FTB w/ deposit - is now the time to buy?

rubberbullet

Hi guys

I'm an FTB with an okay, if not squeaky-clean credit record. I've never defaulted, declared bankrupt, etc, it's just that I've bounced around from address to address for a long time and as such, my electoral roll record is imperfect.

I've banked with RBS for about 8 years, and earn £40k+. My parents have suggested stumping up the money for a deposit (about 20%-30% depending on the house value)´, but are not willing to sign up as guarantors or any suchlike.

Having spent the Christmas period thinking about their offer (they're effectively wanting to get a matching portion of the actual equity in the property, and a cut of the eventual increases in prices as the economic cycle turns), I've thought it is perhaps too good to turn down. Would you agree?

I thought perhaps a 2 bed and taking on a tenant would make it more worthwhile and more affordable on a monthly basis.

A few further questions with which I, and I'm sure my parents, would really appreciate your learned help:

- how's the market looking? with prices falling this year, is it the time to buy now whilst long-term fixed rate debt is relatively cheap if it can be got hold?
- what are the chances of securing a mortgage on a London flat with that income and that deposit, perhaps through RBS?
- what else should I/we be thinking about?

Loads of thanks, and a merry chrimbo to you,

H

opinions4u

rubberbullet wrote: »

Having spent the Christmas period thinking about their offer (they're effectively wanting to get a matching portion of the actual equity in the property, and a cut of the eventual increases in prices as the economic cycle turns), I've thought it is perhaps too good to turn down. Would you agree?
They would need to take out a charge on the property to do this legally. This must be disclosed to any mortgage lender. An informal agreement may be better, depending on your relationship with your parents.

I thought perhaps a 2 bed and taking on a tenant would make it more worthwhile and more affordable on a monthly basis.
It would, but this would also need to be declared to any potential lender. My own view is that having a lodger impedes on your independence. Pick the wrong one and home ownership will not be fun. Buy a house you can afford to maintain without relying on a third party.

- how's the market looking? with prices falling this year, is it the time to buy now whilst long-term fixed rate debt is relatively cheap if it can be got hold?
So called experts are predicting 10%-15% falls in property values. Short term views on interest rates are downward. Medium/long term views are always unreliable.

- what are the chances of securing a mortgage on a London flat with that income and that deposit, perhaps through RBS?
Pretty good through most lenders. London flats cover a wide price range, so it's hard to be specific. Most will be uncomfortable with talk of lodgers and parental ownership. The mortgage advisers on the forum should be able to assist more.

You don't mention any personal savings being introduced as deposit. Where does your £40k income get spent?

spuds_2

Prices seem sure to go down further next year - who knows how far, maybe 10% at least most reckon. I would say that as London prices are so over-valued and City job losses bite, they could go down more than the rest of the country. Unless there is a pressing need I would hold off buying for now and try to save like mad for as long as you can. trackers look good at the moment, but if you could get a long-term fixed deal under 5% that might be better for you. General consensus seems to be that iterest rates will drop furher next year.

Are you sure you want to get the deposit from your parents if they want a share of the equity? This could be a problem if you want to move in a couple of years. What if they need to release their equity in your house? could you afford to 'buy them out'? If prices have then dropped further you may not be able to remortgage because your loan-to-value could be less than the lender will allow.

It is certainly a buyer's market at the moment so I wouldn't rush into anything yet. Save like mad, buy it on your own, look hard for a bargain. Get a property that you can afford on your own, rent out a room, but put all the rent into a savings account for the next move or a rainy day, eg. redundancy. Good luck.