however should eleviate this problem, therefore allowing us to reside in this place for a long time, hopefully beyond any period ofnegative equity. That would be the plan anyway.

penguine

pete96 wrote: »

Yes i did read that. As i understand negative equity, its only really a terrible thing if/when you need to sell or remortgage your property, is this right? I really cant see us wanting/needing to move in the next 5 years, and assuming we can get a 5 year fixed rate mortgage, and afford the repayments (which we have calculated and can afford) then we're really reluctant to hold out on buying, as you can tell!

But what if you do want to sell in 5 years time? What if Barratt goes bust and that estate never gets finished? What if, when you come to sell, you owe far more than your house is worth and you have to come up with thousands, or tens of thousands, of pounds just to get rid of it?

It sounds like you're assuming that if the market continues to fall, at least it will have recovered in 5 years' time and since you don't want to move for at least 5 years you'll be fine. But you can't know that. The last house price crash in the UK was in 1989. It took until 1998 for prices to return to their pre-crash levels.

pete96

Kez100 wrote: »

If any of us take our incomes and look at the very maximum house/castle we could manage each month we'd all get that happy,fuzzy feeling. Fact is though, if we went with that feeling, hard reality would soon set in when we had to live to that level.

What if interest rates rise? Property values continue to plummet? Utilities next year cost twice this year? One of you is made redundant? Food prices increase by 25%?

Don't look at rightmove prices as an indication of what the few that are selling are actually going for. Much as you may not believe it, the house I am now sitting in was on the market for £120,000. I bought it for £75,000.

One thing which has been possibly overlooked during this thread is the fact im in my final year of uni, i have four years experience in a prosperous architects practice with masses of respect/loyalty both ways, and in 12 months time i will be fully qualified and therefore recieve a substantial payrise. I know people will probably now junp on the credit crunch/job security bandwagen, but my company have invested £1000s in me, putting me through uni (paying fees) with the full intention of cashing in on their investment for many years down the line.

In addition, my partner doesn't intend on staying where she is now, and in 1-2 years time im sure will be in a higher position, be it in her current company or another