First Time Buyers/Keyworkers No Deposit

shellnapier

i think its horrible to say if you cant save for a deposit, dont get a house

what if you are homeless?
there is no where to rent
or rent is more than motgage

how can people with all this credit crunch ect ex[ect to save at least 20k

michael1983l

I say if you can afford to pay your mortgage then why not. After all I bet there are plenty complaining who took 100% mortgages.

poppysarah

shellnapier wrote: »

i think its horrible to say if you cant save for a deposit, dont get a house

what if you are homeless?
there is no where to rent
or rent is more than motgage

how can people with all this credit crunch ect ex[ect to save at least 20k

There is nothing in life to say you have to buy a house.
Inability to save a deposit is part of the reason house prices went so insane.

You need deposit for renting too!

rent > mortgage is just another horrible symptom of this society we have engineered for ourselves.

in 2003 houses on this street were 40k.
a 10% deposit was a tiny amount that people could reasonably save.
What's changed? Prices went up insanely.

Look on houseprices.co.uk for info on what houses used to sell for.

Idiophreak

carefullycautious wrote: »

The fact that you are on lower incomes to start with and may not have substantial rises throughout your working life means that unless you win/inherit a large amount of money there is no way of paying it back.

Whoa, whoa...who said *anything* about being on lower incomes!!?

You can't assume that about someone just because they're on one of these schemes..!

My gf and I are both qualified to postgrad level, I work in IT, she's a teacher - we're both early 20s, couple of years out of uni. We both earn above the national average and our wages should (touch wood) both continue to rise over the next few years.

There are maximum earnings attached to some of these schemes, but they're not low at all...

rs82uk

I generally don't like these schemes but after reading more info on it if you can get a decent 2 year fix deal and make significant savings on your current rent then in the five years you could put aside the difference and pay off a sizeable chunk of the loan.

I would personally prefer prices to come down I have a deposit but its only just over 10% but now we have a baby i am less inclined to wait as I used to be.
Out of interest how tight is the restrictions on bedrooms, why would they limit the number of rooms you can have what does it matter surely all that matters is the price.
For example just looking at the shortlist of houses we are interested in the 2 we most like in the town are 4 beds but no more expensive than the three beds, maybe a workaround would be to get the vendor to advertise it as 3 bed with a study.

Imp

Just be careful with these schemes. I looked at the Co-op version and it appears to be a shared appreciation scheme which were getting lots of bad press a couple of years ago. These aren't even as good as the old shared appreciation scheme.

They are very good short term, but if you don't pay off the deposit soon, it could increase an enormous amount. If you just let the mortgage run, and don't move house, you could end up in serious financial difficulties just as you should be looking forward to retirement.

So, use the scheme, and then plan, plan, plan, plan, plan to pay off the 20-40% deposit paid for you.

neas

Just talking hypotheticallty here lets use a couple figures.

Say you buy a 140k house with 100k mortgage (5% interest repayment mortgage) and a 40k equity loan which is interest free for 5 years.

By doing so you will have paid off a about 5-10k off the 100k mortgage after 5 years putting you at:

90k mortgage
40k loan

Now you've 'saved about 11k which the 40k loan would've grown by in that time' which is some 180 quid in interest a month.


Now from my understanding, its unlikely the 40k loan will be paid off immediately and its interest will be RPI+1% (a bit like my student loan). Typically RPI has been around the 3% mark so best case scenario would be at 5 year point:

90k mortgage fixed at 5.5%
40k loan at 4% interest.


These seems all good in the narrow minded view of markets... that things don't change but given the current downward trend of house prices and the economy/recession and devaluing of the pound. I would say it is very likely we will be entering a period where:

1. RPI rises to 5-8%+ as VAT, Taxes, and bank interest rates are risen to counter act inflation
2. House Prices have lost 20% more off their prices.

In this scenario you have 5 year point:

House Worth - 120,000
Mortgage - 90,000 at 5.5% (assume you fixed for 10 years which is unlikely)
Loan - 40k at 6-8+%

How is this a good situation? you can't move because you have negative equity whereas in rented accomodation you could up and go whenever you wanted before and all of a sudden you are expected to pay an additional 200-250 squids a month to service the loan.


I can see the point of getting a house, but borrowing money against future potential earnings (to pay off the increase in 'mortgage') is silly to me. What if you can't pay both loan and mortgage later (as you can't afford to pay it now...)

My mind boggles at how frivoulous people are with money. And check my signature, I was going to buy in 2007 a house in plymouth, but fate intervened (i decided to move to a shared rental house) and now im a good 20k better off from my future house purchase (half the price of your equity loan :P)

Imp

Ref. neas's post.

In the Co-op scheme, the amount you are lent for a deposit remains a fixed part of the house value, in this case 40/140 = 29%.

So if the house prices drop to £120k, the loan falls from £40k to £34k. Interest is still payable on the full amount, i.e. £40k, but you only have to pay back £34k to clear the loan. This is excellent when prices are falling, and as I said previously, is similar to the shared appreciation scheme which was popular the last time prices were falling.

Now, house prices have increased by about 7-8% yearly, on average for a long time. Let's imagine that the housing slump ends today and prices start increasing again.

In 5 years time the house will be worth £196k. Fabulous. The 40k debt is now worth £56k. That's doable.

Let's look long term now. Imagine you are happy in this house, and stick with the mortgage. 25 years time the house will be worth around £760k. Your debt to the scheme is now £217k. The scheme requires you to pay this back. So you are now around 50 years old, and you have to find 29% of the value of your home, or lose it. This will mean taking out another mortgage (if you can) for about 30% of the value of your home, just when you should be looking to retiring.

So,

Short term, these schemes are good.
Long term, these schemes are very very bad.

So get one by all means, but read the small print and understand exactly what you are getting yourself into.

Wickedkitten

rsootarsing wrote: »

I generally don't like these schemes but after reading more info on it if you can get a decent 2 year fix deal and make significant savings on your current rent then in the five years you could put aside the difference and pay off a sizeable chunk of the loan.

I would personally prefer prices to come down I have a deposit but its only just over 10% but now we have a baby i am less inclined to wait as I used to be.
Out of interest how tight is the restrictions on bedrooms, why would they limit the number of rooms you can have what does it matter surely all that matters is the price.
For example just looking at the shortlist of houses we are interested in the 2 we most like in the town are 4 beds but no more expensive than the three beds, maybe a workaround would be to get the vendor to advertise it as 3 bed with a study.

These schemes are only meant to help you onto the first rung of the ladder.

They matter because if you had more bedrooms than you need, that would be betterment and the Government can't do that with taxpayer money unless you happen to be an MP.

neas

who the hell is funding this black hole of money lol? its like the government is taking on negative equity.... how .... crazy .

I still believe putting off for 5 years an increase in mortgage is not a good idea.