First time buyer looking at new build...

Arran83

Hi everyone,

I am 26, single and looking to purchase a new build 2 bedroom apartment on a large local Persimmon development.

Before the last week I knew absolutely nothing about buying...

The apartment is up at £116,995 but the woman at the site office said they would probably accept £111,000 if that is all I could manage...

I earn just about £20k a year with the overtime I do, I know this isn't guaranteed income but it is what I earn generally without fail week in week out so he's taken my year to date figure and put together a figure for me...

He believes I can purchase a property on the Homebuy Direct scheme for up to 130k...

I'm sure some of you are familiar with the Homebuy Direct scheme, whereby you put down a 5% deposit, get a mortgage for 70% of the property and you get a loan of 15% from Persimmon in my case and a 15% loan from the government... I think thats how it works...

I have a few questions....

If she has said they'll probably take 111k, does that mean I should still try and haggle a bit? What is a realistic offer?

After the initial 5 years I have to start paying back this (in total) 30% loan.. It starts at an interest rate of 1.75% and rises 1% each year... How high can that possibly go? Is there a capped limit? I don't want to be paying 25% on it in 25 years time for example...

I have to pay a 'Property Management' fee also of £990 a year... This apparently covers maintenance of all the communal area's, window cleaning etc.. She has a list of everything it covers... Apparently it also includes the buildings insurance (how much is this for a year on average?).. £990 seems pretty steep to me, but then I'm new to all of this so I'm not really sure...

This is what I've budgeted so far... I'm not sure how accurate I am with a lot of it... Council Tax I'm really not sure on, its a band B...

Costs: (per month) – Estimate...
£410 - Mortgage Repayment
£82.50 – Property Management & Building Insurance
£50 – Council Tax
£30 – Gas
£30 – Electricity
£20 – Water
£15 – TV License
£18 – Broadband
Total - £655.50
A friend wants to rent the 2nd room from me, would this be allowed? Obviously it'd help me out with all the costs... Also if I do struggle at some point in the future, my parents said I could move back in with them and rent the place out... Do I need a special type of mortgage in order to do this?
Any advice I would be so grateful for as this process has become very daunting...
Thanks in advance,

Arran

gld73

Try a lower offer - the worse they can do is say no. If it's definitely the place you want, and you feel you can afford the mortgage, then you can go up to 111k if that is the minimum they'll accept.

If you rent out a room to your friend (or anyone else), you can get up to 4,250/yr tax free under the Rent a Room scheme. The 990/yr for the Property management charge doesn't seem abnormally high from my experience.

If you move back with your parents and rent out the flat, you have to let your mortgage company know (you might be able to stay on the same mortgage rate if you pay a Consent to let charge, otherwise you'd need to change to a Buy to Let mortgage). There are other legal requirements if you rent the flat out though (Energy performance Certificate, Gas certificate), but you can search on these forums for what's required then if the time comes that you do rent it out.

I won't comment on the financing scheme though, as I've no experience of that sort of loan arrangement, but others on here may be more helpful on that front.

Good luck with whatever you decide. It's always daunting the first time!

ajbisgr8

I've bought two new builds in the past - the price is always negotiable and the reduction you've got doesn't seem that high. Are there lots of apartments still empty, if so I'd definately try for a lower price - they can always say no but in my experience you'd probably be successful. I'd start at maybe 100k. You might need to come up a bit but I'd be amazed if you couldn't get it for less than your 111k.

The thing is with large homebuilders, they make huge profits on each apartment and while they're standing empty they're losing money. Plus, with more apartments sold the remaining apartments sell easier.

Also, go for all the extras you can e.g. fitted carpets/curtains/appliances.

Fire_Fox

Service charges on new builds are often set artificially low, rising sharply by the fifth year: how high would service charges and mortgage interest rates have to go before you were in financial trouble? Find out which company is going to be managing the property and do your homework. Buildings insurance is not usually expensive, in the region of £100 a year per flat. An explanation of the rights and responsibilities of leasehold properties is here:
http://www.lease-advice.org/publications/

Don't believe anything you are told verbally by the sales team, get everything in writing - what is included in the sale, service charges, parking arrangements, timescale for delivery of completed flat, etc. If you are intending on a long gap between exchange and completion, consider what you will do if the valuation falls short or you are no longer able to raise a mortgage. You will be legally bound to complete the sale so risk being sued for breach of contract. :eek:

The energy figures are way out: my DD for a two bed flat has recently increased to £43 a month and I barely use the heating. Last winter many were paying £100 a month, this year I dread to think. I would be surprised if you have gas at all in a new build apartment, the heating is usually (expensive) electric. Council tax bands and costs can be found on your council's website.

You may not break even if you try to rent the flat out - if you think this is an option you may need to take then do your figures now. You will need to factor in income tax, but can offset the service charges and interest on the mortgage but NOT the capital repayments. Renting out a room is often a better option, would you be willing to live in the smaller bedroom?

You should consider the implications of home ownership, taking in a lodger and letting the entire flat in the event that you are made redundant or become ill or injured so that you are unable to work. Benefits will not pay your mortgage for the first few months, and any money received from a tenant will be deemed additional income. You should therefore have at least three months salary in the bank at all times (or generous relatives!).

tb1105

Arran83 wrote: »

If she has said they'll probably take 111k, does that mean I should still try and haggle a bit? What is a realistic offer?

After the initial 5 years I have to start paying back this (in total) 30% loan.. It starts at an interest rate of 1.75% and rises 1% each year... How high can that possibly go? Is there a capped limit? I don't want to be paying 25% on it in 25 years time for example...

I have to pay a 'Property Management' fee also of £990 a year...

A friend wants to rent the 2nd room from me, would this be allowed?

Hi Arran,

We are currently buying a 3 bed on Homebuy from Persimmon.
Agreed price of £187,000 but valuation has come back at £180,000 and Persimmon getting assey about it, so get the price as low as possible. Offer them £105,000 with carpets and walk away and see what they say when they call you.

The 1% increase is 1% on the 1.75%, so for us 1.75% is £55, an extra 1% of this takes it up by about £1 a year so it really isn't much and is 5 years interest free so much lower than having that lump sum on a mortgage. Just make sure you can save to pay the loan off within 25 years (you can remortgage for 100% if you want). The first payment has to a minimum of 10% of the CURRENT valiue fo your home when you pay it off so if your house has risen 150k when you pay the 10%, it has to be £15k.

Not sure about the management fee, we don;t have this.

You can not rent the room or house out to anybody, the HBD scheme aims to get FTB onto the property ladder. If you can't afford it with the help of HBD, don't do it!!xx

AMILLIONDOLLARS

Is the Management fee of £990 fixed at this costs for the next five year for example or is there a yearly increase from completion? Secondly have you researched the Management Company's reputation? Once the development is completed most are handed over to a Management company of the developer's choice.

This company is certainly not in the top ten list of treating this clients with respect. And for some reason, major house builders do use them to manage their properties!
http://www.thetruthaboutsolitaire.co.uk/

So do your research before you sign on the dotted line, its not all about getting a good price. Try going on land registry or upmystreet.co.uk to find out what others have bought at, tap in the postcode for the property and see what comes up.

Good Luck
AMD

Arran83

Thank you all for your responses and good advice...

Just make sure you can save to pay the loan off within 25 years (you can remortgage for 100% if you want). The first payment has to a minimum of 10% of the CURRENT valiue fo your home when you pay it off so if your house has risen 150k when you pay the 10%, it has to be £15k.

I may be getting this wrong, but are you saying on year 6 I would HAVE to pay 10% of the house's value?

Thanks,
Arran

sugarpants_2

Hi Arran
Good luck with the move.
I am wishing to buy a property through Persimmon. Can you give me the website address and more details on how to apply? Would be very greatful.
The deal they are giving you sounds great!
I am married with 3 kids so will need a bigger property sadly but £660 a month sounds reasonable to me'. Youll be on you rown so you wont need heating too much (lots of jumpers etc) LOL;)

Arran83 wrote: »

Thank you all for your responses and good advice...



I may be getting this wrong, but are you saying on year 6 I would HAVE to pay 10% of the house's value?

Thanks,
Arran

Arran83

You have PM

Good luck