Stuck in a new build apartment - Equity issues

acs202

Hi don't know if anyone has any advice they might be able to offer. Here is the situation.

2 years ago we bought a new build apartment with a 10% deposit - 5 from us and 5 from the builder. The sales price was £177,000. Obviously, new builds and aparments in particular have suffered the worst and our apartment is now valued between £160k to £170 from 2 separate estate agents.

We had a fixed 2 yr mortgage repayment @ 5.49% with Alliance & Leicester (which is soon reverting to the SVR @ 4.99%). As its only been 2 years we have only had about £2-3k capital repaid leaving us with an outstanding mortgage value of circa £157k. Clearly our equity has all most entirely eroded.

We really want to move to a 3 bed house as we want to have children. We like another new build hose which is selling for £225k clearly we don't have the equity to find the required 10%. I was thinking of getting the vendor to contribute but am I correct in thinking there are restrictions in the amount the builder can contribute to our deposit (as prescribed by the Council of Mortgage Lenders)? I was hoping to get them to contribute say 6-7% and we try to get the rest through the very small amount of equity in our apartment and whatever else we can club together?

Does this sound a logical course of action? Also if we can get the builder to contribute any suggestions for moving the mortgage from A&L to something more preferable as we would now have the required 10% for most lenders?

Thanks for reading

dunstonh

The sales price was £177,000. Obviously, new builds and aparments in particular have suffered the worst and our apartment is now valued between £160k to £170 from 2 separate estate agents.

In reality that means a sale price of £150k is more likely.

I think before you consider any other purchase you really need to get a straight idea on what you are likely to get for your exisitng place. I cant see a new build appartment from the height of the market being just 3% down in value in 2 years when the average house price is down over 15% (even if you are in a hotspot).

Estate agent will over price with the expectation that you will get offers between 10% and 20% under the price its up for sale for.

Most lenders have also increased their loan to valuation requirements for new builds. Figures of needing 25-40% to put down are more common for new builds. So, your selection of lenders is going to be much lighter if you only want to put down 10%. Especially if the bulk of it isnt your deposit but a builders incentive.

My gut feeling is that what you want is unrealistic.

silvercar

Your problem is that lenders are now suspicious of vendor gifted deposits from builders and that new builds are being valued very cautiously.

I doubt you would get a lender prepared to consider more than 5% coming from the lender and I would expect the valuation to be cautious on a new build.

acs202

Thanks for the comments. I was fearing the worst and think we may just need to stay in the apartment and ride it through.

My only hope is that the location of our property is unique to the area (nothing simialr nearby) and is also near to a major sports venue. In some small way I hope this contributes to the value of the property....