Should we continue with house purchase?

c0nfused??

We accepted an offer on our current house about 7 weeks ago - £145k- We had our eye on another house for a while-the perfect family home- that was on the market at 290k at christmas, and was reduced to 250k when we sold ours. we negotiated an offer of 244k- which was 170k mortgage, 60k equity, and 14k savings- we made this offer after alot of deep thought as this was close to our monthly mortgage limit and would use up all of our savings. Now, very close to completing, the economy seems to be in meltdown with eveyone predicting further falls in the value of property. hence, the sleepless nights are back. Would we be crazy to continue, knowing that it will not be worth 244k for the forseable future, would it be realistic to put in a reduced offer at this late stage? I'm convinced that the house would no longer achieve 244k in this market...the vendors emigrated late last year and are very keen to sell to raise money to build a new home.

BruTamUK_2

We found ourselves in a similar situation last week. Sold our house 4 months ago for asking price. Pulled out of the house we were buying last thursday. got cold feet in the current situation.
We've put our equity (£60,000) in a savings account making £300 per month interest, and are now looking to rent until the market bottoms out. (We currently live with my parents which cant last much longer!)
We initially didn't want to rent as we always thought it was dead money but in the current market I think its our best option.
Rent is £650 per month less the interest we're pulling in means we are only paying £350 out per month. Over a year this adds up to £4200 per year in rent.
I think its safe to assume house prices will fall more than that in the next 12 months. On top of this, we will add at least £10,000 to our savings as we wont be spending anything on the house while renting.
No lose situation really.
If I was you I would take the money and run. Rent, and buy when the time is right.

Northants_Simon

Don't forget you will be taxed on that interest! And if you're a 40% tax payer you are taxed 40% on your savings too.

jmt

Hi OP,

Did you watch the TV last night - there were 3 programs about the housing market and all were very despressing.

I am in a different position to yourself as I am a BTL investor, but I have just pulled out of a purchase today and I will to sit on my money for the next 6-12 months to see what happens.

The property I was buying was a 12yr old 1 bed starter home. At the height they were up for £109950 and same property 5 doors down sold for £102 Dec 07. My house was on for £100, then reduced to £90 and I got it for £82 when offer was accepted 3 weeks ago.

When I rang the estate agent he told me that I was the 2nd person today to call and withdraw offer due to last nights TV.

In your case, why don't you sell then move into rented and your dream house may be £20,000 cheaper in the next month or so.

c0nfused??

Thanks for the replies. Forgive my ignorance, but would selling my house and not rebuying make me liable to pay capital gains??? Also, does anyone think it may be worth offering a reduced amount for the new house?

truman_sparks

I think capital gains applys after a certain time scale (not sure but 12 months rings a bell?) someone can probably confirm details, this might be for investment property on reflection.

I would personally stay well out of the market if you can. Nothing to stop you buying a really cheap flat in 12 months at auction and selling it again if you need to avoid capital gains. least i dont think there is a reason you couldent.

Only my opinion, do with it what you will!

TS

edit, yes a reduced price is fine, but only if based it on value in 18 months. I doubt they will accept it, lol.

jenny74

Hi,

See this link re the capital gains tax: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/DG_4016313?cids=Google_PPC&cre=Money

So no you won't have to pay CGT if it is you main home you are selling.

Personally, I wouldn't reduce an offer that has been accepted, I don't think it's fair. What you've got to think about is whether the house you are buyign is intended as a HOME or a way to make money. IF it is a home and you intend to stay there for some time, then go ahead at the agreed price. House prices WILL come back up again, just not very soon!!

Good luck with what you decide.
Jenny

carolan78

They may rise again eventually but who is to say they are going to rise to these silly levels? Even though the offer has been accepted you can get sentimental about it after all your talking about thousands of pounds.

Concidering the OP has stated they are pushing themselves to their financial limits with this offer then I would be offering them less. If its not accepted then I would walk away and wait a few months for the estate agents to drop the asking price.

hethmar

Well the vendors will be in a difficult position. Ive no doubt they have heard of the housing slump here. I think if you have the nerve, you could ask the agent to pass on a lower offer before you exchange contracts - Im sure he will explain to them about the current uncertain situation and likely advise them to accept. But what about the house you are selling? Whats the situation with that and will your buyers try to reduce the price of it?

Rebchappers

So you were prepared to push yourself to the limit a few months back, but not now? If you are not planning on selling the house in the near future (or have bought it for an investment) then what it is worth now doesnt really matter. You dont realise the loss/gain until you sell the property.

I would be more worried about over stretching yourself. If you are 'near the limit' now, what happens when the interest rates go up 0.5%?

Providing you can comfortably afford the repayments, and have been sensible in your budgeting it doesnt really matter how much you pay for a house. What is expensive for one, is peanuts for another.

If people werent in such a hurry to borrow 6 or 7 times their income, i dont believe the house prices would have risen as much as they have done. If nobody was borrowing stupid amounts, the house prices would have stopped rising (as we are seeing now, with people unable to get the mortgages)

This is just my opinion and others may disagree

moneysaver

Rebchappers wrote: »

If people werent in such a hurry to borrow 6 or 7 times their income, i dont believe the house prices would have risen as much as they have done. If nobody was borrowing stupid amounts, the house prices would have stopped rising (as we are seeing now, with people unable to get the mortgages)

This is just my opinion and others may disagree

Totally agree with you on this.

Moneysaver