Should I buy outright, go for Homebuy/Shared Ownership or wait??

Jonko

Hello

I have just started househunting, looking for a 2-bed flat or large 1-bed with a balcony/patio in a place close to my work, which is in a popular area of London. I am being told by multiple agents that there are very few properties on the market and 2-beds are a premium as prospective buyers want a second room to rent out. After 6 weeks of looking I have found that there is nothing available and haved seen lots of evidence that there is a bit of truth in what the estate agents are saying, not least that all new properties are coming on at at least 15% more than at the beginning of the year.

As such I cannot afford a decent LTV buying outright and would be facing crippling monthly payments which I could just about afford but it would mean no holidays/car/going out. I see that I have 4 options:

1. buy a smaller place further out but with a 25% LTV and affordable repayments (this is really, really unappealling)
2. buy what I want but with a 10% LT and lousy interest rate meaning crippling repayments (this is more appealling as I really don't want to downgrade where I live)
3. Shared equity or open market homebuy for as much of the property as I can easily afford (I get a great place in a great location and prices are not that overpriced any more compared to new houses on the market. I am worried I might not qualify due to savings and would like an idea of how much might be too much, and any other hidden catches)
4. Wait. (I see this as a massive gamble at the moment and although I would wait if there was a v good chance prices will drop quickly, I can't bear the prospect of waiting but there being no improvement for over a year).

Please can I have some perspective on my best option? I am effectively a first-time buyer having been bought out of my share of where I currently live. I must stress that my main aim is not short to medium-term financial shrewdness - I just want the best property I can get at the moment. My job is about the safest there can be and my salary is guaranteed to increase by a min of £2K per year for the next 6 years.

Many thanks for your help

Jonko

Fire_Fox

You don't mean buy outright - you are not a cash buyer are you?? If I am reading this correctly, you are a first time buyer wanting it all - you want a large first flat, in one of the most desirable areas, to be able to run a car and have regular holidays. Is that right?

If so, what priority order are these in/ which are you willing to compromise on? Size of flat/ area/ lifestyle? Why do you want to live close to work AND run a car? What are your future aspirations - make money on property, marry and have kids, move out of London, travel the world?

What percentage deposit do you have, after fees? What would you do if you fell ill and were unable to work, or if you fell pregnant or got someone else pregnant accidentally? Have you completed a budget planner? What is the service charge on the sort of properties you are viewing?

Sorry it's a lot of questions - we will advise as best we can, but need more info.

Jonko

Thanks for your reply. Yes, wrong terminology - I definitely cannot buy outright, lol!

Yes, I do appear to want it all. Unfortunately I am dealing with dashed expectations at the moment - I was bought out of my previous place which I shared with my ex-partner and made a mistake in agreeing to use the re-mortgage valuation which was pitifully low and left me £10K short of what I expected. Also I was expecting to make a steal on the current market but appear to have missed the boat. So no, I am not in a bad position at all; I just hoped to be able to do much more than I can.

If I move a couple of zones out or get a tiny 1-bed I can buy with a 25% deposit and be relatively comfortable. If I do not compromise I am looking at a 15% deposit, borrowing to my absolute limit (4.5x salary) - this is mostly because I will cross the higher-rate stamp duty threshhold. The car can go and I am expecting to cut down holidays to one or two budget holikdays a year. But borrowing to my max with a 15% LTV will mean literally no holidays and living on an ultra-tight budget for about 2 years, only to give me an extra £25K to play with (it doesn't make any sense to do this).

I guess that I probably shouldn't qualify for first-time buyer assistance but it seems to me the dream option - I can get a great place and not cripple myself. I am hearing that many people are getting turned down for homebuy as they don't have enough savings and I am wondering who can afford the more expensive 2-bed options out there if not someone like me with a little bit of cash.

I am public sector so have good sick-pay options. Children not on the agenda. It is possible I might have someone move in with me in a year or so but this is not definite and I don't want to even discuss this now (but it is in the back of my mind hence wanting a bigger place and considering options for buying more equity in a shared ownership deal)

Thank you again.

Fire_Fox

Me saying you want it all wasn't a criticism - it was a statement. It's good to have goals and aspirations as long as you are able to prioritise and you clearly are. :T I don't think you've made a mistake accepting the bank's valuation, unfortunately a place is only worth what a bank will lend on it plus deposit. The property market is a lottery, you will make a killing and lose out several more times in your lifetime.

I think you need to get out of the dashed expectations mindset. You have walked away from one situation and lost out in one sense, but you now have the opportunity to have a place that is yours and yours alone. I absolutely adore my flat, despite the building and the area not being the best. It's mine and I can't do what I want with it and in it!

You have supplied all the options but still not said what your priorities are. What is more important to you - the location, the size, the car, the holidays? I don't know your lifestyle nor the exact area, but I don't see why anyone would run a car in London. If you add up all the costs over a year (tax, insurance, depreciation, MOT, maintenance, congestion charge, petrol) it seems like a mug's game.

Holidays ... if you are used to regular and expensive holidays, you will struggle with none at all and perhaps be tempted to use the plastic. But one or two budget holidays a year is more than many people have! The £10K you say you have lost on your partner buying you out, how many weeks of expensive holidays would that have bought you?