First Time Buyer Initiative, any good?

fordyman

Hi Guys,

I have been on this forum a few times, thought I would register. :j

Right, down to business. I am 23 and currently living at home with my parents. I have always lived at home and feel sooner or later I need to move out and stand on my own two feet. Not to mention, my bedroom is the size of a shoebox! :rolleyes: I currently earn £17500 a year plus overtime and bonuses. (£2.5k + a year) I have £4k saved up.

I have seen a 2 bedroom flat built by Persimmon homes, being listed at £120k (obviosuly I would seek a large discount). This property is classed as a 'HomeBuy FTBI' property in which the government will buy upto 50% of the property. From corresponding to the local HomeBuy agent I am classed as eligible for the scheme. I have spoken to a mortgage advisor who said I can get a £65,500 mortgage with Nationwide, with no deposit. Is that because the other half is being provided by the government? I don't like the sound of a 100% mortgage.

From reading up on the scheme, you wont pay any interest on the 'other half' until three years in. Then will be 1% after 3yrs, 2% after 4yrs and will stay fixed at 3% after 5.

One thing they don't try to mention is the 2.4% rise year on year of the amount borrowed. They say this gives you a incentive to remortgage later on to take on more of the property. It does however say you can sell at any point

I realise in the current economic times it is not the best time to be investing in property and getting a mortgage. One trail of thought is that its a long term investment and over time the property will make me money.

I have NOT put an offer in on the property. My heart says BUY, but my head says DON'T BUY.

I have heard people on here say that this scheme is a 'con'. Could anyone give me their thoughts.

Thanks in advance,
Lee

stevetodd

fordyman wrote: »

Hi Guys,

I have been on this forum a few times, thought I would register. :j

Right, down to business. I am 23 and currently living at home with my parents. I have always lived at home and feel sooner or later I need to move out and stand on my own two feet. Not to mention, my bedroom is the size of a shoebox! :rolleyes: I currently earn £17500 a year plus overtime and bonuses. (£2.5k + a year) I have £4k saved up.

I have seen a 2 bedroom flat built by Persimmon homes, being listed at £120k (obviosuly I would seek a large discount). This property is classed as a 'HomeBuy FTBI' property in which the government will buy upto 50% of the property. From corresponding to the local HomeBuy agent I am classed as eligible for the scheme. I have spoken to a mortgage advisor who said I can get a £65,500 mortgage with Nationwide, with no deposit. Is that because the other half is being provided by the government? I don't like the sound of a 100% mortgage.

From reading up on the scheme, you wont pay any interest on the 'other half' until three years in. Then will be 1% after 3yrs, 2% after 4yrs and will stay fixed at 3% after 5.

One thing they don't try to mention is the 2.4% rise year on year of the amount borrowed. They say this gives you a incentive to remortgage later on to take on more of the property. It does however say you can sell at any point

I realise in the current economic times it is not the best time to be investing in property and getting a mortgage. One trail of thought is that its a long term investment and over time the property will make me money.

I have NOT put an offer in on the property. My heart says BUY, but my head says DON'T BUY.

I have heard people on here say that this scheme is a 'con'. Could anyone give me their thoughts.

Thanks in advance,
Lee

The scheme looks excellent (I'm not a FTB so I only quickly read over it last week) BUT and it's a huge BUT, why on earth would you want to buy now when prices are dropping? If you wait a year (or longer) you will get the same deal but pay far less for the property. Yes it will probably eventually (long term) make money, but if you buy when it's cheaper it will make more money, not to mention the reduced mortgage payments every month.

One thing I did note when I read up on the scheme was that it appeared to have limited funds, and keyworkers and social housing tenants get priority over FTB's. So you may find that although you are technically eligible, possibly there would not be enough funds to get down to you on the priority list. If this is so (remember I only quickly read about the scheme) then your timing of when you buy will be important (ie when demand is still low but prices have nearly bottomed out). I would ask about priority and how it would effect your application as it may well be a factor that leads you to decide to buy in a falling market (hopefully later rather than now though).

Edit: Are we talking about the same scheme (I believe there are alternative schemes) the one I think is superior is where you chose a property from the OPEN MARKET rather than properties covered in a particular scheme. I.E. a property that is marketed at an estate agent.

ad9898_3

Don't do it under any costs, the builders have their own interests at heart not yours, these places will be the 60's tower blocks of their time in a few years, rat infested chav hovels. Save your money for a few years and buy a better house, cheaper.

stevetodd

ad9898 wrote: »

Don't do it under any costs, the builders have their own interests at heart not yours, these places will be the 60's tower blocks of their time in a few years, rat infested chav hovels. Save your money for a few years and buy a better house, cheaper.

Homebuy have an open market scheme where you buy a property on sale at an estate agent, you are not tied to any properties built by a particular builder:

http://www.communities.gov.uk/housing/buyingselling/ownershipschemes/homebuy/openmarkethomebuy/

fordyman

Thanks for the responses guys, gives me food for thought!

djdaface

The price drops seem to have a wave effect, fast drops one month, then trouble with the banks in the news but slower drops the next month.. I am expecting a quick but sharp fall in prices during october as the squeeze hits hard on borrowing.