First Time Buyer with little or no deposit

tony.simons

Hi all.

The girlfriend and I have decided that in the current economic climate the next 6-12mths is looking like a good time to by as prices should be starting to level out before the start back up again in 2010. (May be wrong but its the way we are thinking).

The problem we have is that we have little or no deposit. I have seen schemes such as those from George Wimpy where you buy 85% of a new home, they have the other 15% and allows you to get it without a deposit.

With the absence of 100% mortgages for the time being, these types of schemes are very attractive. Has anybody else done similar things? Are there any obvious flaws wth these which I'm missing? One im thinking at the moment is that if you only own 85% of a property, are you allowed to make alterations without the permision of those looking after the other 15%. (Not that you would want to on a new home, but its something to consider long term).

The only other option is to try and save over the next year and peice together a deposit while still renting. Unless anyone has any other ideas.

Also, before people ask, the reason for having not saved so far is that we are both recently finished students and up untill now have been paying back overdrafts. Now we are in a position to either start saving or just 'jump in at the deep end'.

Thanks for your advise in advance.

Tony

ILW

The 15% is just added onto the value of the property. You are in effect paying over the valuation.

tony.simons

So in reality would only be worth considering if you thought you could recover that over payment while you own it? Or just dont consider at all?

Thanks

puddy

well from what ive read on here, new builds are over priced to start with, so, not only are you buying an overpriced property, then you pay 15% over the 'overprice' as per above.

why not save like mad in the next 12 months, then get a one or 2 bed place, maybe needing a bit of work over the long term using your savings, say about 10 or 15% deposit. look to lower your aims a bit. i had to do this just recently, we were looking at places for about 170, making offers in the 150-155 region and finally settled on something which was a bit smaller in a slightly less prestigious area which was 140 and we got it for 136 (sale hopefully going through v soon).

you really dont want to be over committing yourself in this market. my assumption is that prices will go another 20% down, meaning my purchase now will be 'worth' 110k in 12 months or so. im ok with it because its our home and all places will drop, but would you be happy with that if you felt you could have got somewhere cheaper in the first place??

tony.simons

We've talked over budgetting and decided that the absolute max we would pay is £150k. We're not too bothered on area but whereas I would like something we could put our own stamp on, the girlfriend would like a new property which would need no work.

We've been renting for a good while now and my main problem with renting is the fact that we are very limited in what we can do. We have had a broken radiator in the lounge now for a couple of months and have had to wait for the letting agent to contact the landlord who is then looking to claim off the builders as the property is only 2yrs old. If it was somewhere we owned yes it would be our cost but would mean that we could solve problems like this a lot quicker.

We've been looking in the York area and not too fussy on which exact part. Like anyone though we wouldnt want to live in a really BAD area. We'd be looking to stay in this property for at least 5 years and 2 bedrooms would suffice.

Based on current salaries we could comfortably save £500 a month, however this would mean 2 years before having a deposit substantial enough to buy, by which time prices are likely to be back on the up.

Its a pickle!

T

puddy

well, thats what our absolute max was, and despite now getting somehting thats slightly smaller, not quite in the place we wanted, but still nice, it is such a relief that we paid less than our max.

so, why not look around the 1110 - 130 mark, then your savings of 500 a month over one year would give you about a 5% deposit (by next year you dont know if 95% mortgages will be back),,,, if not, then save for another 12 months and you'll have your 10% deposit.

2 years sounds like a long time doesnt it,,,,you could shorten it to the basic year by doing a second job?? bar work? catalogue deliveries? depends how much you want the place and how much risk you want to live with.

lostinrates

tony.simons wrote: »

...
Based on current salaries we could comfortably save £500 a month, however this would mean 2 years before having a deposit substantial enough to buy, by which time prices are likely to be back on the up.

Its a pickle!

T

But if prices fall so will the amount you need to save to rech the same percentage for a deposit. My tentative and respectfully made suggestion is that if you have not started saving then this must be a recent desicion to buy? If not, I guess you would have started saving in preparation for this decision at this point?

I think using the saving time will be useful both because I don't personally expect a rapid rise * in house prices; because its good practise; it will enable you to get a mortgage or a better mortage deal and because based on the assumption I outlined above it gives you time to test the commitment you have to this now.

Good luck, and happy house hunting

* I am not an expert in any way, shape or form

tony.simons

The long term aim has always been to buy. We are looking to move in to the York area due to my work changing location, and are currently renting in Sheffield. The decision to buy is one that is relatively recent, due to timing and also our frustration with renting.

On a more specific point, it also appears that in York at least you dont get much for your money if you rent and you just end up paying someone elses mortgage anyway!

Has anyone used the governments equity loan schemes?

PS cracking point about the lowering market. I dont think it ever twigged that if the prices come down the ammount you need to save does also.

I cant help but feel that the £15k worth of savings would end up going on a sports car! HA, dont think the gf would appreciate that! Best not to hey?

blunt_crayon

hi tony,

i'm in a very similar position to you - renting with partner, cleared most of our debts (his debts - i don't have any bar the student loan!), not had time to build up much in the way of savings but would like to buy in the near future and anxious not to 'miss the boat' (i hate that saying by the way).

we did look into govt schemes such as ownhome last year as we qualify for the criteria of FTB's with joint income of less than 60k. haven't written these off completely but it does seem like the most straightforward way would be to buy outright and it doesn't appear to me that the housing market is going to make a dramatic recovery any time soon. not that i know a huge amount about it but the combination of a massive recession, overinflated house prices, strict lending criteria and lack of buyer confidence probably point to a downward trend. so we are going to try and save save save for the next two years by which point we hope that the market will have stabilised and we will have a 10-20% deposit.

my thinking is that house prices won't go up again fast in our area (expensive) if mortgages remain so hard to get... if you need minimum 10% deposit, say 15k, not many people have that kind of money sitting around so will have to wait and save like us! probably flawed argument... feel free to correct me, i'm no expert!!

Mini_Bear

OP please be careful with your thinkin that prices will level out and start to rise again in 2010. i really think you are being far too optimistic.
I dont think you mention why you havent been able to save for a deposit? i kno rentin and saving is a very difficult thing to do but takin 100% mortgages is the reason we r in this mess. all these schemes by house builders to get FTBs on the ladder are just tryin to keep prices high.
Why not consider moving to rent in a block of flats which are "new build" so u can decide whether the area is right etc, i kno ASTs of 6 months arent great but while ur young u may as well hav a few upheavels. once you have rented in a block you like why not wait for one to come up second hand at a vastly reduced price to new.
Properties are like cars, theres depreciation to account for.
good luck what you decide.

lostinrates

tony.simons wrote: »

The long term aim has always been to buy. We are looking to move in to the York area due to my work changing location, and are currently renting in Sheffield. The decision to buy is one that is relatively recent, due to timing and also our frustration with renting. If the long term aim has been to buy it might have been wise for the long term oplan to have included saving but nevertheless, you have to start from where you are now.

On a more specific point, it also appears that in York at least you dont get much for your money if you rent and you just end up paying someone elses mortgage anyway!
Can you comprimise on what you are renting? DH and I have in the past opted to rent something different than what we would buy in odrer to save. For example, when abroad it would have been nice to have a couple of spare bedrooms so that visiting friends and family could stay with us, or to stay in the very desirable addresses we were in when in a corporate let, but we opted instead for a large one bed in a less desirable area. Its the kind of sacrifice thats ok when you have no children, but we wouldn't buy a small flat, ever. In fact, its almost possible to turn being frugal into something quite romantic and fun as you plot dreams and goals together

PS cracking point about the lowering market. I dont think it ever twigged that if the prices come down the ammount you need to save does also. May I suggest you follow the fairly rude but often informative House Prices and Economy board? It will help you look at some of the aspects you might not have considered. I suggest, with no disrespect intended, there might be other aspects you might not haave fully addressed in your plans.

I cant help but feel that the £15k worth of savings would end up going on a sports car! HA, dont think the gf would appreciate that! Best not to hey?

Your last point, though I'm guessing jokingly intended, might be quite telling Housebuying does require commitment and its a lack of commitment and prioritisation of saving that many argue has got the British economy where it is in the current wider economic situation. I'm not pointing a finger at you, and as I say, I sense a smile behind the post, but sadly there is a real truth behind the mentality of our country that we want it all. There is nothing wrong with spending the money on a car and renting, there is nothing wrong with spending it on the deposit for a house, there is something foolish in trying to do it all above your spending power.