FTB such high rates?!

EmmyBrown

Me and my boyfriend are looking to buy a new build property on plan with a 5% gifted builders deposit.

We went to see an independent mortgage advisor last week who gave us these figures -

Working on flat price being£135,000
10% Deposit
Deposit10% - £13,500
Mortgage required90% - £121,500
Likely interest rate (per advisor)- 7%
Repayments
TermMonthly pmt
25 years - £868
30 years - £815
35 years - £781

15% Deposit
Deposit15% - £20,250
Mortgage required 85% - £114,750
Likely interest rate (per advisor)5.5%
Repayments
TermMonthly pmt
25 years - £712
30 years - £657
35 years - £621

We have enough income each month to cover the mortgage repayments (plus bills etc) but no deposit as of yet (parents are going to help with this).

Do the above rates look about right?

I know the deposit is very important right now so any advice would be appreciated.

:j

lukekelly_2

Your planned course of action sounds extremely risky. There's a reason banks are demanding large deposits at the moment: house prices are falling. With a 10% deposit for a new build there's a substantial risk that you're going to be in negative equity. Actually I'd be absolutely amazed if you weren't in negative equity almost immediately. My personal recommendation would be for you and your partner to save for a couple of years before considering buying a house.

EmmyBrown

Thanks for your advice.

However, the prices of the apartments have fallen from 200K in the last 12 months.

We may be in initial negative equity, but surely saving for 2 years would mean that the price of the flat (had we reserved it now), would be higher.

We are not looking to sell this on either, the plan is to buy it now and then move into a house in 2 years and rent out the flat (as it's in an excellent area of Manchester, lots of young professionals etc).

I cant see house prices being lower than they are now in 2 years time that's all.....

I dont really see anything particuluary "risky" as long as we can afford the repayments and are both in secure employment.

lukekelly_2

The flat has lost 32% of its supposed value in the last 12 months and house prices are still falling. If it falls by that much again it'd be worth £91,000 in a years time and you'd have lost over £40,000. That's an awful lot of money. I'd be surprised if prices are higher than now in two years time, and I think you'd struggle to find any forecasters predicting such an eventuality.

You also have to think about unlikely but possible scenarios like one of you losing your job or you and your partner splitting up.

Other people may well have different advice, but in a rapidly falling market in your situation I'd definitely advice caution.

Yakubu22

I'm in the same situation as you. My girlfriend and I are looking a house at 15% LTV as the interest rates are much better. Renting is dead money and so if you count the amount you spend on somebody else's mortgage over 2 years. It does make you more keen to buy. We have agreed though that we only buy if we get a substanstial discount from the list price. So that we are at least a little protected from a further price fall. Although personally I cant see properties dropping another 30% in value.

jamief

Yakubu22 wrote: »

I'm in the same situation as you. My girlfriend and I are looking a house at 15% LTV as the interest rates are much better. Renting is dead money and so if you count the amount you spend on somebody else's mortgage over 2 years. It does make you more keen to buy. We have agreed though that we only buy if we get a substanstial discount from the list price. So that we are at least a little protected from a further price fall. Although personally I cant see properties dropping another 30% in value.

Renting is most certainly not dead money, moreso at the moment.

NickDurham

jamief wrote: »

Renting is most certainly not dead money, moreso at the moment.

Quite! Most of what you pay when you have a mortgage is interest - so just as "dead" as rent money, and it often works out that you can be paying MORE in interest on a mortgage than in rent on the same type of house. Plus you've got to pay for all maintenance and repairs. How many times are we going to see the "renting is dead money" line in here. Don't people read around other posts/threads??

Yakubu22

jamief wrote: »

Renting is most certainly not dead money, moreso at the moment.

but surely by the fact that there is no return on the money spent. Renting is 'dead' money? I rent and have done for three years. I appreciate it proivdes the freedom to walk away at the end of a contract. But if any potential buyer can get a great discount on a property to buy for themselves. Then that isnt a bad deal IMO.

NickDurham

Yakubu22 wrote: »

but surely by the fact that there is no return on the money spent. Renting is 'dead' money? I rent and have done for three years. I appreciate it proivdes the freedom to walk away at the end of a contract. But if any potential buyer can get a great discount on a property to buy for themselves. Then that isnt a bad deal IMO.

See my post above. There's no return on interest payments either. Meanwhile, you can save up rather than paying off money on a mortgage which will only go towards ensuring you have less negative equity in a 2 yrs. If you rent and save you can buy at a lower price AND use that saved up money to get an even lower mortgage.

Yakubu22

NickDurham wrote: »

See my post above. There's no return on interest payments either. Meanwhile, you can save up rather than paying off money on a mortgage which will only go towards ensuring you have less negative equity in a 2 yrs. If you rent and save you can buy at a lower price AND use that saved up money to get an even lower mortgage.

I understand payments on interest return nothing. However savings are getting very little interest these days and depending on the situation.
Your mortgage payments aren't neccessarily much more then your rental payments.

NickDurham

Yakubu22 wrote: »

I understand payments on interest return nothing. However savings are getting very little interest these days and depending on the situation.
Your mortgage payments aren't neccessarily much more then your rental payments.

You seem to be missing my point. Lack of interest on savings doesn't really make any difference here. If the value of your house is continuing to drop, then anything you pay over and above interest is not actually lowering the LTV ratio of your mortgage. But if you were to be renting and saving that additional money, you could then buy at a lower price and still have that saved up cash to get a better LTV mortage.