Homebuy - no deposit?

iscrimger

poppy10 wrote: »

Hey buddy, out of interest, what would you do if house prices fall over the next few years and you need to move house for work or personal reasons? From the sounds of it you are not putting in any deposit of your own, so any fall would leave you instantly in negative equity.

If you take a £80,000 mortgage to buy a £100,000 house, with the LIFT scheme contributing £20,000... say prices fall by just 5%, then the government will expect a return of £19,000 (20% of £95,000) and you will get just £76,000 from the house sale - not enough to clear your mortgage. You will be stuck in your house (unless you can raise four grand), with no way to take up a new job offer or move in with a partner somewhere else in the country.
Unlike proper homeowners, you won't even be able to let your house out and move into new accomodation.

That's a very worst case scenario with lack of details.

Lets get a bit realistic, if house prices were to fall yet again and more than you're guesstimate of 5% then the chances are the economy is in worse shape and I wouldn't be having a new job offer.

You have also assumed I'm going to get a new job offer somewhere else which will require me to move. Seen as I am in full control of my life and my future I can't see me suddenly taking up a job I probably won't apply for. I have already made a significant move.

Realisitically speaking I plan on remaining where I am for at least the next 3-4 years. In that time my financial position will have evolved and I'll have savings to deal with any unlikely scenario like the world ending or being offered the role of Prime Minister. :rolleyes:

With the LIFT scheme you are also permitted to Let out the property after getting written consent from the registered social landlord. If I did get a job offer that required me to move I'd most likely rent an additional home and seek consent to let out the shared equity property.

To answer your comment in simple terms about negative equity then the simple answer is I just wouldn't move.

Your attitude to these schemes is disgusting, they are doing what they were designed to do. House prices ARE NOT going to fall 40% from where they are now as you have suggested.

(To point out I am referring to the open-market LIFT scheme and not the other new supply scheme - there are variations in terms for both)

Muhasib

Taking Poppy10's scenario of a 5% loss, then it would still have been better to have bought the property through LIFT as otherwise you would have needed your own money for a deposit and probably paying a higher rate of interest for a high LTV % that's if say you could get a mortgage at 90 or 95%. Also then you would have lost £5000 of your own money and not £4000; sure you lose money but not on the monthly cost while you live there and less if you do need to sell up - so what is the disadvantage using this as an example?

ooglewoogle

iscrimger wrote: »

House prices ARE NOT going to fall 40% from where they are now as you have suggested.

You DO NOT know this. I assume you haven't researched this to the hilt, otherwise you would have heard these sort of figures from more that just Poppy. There is a reckoning that *has* to happen...it is unavoidable. It is merely a matter of how long it takes to happen...our government is trying to prolong the agony and use the smoke and mirrors as long as possible.

I for one wouldn't touch any of their poxy schemes with a bargepole. They should stop inflating the house market byburning our money by the billion and let the thing find its own level. Then we can get rid of the word "property" and get back to using the word "home".

tek-monkey

Most people don't use these schemes, they buy through traditional methods. Therefore it is all those people who are buying that are not allowing things to 'find their own level', not just those on the schemes. These schemes simply help those, like me, who have no deposit and are throwing away thousands on rent. In fact, as I see it only landlords will be losing out here as more people will want to buy than rent?

charley83

I also can somewhat see what Poppy is saying. I looked at this scheme a while back, so please don't shoot me down as no I can't remember ALL the facts. However, in looking at the pros and cons I did decide not to go with the scheme. I am the type of person who does a lot of research beforehand and weighs up the pros and cons and must say the cons outweighed the pros with this scheme. Just because it is a 'government' scheme does not mean it's foolproof.

tek-monkey

I don't really get what the cons are, if my only alternative is to spend more on rent? If my mortgage on my % is less than my rent is, any extra goes into a pot to buy back the other %. Any money I could save towards a deposit while renting, I could still save towards buying back equity when I have a mortgage. I plan on either selling up in 8-10 years, and buying another similar property at 100% equity, or just buying this one out. Costs during this time will be the same as renting, but at the end I have some equity in the place as long as we're not in NE. If I am, I live there til I'm not!

omen666

Could you get a house on this scheme if you had CCJ's? Or if you were a student at Uni with no CCJ's?

poppy10_2

omen666 wrote: »

Could you get a house on this scheme if you had CCJ's? Or if you were a student at Uni with no CCJ's?

You could get a house on the scheme, whether you'd be able to raise a mortgage is a different matter.

alexnotts

It should also be noted that on this scheme if you get a 30% equity loan you are protected from going into negative equity unless the price falls by 30% (or more if you have paid off some mortgage).

This is because the mortgage lender gets the money first, and any equity loan shortfall does not have to be repaid, and they wont track you down or land you with bad credit - thats the deal.

omen666

poppy10 wrote: »

You could get a house on the scheme, whether you'd be able to raise a mortgage is a different matter.

Thanks poppy, therefore it will be nigh on impossible then?