Buying our first house - the deposit problem!

emsi_rob

Advice wanted please!

Ok, so we have been looking at buying a house as first time buyers. We have no deposit and really no means of saving up for one quickly due to our rent being quite high…so we have been investigating the various deals that the developers are offering…

We looked into doing a shared equity scheme with Barratts but because their house prices were high and their mortgage rates high also it was too expensive for us to do. Basically, we could have bought the house (just about), but wouldn’t have had any money to put anything in it!

We have looked at other schemes, but we seem to be very unlucky because as soon as we find something that would be ideal for us, we get told ‘oh they’ve just stopped doing that offer’ and so on. Also, it appears that rent to buy schemes and shared equity offers are not as readily available now the market has picked up a bit.

Sooo we went to a Gladedale homes development quite close to where we are now at the weekend…and found our perfect first house. Perfect location, price, perfect house. The banners outside were advertising a 75:25 shared equity offer, no deposit and 3 years redundancy cover…fantastic we thought, this could be it. However, the lady on site regrettably informed us that the Halifax (who are the only mortgage lender within this scheme) have now decided that they want customers to put in a 5% deposit…when was this decision made? Last week (told you we’re not very lucky). So basically the situation is that if we’d walked onto the site 2 weeks ago, we could have bought one, not paid a deposit, got a mortagage £110 cheaper per month than what we’re currently paying in rent, and could have been in before christmas. I’ll not tell you how many expletives were uttered upon leaving the sales office.

So, if we want one of those houses we now (thanks to the Halifax) have to find around £7k as our 5% deposit. Now I thought the whole point of the shared equity schemes was that they are for people who DON’T have that initail deposit but there you go…

So, I just wondered if anyone has had similar and managed to barter their way around this with the developer? The lady in the sales office said that they MIGHT have to come up with a way round it, as obviously the scheme has sold them a lot of houses so they are a bit cheesed off too as this will affect their future sales…but she didn’t say how they might do it?

In the meantime we are trying to see if we can beg steal or borrow the money, but it’s unlikely that we’ll be able to…given that both sets of parents don’t have the money to lend. We’re also looking at renting somewhere cheaper so that we can save more money ourselves.

All in all a rather depressing weekend really, have spent most of it kicking ourselves that we didn’t visit the site earlier!

Any advice appreciated, there must be ways round this? I did see that McInerney homes are doing an 85:15 shared equity and offering to pay the 5% deposit so I might have to use this as leverage with Gladedale to see if I can get the developer to pay it?

LeeSouthEast

An alternative is think outside the box. Can you downsize your rental to increase the amount you can save?

Fortheloveofmoney

In reality if it's only going to save you £110 per month versus rent payments then you probably can't afford to buy at the moment. All houses (even new ones) require some kind of maintenance and this would soon eat into your spare money.

Also could you still afford it when the mortgage interest rates go up? They are at an all time low at the moment.

Have you considered getting a second job to try to come up with the deposit?

emsi_rob

LeeSouthEast wrote: »

An alternative is think outside the box. Can you downsize your rental to increase the amount you can save?

Hi Lee,

yes we are already starting to look round for cheaper rental alternatives. I have also posed the question to our current landlord regarding whether he will consider reducing the rent so we'll see what the outcome is of that. If he says no, we're on a rolling monthly contract so if we find somewhere cheaper we can move fairly quickly.

I also want to see if we can swing anything with the developes though to get us on the ladder sooner rather than later.

emsi_rob

Fortheloveofmoney wrote: »

In reality if it's only going to save you £110 per month versus rent payments then you probably can't afford to buy at the moment. All houses (even new ones) require some kind of maintenance and this would soon eat into your spare money.

Also could you still afford it when the mortgage interest rates go up? They are at an all time low at the moment.

Have you considered getting a second job to try to come up with the deposit?

Hi, the houses we've been looking at buying are smaller than the one we currently rent. We'd be downsizing from a 4-bedroom detached to a three bedroomed semi, so we're hoping to make some savings on the council tax and utilities too. The mortgage rate they give you on these schemes is a fixed rate one and it's set quite high (no where near as low as they are at the moment) so I wouldn't be expecting it to go up too quickly too soon.

I see what you're saying re difference in cost, but I already feel like we're chucking £750 a month down the pan as it is....we might as well pay less than that and be in our own home..no?

ILW

I would suggest that on the face of it, you cannot afford this house.
If your mortgage is going to only be £100 per monthe less than your rent and you have been unable to save any money for a deposit, you just do not have sufficient income to take on this mortgage. If you had been saving say £5-600 per month it would have been different.

LeeSouthEast

The key question to ask yourself is could you manage if it reaches 12% or higher, which isn't outside the realms of possibility. It hit 15% in the 80's.

mr_fishbulb

ILW wrote: »

If your mortgage is going to only be £100 per monthe less than your rent and you have been unable to save any money for a deposit, you just do not have sufficient income to take on this mortgage.

Not to mention all the other costs which will come with owning - maintenance, buildings insurance, emergency broken boiler fund.

Fire_Fox

emsi_rob wrote: »

Hi Lee,

yes we are already starting to look round for cheaper rental alternatives. I have also posed the question to our current landlord regarding whether he will consider reducing the rent so we'll see what the outcome is of that. If he says no, we're on a rolling monthly contract so if we find somewhere cheaper we can move fairly quickly.

I also want to see if we can swing anything with the developes though to get us on the ladder sooner rather than later.

There's a good reason lenders want a deposit - it's to protect both you and them for an uncertain property market. What will you do if you end up in negative equity?

If you can't afford to save, you are unlikely to be able to afford all the extra costs that come with buying. Don't be fooled into thinking you won't need to do anything to a new build: the small stuff really adds up. All the little fixtures and fittings for kitchens and bathrooms (hooks/ shelving/ rails/ toilet roll and toothbrush holders), curtains and poles, tools for fitting all these items.

An excellent budget calculator that the DFW board use for work out where to suggest cutbacks. If you post it up for comments they'd be happy to dissect it!
http://www.makesenseofcards.com/soacalc.html