Rent to buy, dream house

alexsean

Hi there

Long time reader, first time poster.

We currently rent a modest 3 bedroom property in liverpool, the rent on this is £550 per month, which we can easily afford. For the past 3 years we have been monitoring the property market and quit recently a new estate has sprung up about a mile away from our current home.
The house prices on these have come down about £20,000 in the past 6 months and they are now ofering allsorts, council tax paid, 5% paid, £5000 cashback, basically there a bit desperate. The house is currently £149,995 and it was £169,995.
In the meantime we have been trying to save up a deposit for a house and have got ourselves upto £2000 ( or thereabouts) when we got a call from them to say that they are now doing a rent to buy scheme.
Basically, we rent the property for £600/month and when we are ready to complete (must be within two years), we get the entire rent we have paid to use as a deposit on a mortgage.
This all makes sense, the rent is no longer "dead money" and were saving in two ways towards that elusive deposit. The only thing nagging me is that what with the economy in its current climate, i'm imagining the house price may come down further, or it may not. Haha, basically i'm at sixes and sevens and would like a bit of advice from you guys (and gals).

Thanks

milliemonster

what would happen at the end of the 2 years though if you couldn't get a mortgage? or still didn't have enough of a deposit if house prices fall further? this is highly likely as new builds are massively overpriced (even with a £20k reduction it will prob still fall)

alexsean

After two years, if you dont complete then you dont get any of the rent back, but are allowed to continue renting. Which is basically what we are doing now, but with no chance of getting money back.
We can save roughly £10,000 a year towards a deposit, so hopefully would see us in good stead if we do wish to go ahead.
When you say overpriced, how much realistically do you think a 3 bed new build should go for?. The ex council 3 bed houses around here are going for about £90,000, down about £15,000 on a year ago.

milliemonster

Blimey, thats a big drop!, I guess it depends on the area, near me prices aren't dropping much 1-2% from 2 years ago (and that is sold prices) but I think lenders are just very nervy at lending on new builds at the moment although I am no expert on what will happen with lenders over the next couple of years, however if you can save £10k a year then you should be fine.

It sounds like a good deal, I guess you also have to ask though what happens if the value rises in 2 years? I know that again that is highly unlikely given the current market but theoretically if it did you could be priced out of buying it altogether. Have you contacted a solicitor in conveyancing to ask their thoughts? I would if I were you

louby_lou

blimey we get a 1 bed flat for 500 a month - good work!

bob79

Don't be fooled by all their gimmicks.

If you rent a three bedroom property for 550 a month and ex council 3 beds go for 90k, then 3 bed new builds in your area are probably worth only about 100k and not the about 150k that they are asking. As most new builds, this estate seems to be massively overpriced (of course I'm saying this without actually having seen whether these properties are indeed somewhat comparable.....).

All the gimmicks seem to be a scam to make you forget about the hefty 150k price tag.