5% mortgages........

sdooley

GoldenEye07 wrote: »

my deal isn’t up for renewal until may….?

Confused……….:mad:

You won't be able to do much until then, as you don't want an early repayment charge on top of all your other costs.

But if the funds you have are enough to pay the mortgage on the flat down and take it to a level that a lender will lend to you, your existing lender might switch the names on the mortgage to you and your girlfriend or maybe you might find a new lender willing to do a mortgage to the two of you.

The purchase from your friend will have to go through solicitors/licensed conveyancers, they will insist on your friend taking seperate advice. Your friend, if sensible, won't agree to sell unless he's off the mortgage, however good you are as friends!

GoldenEye07

Yeah realise I can’t change deals til then but is it sensible/correct to assume if me and my gf could afford the mortgage now we will still be able to in may as we will be coming off a SVR onto say a fixed and our deposit will be in already from me and my mate before? Or do I need to put more money in in May, that’s wot I don’t get here!

Would it be acceptable to pay my mate his half off the deposit back plus a bit on top for his 2 years (albeit all he’s done is pay interest) and expect him to walk away…..

Yes sdooley spell it out for me :rolleyes:

GoldenEye07

just spoke to a family friend who is a mortgage adviser and he kept it simple for me, he said regardless of what happens if I want to buy my mate out I basically buy the flat from him & me if that makes sense and pay off our lender then I would need to get a mortgage with my gf with a 10% deposit, I wouldn't have anywhere near 10% of say 170k..........so is the only way to keep him on the deed and I "continue" our mortgage but with my gf instead of him, but it means I need to give him half of any profit I make further down the line?

i'm a bit lost now to be honest!!

lets-save-money

beecher wrote: »

Just to pick up on a couple of points - what evidence do you have that house prices aren't falling at the rate being reporting by the press?

And are you sure that Nationwide are offering 95% deals to FTB as their website only mentions 85% LTV deals.

Also, I do not think that house prices have fallen purely because of a lack of lending. I think it is more likely that we're seeing a pyramid scheme collapse.

The press get their figures from the Nationwide and Halifax who use their own lending figures. Bearing in mind that these lenders account for less than 20% of the market their data is hardly representative of the whole country. Even these two lenders figures dont agree with eachother so what reliance can we place on them.

I watched a program a couple of weeks ago - I think it was Panorama. They asked one of the universities to independently research all the data available on house prices (eg land registry info etc) and the figure they reached was considerably lower than the 20% figure being quoted by the press. Added to that there were significant regional variations. Oxford for example has not seen any substantial drop in values and in some areas even increases!!!

Nationwide and several lenders are still offering 95% deals to "selected" borrowers - usually existing customers with a proven track record. Theres an obvious reason why they dont advertise this - they couldnt handle the stampede if they did and the number of declined applications would give them a bad press.

I accept that there are several factors affecting house price falls but the main factor today is the shortage of funds especially to First Time Buyers. Without these buyers at the bottom of the housing ladder the whole system jams up. If there is nobody to buy the cheaper houses this in turn prevents those sellers from moving up the property ladder. In the past some of those first rung homeowners could remortgage their first property onto a Buy to Let but this is now virtually impossible.

Whichever way you look at it, lending is the key. First Time purchasers must be able to get on the housing ladder and to do this the government needs to come up with a guarantee scheme so that lenders could offer 95% and 100% loans without fear of the borrowers going into negative equity.

Unless such a scheme is put in place the lenders wont lend as its too great a risk for them. Unless the lenders lend, property values will continue to fall. QED

There is a lot the government could do to sort out the housing market but it the fact is they havent got a clue. They do what they always do when theres a crisis - they throw money at it. Look at the billions they have ploughed into the NHS. Even with banks that they virtually now own it seems they havent got the clout to tell the bankers what to do with our money. On one hand they are saying you must lend responsibly (in banker speak that means hoard the taxpayers money that we gave you) - on the other they are telling them to lend more - talk about mixed messages.

If the government had had any balls they would have nationalised the failing banks in exchange for the bankers keeping their jobs. The likelyhood is that even now they may end up doing this but it will cost the taxpayer much more now to do so.

Bring back the guillotine !

lets-save-money

GoldenEye07 wrote: »

Some interesting points particularly from lets-save-money…………so thanks.

At the risk of confusing matters…..I currently have a flat which was bought with my mate 2 years ago, but this summer we both plan to move in with our girlfriends (either renting or buying) and rent the original flat out…..

My question is, at the moment we are on a discounted rate for 2 years (which runs out this may) but realistically we may find we are in negative equity – we payed £172k for the flat 2 years ago with a 5% deposit. Wot is the best way to deal with this situation?
We went on a SVR rate which allows us to walk away without any fees this summer so is it just a case of shopping around now? Will we need to have the flat revalued etc?
:eek:

I have tried to follow your posts and I am a little confused as to what your ultimate aim is.

There seems little point in you remortgaging as you simply wont get a mortgage and in any event the present lenders SVR will now be relatively low so why would you want to switch to something more expensive.

If your plan is to buy out your mate from the existing mortgage there is no equity in the property so what would it cost you to buy him out - nothing. You could argue that he should pay you to get him off the mortgage.

If you wanted to substitute your girlfriend for your mate on the mortgage it is entirely possible that the lender would agree to this provided your incomes were able to support the existing mortgage. The possibility that the property was in negative equity shouldnt influence their decision. As long as the lenders position was not worsened by this change the mortgage would still continue to be paid and the security of the property would remain. You would have to pay the lenders solicitor for changing the ownership on the land registry - the cost is about £300.

As for renting the flat out you should ask the present lender if they will agree to this - most lenders will do so but some will refuse and expect you to convert it to a much more expensive Buy to Let (if you tell me who your lender is I can find this out for you on the quiet).

Alternately you could simply rent the property out without telling the lender. Im not advising this but the fact is thats what many people do. If the lender were to find out the worst they could do was to ask you to stop (as long as you had being paying the mortgage and were not in arrears).

I had a case recently where a client had remortgaged to a 6.5% Fixed rate and the lender discovered he was letting the property. They asked him to call them and said he must convert his residential mortgage to one of their Buy to Let mortgages. They agreed he would not be charged the early repayment charge for the Fixed rate mortgage. The rate for the Buy to Let product was 5% !!!!

lynnexxxo

Just a thought,

Is your current flat a new build? If so its likely that it has fallen in value. Currently you and your mate are both responsible for any negative equity. Get it valued before you make any offers to buy him out (or at least investigate what similar properties in the area are selling for)

Robert_Sterling_3

lets-save-money wrote: »

To answer your question, there are a couple of lenders who offer 95% deals - Nationwide is one of them but the rates charged are extortionate (in excess of 7.5% and ususlly fixed for 5 years).

The Nationwide, in my opinion, should not lend as much as 95%. The customer could easily be in the negative equity zone within six months. In the event that Nationwide does lend 95% it is not surprising that they calculate that an appropriate rate is 7.5% per annum fixed for 5 years in view of the risk involved in such deals.

Phlip_corter

It sounds good , I think it's great opportunity for you.

lets-save-money

Robert_Sterling wrote: »

The Nationwide, in my opinion, should not lend as much as 95%. The customer could easily be in the negative equity zone within six months. In the event that Nationwide does lend 95% it is not surprising that they calculate that an appropriate rate is 7.5% per annum fixed for 5 years in view of the risk involved in such deals.

I cant argue with your logic but if all the lenders take this approach then property prices will continue to crash. Its a self perpetuating disaster.

The government should step in and give the banks guarantees against the negative equity problem. Then there would be a chance the property market would recover and return to positive growth.

After all theres nothing wrong with lending to people in negative equity as long as they are creditworthy and insure against the possibility of illness and redundancy. Lets face it banks are happy to give people unsecured loans and credit cards - lending to borrowers in negative equity is no different.

Striping up the cost of borrowing to first time buyers is counterproductive and simply makes them more likely to default on the loan when times get hard.

GoldenEye07

Thanks for all replies………

Yeah the flat is a new build so as you say its very likely we are in neg. eq, we had a bit of a flat meeting last night and may have found a compromise. The flat is a 3 bedroom and a decent size so we are considering my gf moving in for maybe a year/2years so we can continue to save, we can third all bills and the mortgage and my mate has a bit of security for that period also to save or whatever…….we are thinking of converting the spare room into a second living area so we have our own space also…..its not ideal but could make financial sense no?

So assuming we go for this, our mortgage deal may still need to change…….we are on a discounted SVR for 2 years (as my mate is a teacher) but in may we lose this discount so is there anything we can do to keep the figures down assuming we are in neg. eq?