HOMEBUY scheme - FTB - Buy in Brighton - am I mad??

Androo_2

Hello Moneysavers!

I don't know if I should buy a home, or continue renting. There's a lot of advice out there, and since it all conflicts, half of it must be wrong.....

BUT - I've had consistent success with moneysavingexpert and so I hope you'll offer me some advice, because I'll listen!

I've just split up with my partner of six years we had just started to save so that one day we could buy a house together but now I'm on my own. I'd like to move out of the flat we shared and I don't know if I should try to buy a place or not.....

I earn about £35k (gross) and have no debts except a student loan (which doesn't matter). I have a good credit history - I'm nearly 30, I've had my job for seven years and have no history of bad debt. But my savings only amount to about £4k

I noticed there's a scheme offered by the Cooperative bank called Ownhome that effectively lends you your deposit and you can then go and buy a home from the open market. You have to pay back the loan, but the interest is 0% for the first 5 years then after five years interest is fixed at 1.75% pa, then after a further five years this increases to a fixed rate of 3.75% pa.

I want to move out of the flat I currently rent, but I want to stay in Brighton. I don't know whether to rent somewhere else or to try to buy a place using the Ownhome scheme. I know house prices will probably fall, but I think it might be the right time for me to buy because:

• If I buy a £175k home before December I won't have to pay any stamp duty
• The Ownhome scheme offers a pretty good deal (I think?)
• Schemes like the Ownhome scheme might not be available in the future?
• I want to move now anyway and would prefer not to move house twice (I hate moving house, it's expensive and stressful!)

I'd like some impartial advice - should I buy a cheap house in the Brighton suburbs using the Ownhome scheme or am I going to be much better off NOT buying because of the likelyhood that house prices will crash?

Emmzi

Interest rates are low now but may rise steeply in the future. You need to think about how you would afford the mortgage if that happened.

Although banks do lend more, I still like the '3 times your salary" rule because you won't be overstretched.

175k on 35k os a bit high for me to be comfortable especially when you havent managed to save a deposit - this indicates you like to spend, which is fine, but means you might need a change on lifesytle to meet all the maintainance costs of as house (not to mention the shniy new things you will want for it as soon as you move no matter how much you tell yourself you won't!)

So in summary - I'd buy but look for something cheaper *or* find myself a good lodger to help with the bills.

superfran_uk

The Ownhome scheme itself is discussed in depth in another thread, you should read it as it will probably answer whatever questions you may have. Potentially it could really work for you as you earn a decent wage, shouldn't have any problems getting a mortgage and you have set enough aside for fees. However I should warn you even if you apply today, it could take months before they contact you and then longer until you find out you're eligible. Then you have to find somewhere and there is likely to be a few month before you are in a position to exchange and then two weeks before completion... The whole thing will easily take upwards of 6 months from the date you apply. We found our place after about a month, and there was no chain, but it's still taken over 7 months. Can you wait that long?

bdl1brick

Just had a quick look at the scheme and it looks quite interesting so i'd have a go applying if I was you. I live and invest in Brighton myself so know it well.

You should maybe not borrow the max amount as you have a reasonable income and a bit of money. If you borrow 20% from them and you can get a mortgage of say 105k yourself that means you could buy something for 130k and keep your savings for moving costs etc.

I would then say try and get a tatty one bed victorian conversion in a decent road within walking distant of town and station, maybe hanover or new england/london road sort of area. There are quite a lot of people buying at the mo though so you probably need to get the scheme well on the way if it takes a while.

With your current savings you can make the flat nice and with a 20% share from ownhome you will be in a good position to repay them by remortgaging in 5 years time. Might best to look at a 5 year fixed mortgage if you can so you know what you are paying.

superfran_uk

Don't go for London Road - you'll be surrounded by students! They don't do wonders for property prices, although I guess you can rent it out more easily if you have to.... You could do worse than Hove outskirts.

Be aware that you can get a 4.69% rate ONLY if you take the full 40% loan. We have only taken 30%, and we'll be paying 5.99% interest on the mortgage.

Trollfever

A very long running and active Brighton thread can be found here:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=50475



.

bdl1brick

That's pretty bad only get the best rate if you take the 40%! I suppose if you keep the value of the property down to say 4 x times your salary you should still be able to remortgage in 5 years to repay the loan. I'm sure that it would be tempting to borrow as much as possible though to get the best property though!

To be fair I don't know much about Hove borders but I have a mate who lives in the Poets area and that seems nice and you can walk into Brighton city centre in about 25mins, not sure about prices around there as I haven't looked.

brit1234

Rent a couple years, save a deposit you will be far better in the long term with prices set to fall and short term and swap interest rates rising now

superfran_uk

brit1234 wrote: »

Rent a couple years, save a deposit you will be far better in the long term with prices set to fall and short term and swap interest rates rising now

Unfortunately I know the pain of living in Brighton - VERY high rents which are comparable with London and the pay is no-where near. It was near impossible for me to save while living there, and I am a very careful person!

Most 30-somethings I knew, even those in well-paid London jobs had even not started to contemplate buying in the same way that people in London often don't - It's just crazy and out of reach. I remember about 2 years ago an article in the local paper saying to be a FTB in central Brighton you had to earn as much as a pilot!

So although ideally it would be great to save, I can understand why the OP is in this position and therefore I think the Ownhome scheme could really help her, as it is these people in the middle (on a good income, good credit etc however cannot afford to buy) that it is designed to help.

I always preferred Hove as it had its own shops (infinitely nicer on a Saturday to pop into Hove than Brighton if you need something!) and its own train station (which actually serves more places than Brighton as it's not a terminal), but it's walking distance or a quick bus into the town centre for a meal or a drink, plus if you go slightly outside (on the border of Portslade for instance) you get all the benefits of living out of the town - the driveways, the nicer house, no students being sick in your recycling etc.

lynzpower

When you say your student loans dont matter- why do you say that? in peak market lenders added up the debt i HAd and subtracted this from the amount they were willing to lend( halifax) Its interesting you should say it doesnt matter, yes its probably low interest but its still debt- I expect you were a mature student?

I suppose im wondering why if you are earning 35k a year, then 4k savings isnt really so much to be honest.... 4k on buying a SO will go in fees, solicitors always charge more on these schemes as there is a lot more paperwork to rake through...

superfran_uk

lynzpower wrote: »

When you say your student loans dont matter- why do you say that? in peak market lenders added up the debt i HAd and subtracted this from the amount they were willing to lend( halifax) Its interesting you should say it doesnt matter, yes its probably low interest but its still debt- I expect you were a mature student?

I suppose im wondering why if you are earning 35k a year, then 4k savings isnt really so much to be honest.... 4k on buying a SO will go in fees, solicitors always charge more on these schemes as there is a lot more paperwork to rake through...

A student loan does not usually affect your mortgageability, whereas if you had £15k of debt through a bank you'd be lucky to find a lender. Certainly on the Ownhome scheme, it will not disqualify you; the same debt from a bank might. It will be taken into account when they assess how much you borrow, I am sure OP is aware of this.

Ownhome is not a shared ownership scheme, it's an equity loan, meaning that the 4k should cover the fees and costs as long as she does not go over the stamp duty threshold.