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

GDB2222

I think that somewhere in this long thread he said he was going to be qualifying soon as an architect and his salary will go up. Either that, or as there is a building slump on, they will sack him. One or the other, I guess.

ginvzt

pete96 wrote: »

we have a joint income of around £37K.

A mortgage of £134K equates to monthly payments in the region of £750/month + £50-80 for the equity loan.... so yes this is afordable for us.

Is this thread likely to focus in on why i posted in the first place - the offer? lol

You will need to pay more than £800 for your mortgage+ loan, plus all the bills, insurances and council tax. You said you have a low rent now. How are you going to make the ends meet once you start paying all those expenses? If you pay council tac now and bills, you still would need to spend £850 more on the house. So, unless your rent is much more than £600 (you have £250 left in the end of the month), I can't see how this is going to work.

morg_monster

the problem i see is that your numbers leave you with very little leeway for any unforeseen circumstances. Yes, it is unlikely that these things might happen: your gf gets pregnant, you don't get a payrise you've been expecting/banking on, your gf isn't able to get a better paying job as soon as you hoped, either of you get made redundant or long term sick, you split up, interest rates go up. But because you have such a small deposit, if any of these things DID happen, you would be in financial trouble almost immediately.

These are the things that provide a cushion in the event of the above problems:
decent savings (you won't have any savings when you first buy and sounds like you won't be able to save much at all until you get your payrise),
ability to take payment holidays or go interest only for a few months on the mortgage (depends on mortgage; and remember this won't apply to your loan)
ability to sell house (not if you have negative equity)
ability to rent out house (there are costs associated with this which you probably wouldn't be able to afford if things were that bad)
company sick leave policy (how long would you be on full pay, what happens after that?)
company maternity leave policy (ditto above)
equity in the property (you will not really have any for quite a while)
helpful family with spare rooms (you do have that) and potentially with money to loan you (possibly by the sound of things)

As far as I can see at the moment, you don't check that many of these boxes. why not sit down and think about how you can check a few more?

Another thing - you overreacted to someone telling you to wait, saying "I might be 30!" - who said wait 8 years?! I said wait 6 months, save, and then reconsider then - please tell me a good reason why you can't do this?! Seriously, I'm someone who will be buying before this crash is over, I am desperate, I understand the lure of your own place together and I'm STILL begging you to slow down!!

angrypirate

Pete, i posted this yesterday, and you never answered my question regarding interest rates going up. Would you be able to afford them? I'll put the spreadsheet ive got on a filesharing website later today and you can have a play around with it.

We are not trying to saying owning a house it a bad thing - we are trying to help you save your money. Do you have any contingency if things go wrong?If one of you are made redundant? If interest rates go up? What about when the boiler breaks and you need to fork out 5k for a new one? What about when you need to start paying back the other loan?

Have you seen the posts on this webiste with people in serious trouble with debts they are struggling to pay off? We dont want you to be one of those people in 4 years time. We'd much rather see you sitting pretty in a 3bed house in the same development that you paid 30k less for 2 years later with a 15k deposit.

You saved 1k in 4 months which is good. All i can say is hold off and save money.

Can I also ask, which bank / building soc has agreed to give you a mortgage with only a 1k deposit on a new build?

Despite you trying to say you understand negative equity and saying you'll sit it out, do you realise if house prices fall by 10%, they have to rise by 11.8% to be at the same level?

Dont believe me?
174k (average uk house price according to NW i think) less 10% = 156.6k
156.6k plus 10% = 172.26k.
156.6k plus 11.8 = 175k.
Imagine if this is a 30% fall. Well, here are the calcs
174k less 30% = 121.8k
To return to 121.8k house prices have to rise by 44%
121.8k plus 44% = 175.4k

If you are adament on buying, my only other advice is ring the salesperson back and say, your offer still stands, but for every week they delay in accepting, you'll reduce your offer by £500. They WILL come back - just wait it out.

angrypirate wrote: »

Ive got a nifty little spreadsheet that works this all out. A mortgage of 135k taken out at an interest rate of 7% over 25 years has monthly payment of £954. After 12months you would have paid £11,449.80 but the total amount paid off the mortgage will only be £2066. That means £9,383 has gone on interest. Imagine if you are renting a similar property. Say you pay £600 a month. That means after 1 year in the property you would have forked out £7200 and the difference (£11449-£7200) is £4249 that you can have in savings putting towards the same house you can buy in a year which will probably be reduced by 10k. In the currently climate of falling house prices, renting is not dead money. Save yourself a good deposit mate.

Also, I expect interest rates to go up again in the near future and more and more people to slip into negative equity. Ask yourself when looking at mortgages, "can I afford this if interest rates are 9%, 11% etc etc. At 9%, the months repayments on the figures above are £1,132 per month and 11% its £1323. Can you afford this??

ginvzt

angrypirate wrote: »

We are not trying to saying owning a house it a bad thing - we are trying to help you save your money. Do you have any contingency if things go wrong?If one of you are made redundant? If interest rates go up? What about when the boiler breaks and you need to fork out 5k for a new one? What about when you need to start paying back the other loan?

I suppose that because he is buying a new build house, he assumes nothing wrong can happen with it. Definitely not a boiler breaking!

angrypirate

ginvzt wrote: »

I suppose that because he is buying a new build house, he assumes nothing wrong can happen with it. Definitely not a boiler breaking!

Well, maybe not in the first 5 years, but what after that? Nowadays things break just after their warrenty expires. In 5 years time they might find themselves 30k in negative equity and having to fork out an extra 5k for a new boiler. That really would hurt

ad44downey

If you were going to be an architect why don't you design and build your own home instead of buying some over-priced new build rubbish?

Kez100

I'm concerned the monthly numbers just don't add up (basically due to how low your savings are Pete). Can you detail your estimated statement of monthly income and expenses when you are in your new home (for the months before you qualify)?

Kez100

ad44downey wrote: »

If you were going to be an architect why don't you design and build your own home instead of buying some over-priced new build rubbish?

Possibly not a bad idea. Save like fury and later buy a plot of land. Design your own place and live with outlaws while doing so. Could build a family home that way, not some rabbit hutch.

penguine

pete96 wrote: »

Thanks for your advice, ginvzt. As i have already said, if we cant remortgage in 5 years due to NE, we wont. If we then cant quite make the payments, then there are ways round it (refer to my essay post). Regarding pregnancy, obviously we will endeavour to only to be responsible adult and only bring a child into the world when THE TIME IS RIGHT. When ever that time comes, childcare costs will be covered with a free/cheap nanny... she's called the mother inlaw (who has already expressed her concerns to help out in this way)

If you can't remortgage once your fixed rate expires, you'll go onto your lender's SVR. If interest rates are higher in 5 years (which they are likely to be if we go into a recession), your mortgage payments are going to be higher. Even a small rise in interest rates is going to have a huge effect on you because, as someone who bought recently with virtually no deposit, your principal is going to be much higher. So it may not be the case that you can't "quite make the payments", it may be quite literally impossible.

What if by the time you have a child, your mother-in-law is no longer able to provide free/cheap childcare? People's circumstances/health can change quite suddenly. What if you or your partner would like to stay at home with your child while they're small, but can't afford to? Would you be happy going out to work every day to pay for this overpriced 2-bed house while your child's early years pass you by?

What is telling is that I think no one who's posted here has told you this is a good idea. There are people out there still buying houses, but those who are making a considered decision to take advantage of the falling market are those who already have equity and/or savings. I don't think anyone here is trying to quash your dreams or tell you to never buy a house, just to wait awhile. A house price crash can be a once-in-a-lifetime opportunity to buy a good house at a good price, and get yourself off on a solid financial footing for the rest of your life -- but only if you can wait.