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

ginvzt

pete96 wrote: »

I know someone had asked (yourself) as in a previous post a said i dont have time to give you the detail (at work).

...but you do have time to come at everyone who is trying to advice you not to do what you are about to....

The £200 car service 'contingency' should not be used for mortgage overpayment anyway, you should have pot of money for these routine things! And only after you put some money away you should consider overpaying the mortgage...

briona

pete96 wrote: »

Well what I will say is, if I did do that and got to 30 before buying, if I knew that I actually could have brought a property now and actually survived the credit crunch…. I would be KICKING MYSELF!!! Knowing that I had just wasted 8 years of my life renting when actually I could have spent 8 years of my life investing in property… that thought is almost, no I’d go as far to say IS, as scary as the thought of buying a house now, in my opinion of course.

It looks like I’ve missed the boat then, what with being 31 and still renting! :rolleyes:

I’ll probably get shot down for this but Pete, your figures just don’t add up. You’ve managed to save a paltry £1,000 (between two of you in 4 months), which on your own admission is a contingency for car repairs or other such like. How do you intend to furnish your house? Or pay for repairs? Or pay for sky-rocketing utility bills?

When I was renting my last house, one month the boiler failed, the washing machine broke and the fridge stopped working! And how glad was I not to be the homeowner?! :eek: My savings at that time would have scarcely allowed me to replace ONE appliance never mind three of the damn things! Fortunately my landlord replaced them all within record time BUT if I had been the homeowner, what the hell would I have done? How do you choose between heat, clean clothes and chilled food?! And with no realistic contingency fund, what would YOU do?!

Despite the fact that house prices are falling, despite the fact that there is a very real threat of negative equity, despite the warnings from the people who’ve been through previous crashes, there are many people on these boards at the moment who are hell bent on buying a property. It’s your prerogative to buy of course but I can’t help but wonder how many of today’s over-eager buyers will be repossessed in 2-3 years time?

If I had jumped on the property ladder a couple of years ago, my fixed rate would undoubtedly be ending, hence (and also in response to your earlier question) the need to remortgage. However, the economy is changing and I would be unlikely to secure a particularly good deal. So I might see my rate jump from 4 or 5% to over 7%. Coupled with rising utility bills, my salary (which had not seen so much as a cost of living rise for over two years) would be stretched to its limits. Any money I could have saved would now be being poured into my money pit – I mean my home. In the event of appliance failure for example, I would probably end up cleaning out my paltry savings leaving me in a very vulnerable position. Also the company I work(ed) for is in danger of being insolvent. For the second time in four years, they have made 50% of the staff redundant… my job was safe, but for how long? Things could get a whole lot worse…

As it happens I decided to continue renting. I moved in with my best friend and I pay him an all-inclusive rent. I am insured to drive his cars (meaning that I don’t need to run my own) – I just share petrol costs and obviously pay my insurance. I quit my job to go freelance (something I couldn’t afford to do if I had a mortgage!) and I now work less and earn more. Consequently I have built up some savings and can afford to watch the market for a while. (However I may go travelling next year – who knows?!) So right now the housing market can do what it likes, and it doesn’t affect me.

That’s just my take on things… and no doubt you will still plough ahead and buy a house anyway. I'd urge you to think about what you REALLY want from life. Is it of utmost importance that you buy a house NOW or is it worth giving yourself the best chance financially first?

Incisor

pete96 wrote: »

... Now this next escape route may rile a few individuals, but I will say it would only ever be a last resort. If for what ever reason we got into SERIOUS negative equity, some people have thrown about figure likes -$40K for example, and bankruptcy is imminent and our lives are over in terms of living a decent life, one thing could relieve such pressure…. We could emigrate to the USA easily enough and leave it all behind us.

:eek:

But with these rescue plans aside, I hear some of you saying already ‘JUST WAIT 1 OR 2 YEARS AND REDUCE ALL THAT RISK!!!’ Well yes we could wait and reduce that risk, but how long should one wait, and how ‘risk free’ should one wait before committing to buy? From what I’ve learnt the last few days, the guy with the wise head on his shoulder will be waiting until the housing market settles, reaches it’s trough or even wait until we see a slight uptrend. Well correct me if I’m wrong, but I could be 30 years old before that time, judging by most predictions.

• Wise man: waits till he sees property values settle and a slight uptrend
• Adventurous man: waits until he sees property values settle and hold steady for a while
• Gambling man: goes in when he sees prices are beginning to level out
• Foolish man: rushes in [with little more than the proverbial £1000] while prices are still in free fall

So if I only buy when I’m thirty, surely I will be overjoyed that I waited all that time knowing that there will be little/no risk in buying a house…. Or will I?? Well what I will say is, if I did do that and got to 30 before buying, if I knew that I actually could have brought a property now and actually survived the credit crunch…. I would be KICKING MYSELF!!! Knowing that I had just wasted 8 years of my life renting when actually I could have spent 8 years of my life investing in property… that thought is almost, no I’d go as far to say IS, as scary as the thought of buying a house now, in my opinion of course.

So you survive the credit crunch, let's say the worst is actually over in 5 years. You have accumulated £30,000 of negative equity and you would be congratulating yourself for only being £30,000 down, having a place on the property ladder and surviving the credit crunch. You would be congratulating yourself for not having rented and for having a home with £30,000 negative equity [which you could have bought after 5 years of renting with no negative equity and a sizeable deposit]. Our local property rag has gone from about half a page of lets to about a dozen pages in under a year. Many Landlords would love to meet potential tenants with owner occupier attitudes and aspirations right now. Why not let these people bear the brunt of the credit crunch for you? [No, I am not a Landlord, I'm a tenant, having come out of owner occupation a year ago.]

pete96

Right ok figures you all been waiting for the then.... may as well get it over with now before i really do go ahead and make a big mistake! Please examine, calculate, and give me the sad news....

Salerys:

Me - £1354 take home
Partner - £12,000pa before tax (dont know take home as never seen a pay slip) PLUS any commision (which varies from about £100 for a bad month to anything upto £1K in good months - probably averages out at about £250 though)

EDIT* I forgot to add, our friend will be lodging for 6-12months:
£250-300 (not yet agreed obviously)

Outgoings carried to new house (if we buy)

Me:
Car - £150
Petrol - £140 (this likely to reduce, going out alot less)
Insurance - £57.50
Phone+insurance - £35
Gym - £25 (this could easilly be stopped if needs be)

Partner:
Car - £110
Petrol - £120
Insurance - £35 (this is approx, not sure on exact figure)
Gym - £30 (again could be cancelled)
Phone - £40 (but THIS WILL be changed - lower tarrif or PAYG)

Bills:
£260 ish (gas/elec/water/broadband/council tax/TV license etc)

Mortgage + 1.5%pa loan interest:
£750-850 (i beleive this could be quite flexible depending on length of term, interest rate, and also equity share (50-85%))

Advice about how best to arrange the mortgage:equity loan, and term length i might source later perhaps.

Well i think i covered everything there (but no doubt you'll pick me up on a couple things!) I guess after all this is what we'd have to live on - food, savings, and what ever else

pete96

Just doing my sums, and we should have around £550 left to live on/put into savings. This doesnt include rent from freind, so say £800. So is the general consensus £800 disposable income not enough?

Incisor

pete96 wrote: »

Right ok figures you all been waiting for the then.... may as well get it over with now before i really do go ahead and make a big mistake! Please examine, calculate, and give me the sad news....

Salerys:

Me - £1354 take home
Partner - £12,000pa before tax (dont know take home as never seen a pay slip) PLUS any commision (which varies from about £100 for a bad month to anything upto £1K in good months - probably averages out at about £250 though)

Outgoings carried to new house (if we buy)

Me:
Car - £150
Petrol - £140 (this likely to reduce, going out alot less)
Insurance - £57.50
Phone+insurance - £35
Gym - £25 (this could easilly be stopped if needs be)

Partner:
Car - £110
Petrol - £120
Insurance - £35 (this is approx, not sure on exact figure)
Gym - £30 (again could be cancelled)
Phone - £40 (but THIS WILL be changed - lower tarrif or PAYG)

Bills:
£260 ish (gas/elec/water/broadband/council tax/TV license etc)

Mortgage + 1.5%pa loan interest:
£750-850 (i beleive this could be quite flexible depending on length of term, interest rate, and also equity share (50-85%))

Advice about how best to arrange the mortgage:equity loan, and term length i might source later perhaps.

Well i think i covered everything there (but no doubt you'll pick me up on a couple things!) I guess after all this is what we'd have to live on - food, savings, and what ever else

There it is, laid out in black and white. You are viewing this as a monthly budget calculation. The bit in red is just for monthly affordability, but otherwise this is irrelevant. The really important thing for you to understand is the capital or equity position in the long term.

Please take another shot at this, comparing your rental and mortgage costs over 5 years, some sensible assumptions about savings and overpayments (for like with like [mortgage + overpayment ] = [rental + savings]). Then compare your savings with your equity after 5 years for rental and buying, assuming some value of house price falls.

You can make an apparently good decision to buy on monthly outgoings, but it could be a disaster compared to renting if you compare on the basis of the capital at your disposal. What is the .... point of getting on the housing ladder now to get a £30,000 debt in 5 years, when you could rent for about the same, have no debt and buy the same house for less?

morg_monster

because i've got my funky homemade tax calculator spreadsheet open here at work (trying to work out how much tax I can claim back in april) i will tell you that your partner is probably taking home about £850 a month after tax and NI.
oh and if you are going to buy a house together I'm sure you realise you need to be completely open with each other about things like take home pay - but I'm sure you didn't know right now just because you never thought to ask her.

Not sure since you are part time - but will you have any student loans to pay back once you have finished your course? Ditto for your partner - did she go to uni? I know she is probably just on the threshold for paying back (with the commission) but she will have to start paying back sometime if she did have a loan.

Anyway as I calculate it, you have £2204 incoming (plus potential £300 from lodger). If we just base it on the 2204 then after the outgoings and bills above (not mortgage) you are left with 1241.50. Minus 850 leaves just under £400, between two of you. That really isn't very much to live on. You should probably account for £100 each for food, though you could get that down. So that leaves £200 spending money; £100 each. You won't be able to save ANYTHING out of that or overpay the mortgage. To be honest it'd be a good few months of scrimping before you could even afford a sofa, or an oven, or curtains, or a BED ... how are you going to pay to furnish this house?!

I know that bills and your outgoings and the mortgage could be less, but I think until you know better, you should assume the max. And yes- the £300 from the lodger. My god will you need that, probably just to get by, let alone worrying about savings. How is he going to feel about paying £300 to rent a room with no bed?! What if he wants to move before you get your promotion?

My friend is in this exact position at the moment - lodging with a friend who has just bought her first house THIS SUMMER (duh) - she has a mattress and a small table in her room - the owner has no spare money to furnish the house and my friend knows that if she moves out, the owner will not be able to pay the mortgage. What a horrible position to be in, I don't see their friendship surviving this.

mrs_deadline

Martin's budget planner spreadsheet is a good reminder of everything your income has to stretch to like clothes, haircuts, nights out, gifts, travel, Christmas, home repairs...

http://www.moneysavingexpert.com/banking/Budget-planning

RoxieW

Agree with the above - believe me it's the little things that add up. Brithday and Xmas presents, a new kettle/rug/bed set or whatever is needed that month, a cinema trip, a haircut, new pair of shoes. You're proposing that you wont have a night out/holiday/buy xmas presents etc for the foreseeable. Is that realistic?

ginvzt

Ok, in your outgoings, food is missing. Any clothes, shoes? Birthday gifts to each other, family, friends? Any holidays? You wouldn't have much left to cover these every month!!!!

So, you total take home pay is about £2200 plus commission (don't count on that, as it may not come sometimes). You shouldn't count on the possible rent either, as you never know - friendships and money should not be mixed. You monthly expenses as listed by you are about £1800. That leaves £300 to cover the things I listed above and others, which is not much.

In the end of they - it is your choice. Just don't come back here when you will be in arrears with your mortgage.