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

beegee123

Maybe it'll help to imagine this scenario....

In a year and a half's time, after buying this house, you are chatting to your new next door neighbour - who mentions they paid £90k for their, identical, house.

If that won't bother you - go ahead.

beingjdc

pete96 wrote: »

Well luckilly for us, our firm's work is predominantly public sector work - sports centres, uni halls, community building etc etc, so fortunately we've not been as heavilly affected by the 'credit crunch' as alot of companies in the industry.

Wait for the Tory Government to arrive...

As to what you pay off, it's not a lot in the first three years of a mortgage, you mostly pay interest at the beginning. You'd probably not have paid off £10k on a £180k mortgage.

gggareth

Ok, if it's the site i'm thinking it is in Eastleigh then i would not touch it..as usual with Barratt there will be no parking & poor build quality.How can you have any faith in a company that has gone from 10 quid a share to a pound in a year...

This time next year the site will still only be half full and you will pick one up for less than 140..
There are 100's possibly 1000's of flats being put up or half built within a 5 mile radius of Eastleigh..

3 bed semi in eastleigh sold for 152 this week..

get property bee and monitor pricing it's a real eye opener..

GG

lynzpower

pete96 wrote: »

Well luckilly for us, our firm's work is predominantly public sector work - sports centres, uni halls, community building etc etc, so fortunately we've not been as heavilly affected by the 'credit crunch' as alot of companies in the industry. We had a meeting regarding the issue just recently, and all seemed well, but thanks for the concern!

Im really sorry to have to tell you this, but over the next few years these projects are the first thing to stop when local authorities plunge into the "no new spending" category.

You have not been heavily effected by the "credit crunch" as it is at the moment, mainly because funding of these sort of projects would be decided and earmarked WELL in advance of the tenders going out.

I would certainly be interested to see what happens IN RECESSION - which is a very different kettle of fish from "credit crunch".

angrypirate

Max_Headroom wrote: »

In an ideal world, yes. But bear in mind typical mortgage rates with virtually no deposit are going to be in the region of 7%, which on £130K mortgage is about £9,000 a year, or £750 a month. That is just to stand still, paying nothing back, you have to add on the repayments over and above that.

Of course as the capital is paid back, the amount you're paying in interest gradually decreases which means a bigger chunk of your monthly payment goes toward actually clearing the loan, but often in the first few years you're only clearing maybe £1,000 - £2,000 off of your mortgage per year. (I'm sure someone a lot cleverer than me could give you real working examples)

So in two years time you might have repaid £2,000-£3,000 off of what you borrowed (the rest of those huge payments having gone on interest).

Better than nothing of course, and you're on your way. Trouble is, in a falling market you might have paid off £3,000 of your big loan, but your house might be worth £5,000 less. Or £10,000 or £20,000 or £30,000.

Indeed, if a £160,000 loses 35% from todays prices as a lot of people are speculating it would drop £56,000, down to close to £100,000!!! Against that, your £3,000 paid back is going to be pretty insignificant.

These are huge chunks of money and WILL make life changing differences as you get older.

Of course they might not drop any further at all, but all sensible suggestion seems to point to the fact that they will.

Hence you need to be really sure about what you are doing.

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??

PS - to give you an idea, im 27, got 80k savings for a deposit (ive work abroad for a bit and came back last March) and Im not going to buy for a while, probably at least 18months.

redrabbit29

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??

PS - to give you an idea, im 27, got 80k savings for a deposit (ive work abroad for a bit and came back last March) and Im not going to buy for a while, probably at least 18months.

Ohhhh, can you send me your nifty spreadsheet, or put the link up here - would be really interesting to use it.

angrypirate

redrabbit29 wrote: »

Ohhhh, can you send me your nifty spreadsheet, or put the link up here - would be really interesting to use it.

Id put it on a filesharing website, but being in work they are blocked. Any suggestions?

Kez100

Pete, we had negative equity in 1994 and needed to move.

The market had dropped a lot between 1989 and 1991, so we bought in 1991 thinking it was the bottom of the market. It wasn't.

When we needed to sell in 1994 we had to save £6000 to pay off the negative equity and afford a new deposit and fees. If we had bought the same house not in 1991 but in 1989, that figure would have been circa £22,000 and we would never have been able to save enough to do it.

These figures are based on our FTB home costing £69,000 (1989), 53,000 (1991), £49,000 (1994)

redrabbit29

angrypirate wrote: »

Id put it on a filesharing website, but being in work they are blocked. Any suggestions?

Wait till your at home, or email it to someone on here who can then put it up there for you.

damanpunk

I think your totally nuts to go for this, have you added up all bills such as council tax, electricity, gas, food, petrol........ basically everything you spend money on in a month. I have a similar sized mortgage, £189k but put down 10%. It is a huge commitment, even with a joint income of about £75-90k we still don't live that comfortably (and I'm interest only at the moment too!).