New Home Advice Please...

LeeHarry

Hello everyone, first post! We are first time buyers so bear with me if I have some of the terminology wrong.

Bit of a dilemma that's giving me & my fiance a headache. We currently rent a 2 bedroom new build house & are saving at least £500 a month. We have the option to go into a part buy part rent scheme until March next year by which time we hope to have at least £9k saved. The house is currently valued at £135k. We have been advised that we could either buy a 25% share of the house with a 20% deposit at a rate of 5% fixed (approx £400 a month combined rent & mortgage), or a 50% share with a 10% deposit at the higher rate of 7%(approx £610 combined), which would be better for us in the long run? The first option would leave us the spare £500 a month to pay off more if we wanted to.

This is where it gets really confusing, we have also seen our dream home not far away which is valued at £200k, it's 3 bedrooms & a good size family home. We get married next year & would like to start a family so we are kind of thinking it would make sense to move before the mini me's arrive & save having to sell the 2 bedroom house we are in now. Another new build, they have offered us £10k for the deposit & £500 towards the legal fees if we go for their 80-20 shared equity scheme. The remaining 20% is interest free for 10 years. We can afford the monthly repayment of £850 a month for the mortgage but the remaining 20% scares me! They say to just remortgage in 10 years time. Would mean the fiance going back into work full time after having the children, child care costs etc would really stretch our budget & not leave us much spare money until the loans we both have finish in a few years time, combined total of £400 a month.

But to make things even more complicated....the housing people we rent off now have told me there is a 3 bedroom house available shortly around the corner from where we are now for an extra £50 a month rent, we do love this estate we are on. However, they don't know when they will want to sell it to us, could be a year, 2 years, maybe 5. But in the meantime we could still save that £500 a month for when they are ready to sell.

Any advice on what to do would be greatfully received, both our heads hurt!!

poppysarah

How much have you got saved?


Do you want to buy 1/2 a mars bar? You can have the whole thing now but I'd charge you rent on the half you don't buy...

You've not got 9k saved and are even thinking about buying a house for a gazillion times more than that.

If you're planing on having kids how will that affect incomes?

Fire_Fox

Unfortunately gifted deposits don't fool lenders, they often value new builds at the offer price minus any gifted deposit. Have you got a mortgage in principle yet, so you know what the bank will lend you on your current salaries? Do you have any debts? How much do you want the three bedroom new build, enough to take in a lodger for a year or two to help out with the bills and mortgage? Is there no possibility you could save more now - do you know where very last fiver of your income goes? What are you doing to increase your income now, have you considered a second job/ matched betting/ focus groups/ mystery shopping?

This is the budget planner used by the Debt-free Wannabe board:
http://www.makesenseofcards.com/soacalc.html

Estate_Agent

Figure out what sort of lifestyle you want and work backwards from there.

If you want a jet set lifestyle then you need cash now. If you want stability for your future and don't mind cutting back go for the house. Be aware though that rents will rise in the long term and you are only paying off someone else's mortgage. If you buy a house - on whichever scheme you choose, as long as you are paying towards the capital you are paying your own mortgage off.

My wife and I struggled when we bought our first house. We went without the chinese, trip to the cinema, expensive clothes etc. In short we cut back on our luxuries. But we had our own home and the sense of achievement when you paint a wall or mow the lawn was worth far more. When we moved 4 1/2 years later, we noticed that with payrises, our situation had gone back to the point we started at.

Owning your own home is also fantastic when you have kids. It teaches them about finances. Gives them security. Just don't use your house as a chequebook and constantly remortgage to fund the lifestyle. You can have the best of both worlds - eventually.

LeeHarry

To be honest, the house with the £10k gifted deposit is probably at the bottom of the pile now. Think we both got a bit carried away when we worked out we could afford it at the minute, we would both dearly love to have children so think it's best we leave that option. Spoke to a financial advisor who said we could get a mortgage of up to £172k.
We have £3k banked now & can save a minimum of £500 a month, going up to £650 in July. Very long story that involves my ex but I have a loan of £255 a month which I hope she will clear sometime this year, so that could be £900 a month to save.
Bottom line is, we still need somewhere to live! These are just the options we have now. Other than stay in this house & get the loft converted!