Advice needed on buying.

Jorgan_2

Guapito wrote: »

I popped back into Wimpey and after much discussion, they wouldn't budge when it came to a bigger discount, they offered me the following:

If we bought the house for £260k and they pay a 25% deposit which we would pay back over 10 years interest free. This deal would would leave us to mortgage the house at reduced 4.99% fixed rate on just under £200k.
We can payback the 25% anytime over the 10 years, either remortgaging, paying it off when we eventually sell or simply putting money by each month. Now it seems like a good deal to me as we can choose when we want to put money by which is important to us as we are starting a family and it's a big house with decent sized rooms, plus we get to keep our 20k which can be used towards baby stuff, decorating, etc if not pay back some of the loan.
I know paying off the interest-free loan maybe a burden as such, but we intend to stay put for at least 7 or 8 years (if not more), we'll be earning better money and we can always remortage if we want to. My wife is not too sure because of the loan but I'm pretty happy about it.

This sounds like a really bad deal to me. You can't really afford to buy this property at the moment and are just storing up problems for the future, IMO. What happens if the property drops in value by 30%? You may not be able to re-mortgage, if you sell the charges on the property may leave you with no deposit to move onto the next property.

Why do you need such a big property if there is only two of you living in the property initially? Buy something more affordable to start off with & then look to move onto the four bedroom family home.

hoggums

Guapito - you are an idiot. 300K for a SEMI ??? borrowing 95%+ ??

Sorry but I'm so incredulous that someone can be so idiotic in this kind of market.

LISTEN TO YOUR WIFE.

You won't be able to re-mortgage in a few years as you'll still be over the minimum LTVs.

bubblesmoney

Guapito wrote: »

I'm currently in a similar situation.

We're looking to buy a 4bed semi with George Wimpey at £299'995. They initailly offered us a discount of 50k and a 5k gift for the deposit as we were short of the 10%. We were quite happy to go ahead until I spoke to the recommended IFA and he told us that the best available mortagage for us at that moment was with the Halifax at 7.2% fixed for 5 years(!). He said that as it was a new-build and that we only had a 10% deposit, interest rates aren't as favourable as for an older home. Of course we pulled out as paying an extra £300 or more a month above the average was a no-no, especially as we have a baby on the way. I had a look around for a better deal as initially I thought he was pulling a fast one, but no the Halifax deal was the only one with the exception of RBS which was even worse.

I popped back into Wimpey and after much discussion, they wouldn't budge when it came to a bigger discount, they offered me the following:

If we bought the house for £260k and they pay a 25% deposit which we would pay back over 10 years interest free. This deal would would leave us to mortgage the house at reduced 4.99% fixed rate on just under £200k.
We can payback the 25% anytime over the 10 years, either remortgaging, paying it off when we eventually sell or simply putting money by each month. Now it seems like a good deal to me as we can choose when we want to put money by which is important to us as we are starting a family and it's a big house with decent sized rooms, plus we get to keep our 20k which can be used towards baby stuff, decorating, etc if not pay back some of the loan.
I know paying off the interest-free loan maybe a burden as such, but we intend to stay put for at least 7 or 8 years (if not more), we'll be earning better money and we can always remortage if we want to. My wife is not too sure because of the loan but I'm pretty happy about it.

what happens when it comes to remortgage time and if prices have fallen and u r in negative equity. have thought about that. if that scenario comes true u will be in shitscreek without a paddle and land u with the banks svr rate as u wont be able to remortgage and worse will happen if interest rates go higher by then. repocession can ruin ur credit history for years and u might still be neck deep in debt for years later and not even in a position to buy a house half the size then. it is a bad idea to get a loan for a house deposit even if it is interest free

Guapito

bubblesmoney wrote: »

what happens when it comes to remortgage time and if prices have fallen and u r in negative equity. have thought about that. if that scenario comes true u will be in shitscreek without a paddle and land u with the banks svr rate as u wont be able to remortgage and worse will happen if interest rates go higher by then. repocession can ruin ur credit history for years and u might still be neck deep in debt for years later and not even in a position to buy a house half the size then. it is a bad idea to get a loan for a house deposit even if it is interest free

Nice to see some optimism here!

Guapito

hoggums wrote: »

Guapito - you are an idiot. 300K for a SEMI ??? borrowing 95%+ ??

Sorry but I'm so incredulous that someone can be so idiotic in this kind of market.

LISTEN TO YOUR WIFE.

You won't be able to re-mortgage in a few years as you'll still be over the minimum LTVs.

First of all, thanks for the insult.

You don't know where it is. I've recently been to see 3 tired 3 bed semis in the same area for around 250k and they were reduced. Thats the adverage price for a 3 bed around here. The price is this house is 260K for a 4 bed 3 floor semi and the mortgage will be £198K. The house will be 100% ours. As long as the loan is payed off in 10 years time I don't see the problem. Maybe you can enlighten me?

Guapito

pinkshoes wrote: »

I'd say if you haven't got the 10% deposit plus £1000 solicitors fees, £2500 stamp duty, and £1000 moving costs in CASH, then you're not ready to be buying, and should save up some more.

You should never pay a deposit out of a loan.

We are just short by a couple of grand, something we could save in a few months, problem though is that we need to move by spring. We have just over 20k at the moment and could use it to pay the fees, etc and whats left over goes towards the deposit loan.

brit1234

Guapito wrote: »

Nice to see some optimism here!

Prices will probably continually to fall for the next few months if not the next year but to say that when we remortgage we could be in negative equity is simply crystal ball-gazing.

No it is common sense. Listern to well known independant experts and strangly now some of the vested interest groups who are excepting reality.

Guapito wrote: »

You say it's bad to borrow money for a deposit to buy an house even if it's interest free. It's bad to borrow ANY money full stop. I know poeple who will quite happily borrow 25-30 grand to buy a car that will be worth peanuts in 5-10 years time, not something I partake in thankyou very much but it's widespread.

If anyone considers borrowing a deposit then the simple term for them is a fool. They don't deserve to buy a house and are a extreme risk to the bank and the well fare of their family.

Guapito wrote: »

Yeah, the economy is not looking good, but it's hardly 1929 all over again, is it?

It is looking more like 1929 than any other time in history. What is is increasingly likely is a 1980s Japanese Depression lasting longer than a decade.

Guapito wrote: »

I respect your advice but find it a little fatalistic but thanks anyway.

What you fail to realise is both bull and bears are now commiming to similar standpoints on this forum for the first time ever. If you chose to ignore both factions surely you have deluded yourself to the true magnitude of what is happening.:eek:

Good luck because you are going to need it.

Guapito

Ok, what I don't get is the how do developers manage to sell these deals if they are so dodgy?
You see developers offering the 75/25 deal everywhere as property has become more and more expensive, especially in the south-east.
We both earn above average (just, although I'm on 40k) and apart from a bank loan I have we are fairly much ok cash-flow wise but find it hard to find a decent house in a 15mile radius of where we work. We only recently decided to start looking for a home (hence being shy of the 10%) and had a shock when we discovered that my wife is pregnant as we intended to save well into next year. As circumstances have changed we need to buy a house sooner hence why I think this isn't a bad deal. The property would be ours 100% and what we would owe to the bank would be the 75% mortgage. The loan is a separate charge which is owed to the builder. Why is it a bad deal.

As you can guess, I'm not the most savvy of posters here but this deal was recommended by an IFA who works for Allensons, a supposedly reputable company. It would be great if someone could shed some light on this type of bad deal as you've now got me worried.

Thanks

Jorgan_2

If you need to move by Spring, go into rented for six months. Things may have stabalised within the housing market by then, but they may not have. Save the extra money you need and buy then. I'm guessing you are from the generation that has only known house price increases, it hasn't always been like that. The last recession saw prices crashing in '89 to '91, prices didn't really start to rise until '97/'98. This won't be over in a few months.

Guapito

By the way, here's the link to the George Wimpey site with the info regarding the deal:


http://www.georgewimpey.co.uk/homes%20for%20sale/Shared_Equity_Offer