Rent or Homebuy?

Stellar_Star

Hi, just to explain our situation.

Me and my fiance are looking to move out just after Christmas, mainly because of pressure from our parents and the fact we need to move out for our sanity. We are currently looking at renting, or the homebuy scheme in our area.

My details
Salary - £17,106
Monthly Take Home - £1100 (ish)
Savings - £7500
Part time weekend job - £280 per month
Total £ per month - £1420

OH's Details
Wage - £700 per month
Savings £1000
Total £ per month - £730

Total takehome between us per month - £2100 or thereabouts. Do you think this is enough money for the following?

Looking at renting, we could get a two bedroom flat in a good area for around £425 per month. http://www.rightmove.co.uk/viewdetails-22311848.rsp?pa_n=2&tr_t=rent&mam_disp=true

Looking at Homebuy in the area we could get a two bedroom house for £62,000 for 50%, rent on other half being £140. The total including mortgage would be around £475.
http://www.rightmove.co.uk/viewdetails-19986641.rsp?pa_n=1&tr_t=buy&from_showcase=true&pa_n=1

The Homebuy is also a little further from work, so would involve more petrol costs but not too much.

It's hard to decide because of a few horror stories about Homebuy on these forums and elsewhere, and horror stores about bad landlords and renting problems.

I know it's a bad time to buy any house, but does that include homebuy? We would love our own place that we can do with as we please, but on the other hand renting will be cheaper until the market calms down and we can buy a house outright and not worry about rent on the 50% loan. But then we'd have to live in someone elses house under their rules. I don't know what to do. Rent and hold off altogether? Or Homebuy and stop any dead money going on renting?

brit1234

Rent a year and save a deposit. Homebuy is very dangerous as you buy a home above present market value that will depreciate very fast in value.

Incisor

What brit1234 says.

You may have heard people say 'renting is dead money'. Don't let this get to you, because if you rent, your savings will be safe and hopefully growing, whereas if you buy, with house prices falling, your savings will be wiped out - if you bought with £8,000 savings and when you come to sell prices have dropped by £10,000, then you will not get your savings back, you will owe £2,000 and all this after paying an extra £50/month not to be renting. The prospect of getting into debt is very serious even for people like yourselves who are financially responsible and have savings.

And don't forget that when it comes to selling out of shared ownership, it is more complicated and you will be at a disadvantage compared to 100% owners - particularly if the market has picked up.

Stellar_Star

I was edging towards renting, and as you say Homebuy is a bit risky with prices going haywire lately. I think personally I want to rent, and OH thinks so too now. Thanks for the input. Renting and saving a deposit seems the best option.

One quick question, do you think about £2000 a month ok to live on if we rent a £425 apartment?

brit1234

Stellar_Star wrote: »

I was edging towards renting, and as you say Homebuy is a bit risky with prices going haywire lately. I think personally I want to rent, and OH thinks so too now. Thanks for the input. Renting and saving a deposit seems the best option.

One quick question, do you think about £2000 a month ok to live on if we rent a £425 apartment?

Easy to live on.


By the way you might want to read this current homebuy thread of someone who is going through the process to really put you off the scheme.
http://forums.moneysavingexpert.com/showthread.html?t=1212191

robin_banks

brit1234 wrote: »

Rent a year and save a deposit. Homebuy is very dangerous as you buy a home above present market value that will depreciate very fast in value.

.

That is not striclty speaking true, in this instance you are considering buying a 50% equity in a property and I assume you need to finance this via a mortgage. You apply to a prospective lender and a valuation of the property is still carried out.

For example if the housing association value the property at £125,000 (full value) you apply for a 50% stake borrowing £62,500 less any deposit btw you'll need at least 10% deposit.

If your prospective lender values the property at say for example £115,000 they will only lend £57,500 less any deposit you have. More often than not the housing association will accept the reduced offer as they lose rental income and they cannot afford properties to sit empty. This is where having a good solicitor with specific experience of shared ownership schemes will prove to be invaluable.

You may also find that the rental element will be less as the HA charge rent based on the value of the property.

That is not to say these schemes aren't a big risk you also need to answer the following questions;

Will it be big enough for future needs - family etc.
Do you intend to stay in the area - selling can be difficult no doubt
Repairs - can you afford to be able to afford the rent , mortgage and be able to cover costs of major repairs or improvements - dont forget these can be imposed on you.

Shared ownership certainly ain't for everyone you need to decide is it for you?.

Northants_Simon

The Homebuy schemes sound good on paper. Especially the Homebuy Mychoice scheme (which I'm using) as this allows you to buy any house of your choice. The newbuild schemes aren't quiet as good as they are only on selected properties.

The problem with Homebuy is the way it is administered by Housing charities. My experience is these do not have enough staff to cope with the level of applications.

This is an account of my dealings with Homebuy (it's long!)

I applied for Homebuy Mychoice back at the end of April on the advice of the FA in an estate agents. It took a couple of weeks to receive a letter accepting us onto the scheme, but that didn't really mean anything as at this stage no money is allocated.

They didn't tell me how much I could borrow, but I knew from my FA I could mortgage up to £175k on my self employed income. The FA (in an estate agents remember) pressurised me into choosing a house through them and told me I needed to be quick as the money was running out. I placed an offer on a house and they submitted the details to Homebuy.

A couple of weeks went by and I was told the property had been accepted. Then after another week I had a call from the estate agents to say Homebuy didn't have the funding. The sale fell through.

Then a month later I had another call from my estate agent saying Homebuy had found the money and the sale was back on. By this point I had changed my mind about the house and found another at the same price that I wanted to buy. Homebuy said I couldn't transfer my loan (so much for the Mychoice) and I should be grateful I could buy anything at all.

Eventually I pulled out of the sale as the house wasn't right for me. I spoke to someone else at Homebuy who said I could transfer the loan, so put an offer on the second house. I then had to submit the new property details to the local Homebuy office. I drove to their office and handing them in. A few weeks went by and I heard nothing. I then pestered them everyday until finally they said the house was approved and funding was in place.

I then waited for this in writing, which never arrived. On phoning the office on a Friday I was told funding was not allocated to me. By this point I had already paid for the Homebuyer survey (£540). They left me all weekend worrying about it and on the Monday I received an email saying they had made a mistake and funding was allocated.

My solicitor received the loan contract from them and I signed this along with my mortgage forms and the contract for the house. At this point we realised we had a shortfall of £5 on the mortgage, but looking through the Homebuy forms it clearly says you can pout your own money in as well. So my solicitor said it wouldn't be a problem to pay the missing £5. We set a completion date (27th October) and went away happy.

Then on Friday last week the solicitor called to say Homebuy had rejected everything and wouldn't allow the funds to be released as the mortgage was £5 less than expected. My solicitor explained we would be paying the missing £5. I faxed, emailed, phoned Homebuy and got nowhere with it. I even faxed over the leaflet from Homebuy that said I could put my own money in.

I have since gone back to Halifax and rearranged my mortgage for £5 more. I contacted Homebuy to tell them and was told my file has been passed on to someone else and my contact at Homebuy was no longer dealing with it.

So here I am, two weeks away from completion and not knowing if the sale will go through or not. I have given notice on my rented house and am due out at the end of the month. I have a wife and 3 kids who don't know what is going to happen or where we will be living at the end of the month.

andrewmp

Stellar_Star wrote: »

I was edging towards renting, and as you say Homebuy is a bit risky with prices going haywire lately. I think personally I want to rent, and OH thinks so too now. Thanks for the input. Renting and saving a deposit seems the best option.

One quick question, do you think about £2000 a month ok to live on if we rent a £425 apartment?

Very easy! If you can rent for £425 per month, why would you buy a house for £125,000 in a falling market?