Advice needed, sell & buy or sell & back to parents

savetospend

Me and my OH bought our flat in Scotland in 2007 for £71500. We have a fixed rate a 5.79% which ends at the end of the year. We currently have approx £65000 of our mortgage left plus approx £3000 loan which was part of the MOREgage packgage with Coventry Building Society. Basically our package was 95% ltv and 5% is the loan. Our gross combined income is £35,000.

So, we began looking at some new build developments in the area - thinking we were in a "better position" than most to upgrade. (dont know why we thought this - naive!) Anyway, one of the properties we have looked at is £100,000. I called Coventry and they say we could get 85% ltv, although now Im not too sure whether I mentioned it was a new build, as I have discovered on this forum and elsewhere that it could be less (75% ltv typically?)

At the end of 2007, a flat in my block sold for £80,000 within 2 weeks. There has been one or two sold recently but Im not sure of the prices yet and they took about a year to sell.

Basically, if we were to pursue the new build property, we would be relying on still having equity in our flat (which Im not sure of - we havent got that far but I would hope so - tell me again if Im being naive!) However we would still be looking at finding further funds to make up the deposit. Is it possible to get a loan with anyone (like we did with our current mortgage provider to cover the rest??)

Im just wondering what people think of our current situation and what our options are? Another option we have briefly discussed is trying to sell our property just now and moving back home to our parents and we could build approx £20,000 deposit in a year.

Any advice would be appreciated. Thanks

Cannon_Fodder

Different parts of Scotland have been hit differently. http://www.ros.gov.uk/pdfs/2009_02_release.pdf doesn't look too bad for North Lanarkshire, but Flats are often hit worse according to this report - average -8% across Scotland.

You may struggle to sell, or find you have to accept NE to sell. Would you have cash left to pay EA fees, removals, legal fees etc?

If you sit tight for a year, can you still build a deposit?

What SVR does it change to at the end of the fixed term?

You may find that they have a similar deal to this, then;
http://www.timesonline.co.uk/tol/money/article5759476.ece

maybe you will "revert to the lender’s standard variable rate (SVR), currently 4.74 per cent" ?

If that level of SVR applies you might want to stay on the SVR while continuing to build your deposit - don't forget EA fees, legal fees, removals, on top when you decide to sell.

Meantime, hopefully the developers will continue to offer better and better deals, shrinking the gap between your flat and their house prices.

Just tread carefully with new builds, lots of "Pay 70%" deals, that tie you to a 5 or 10 year loan for the balance that needs repaying/funding...if you cannot afford to pay 100%, how do they expect people to pay 70% while also saving the 30%...poor logic, creating a housing timebomb.

If you go for 100%, make them give you a big discount, all the carpets, trimmings etc...

Final thought, any chance of a part-exchange - they may give you a good price on your flat, to avoid having to drop their price that ends up in the ROS stats.

savetospend

Thanks Cannon Fodder, some good points to think about there.

I think we would struggle to sell at the moment. If we accepted NE to sell, we could just about cover the other costs, asumming the NE wasn't drastic.

I don't think we could build a big enough deposit if we sit tight for a year, however if in a year prices are on the rise again then we would have more equity, but this is the unknown for the time being, it may get worse and then I will be worrying.

Very interesting article, when I spoke to them on the phone he never mentioned this, but I suppose I was asking about porting my current mortgage and not re-mortgage, but great deal. I will look into this.

The developers we went to said we could part-exchange on a property that was 30% more than the one we are in currently. (We initally looked at a property at £120,000) But by the time we actually went back to the Sales Centre, the properties were all sold or deposited so we never asked to much details, and it wasn't until we were back home we started looking into things.

dimbo61

Sit tight right now and overpay on mortgage and clear the £3000 loan first
You now have a mortgage on approx £65,000 and earn £35,000 gross income between you.
Your mortgage is costing you about £426.50 a month
Are you also repaying the loan ?
Put every penny you can to repaying the loan and reducing the mortgage and see where you are at the end of the year.

savetospend

Thanks Dimbo for your reply. Yes we are paying the loan as well, £25 per month, ridiculous really that we are paying £3000 loan over 25 years but thats what we took at the time. I will definetly consider overpaying - I have a balance of around £1000 of a credit card I need to get rid of, but have a loan coming to an end shortly so hopefully this can happen.

I have just saw the land registry update and the flat that took over a year to sell in our block , sold for £78,000 in Jan this year, so currently only a drop of £2000 since the highs of 2007 which is better news than I thought.

And on another note, the property we saw originally, but was gone by the time we made it to the sales centre is back on - someone dropped out. But there is no way we can go for it just now anyway so better finding out all this before we went plunging in, without realising our situation properly.