FTB Dilema

coz_1967

Hi all,

I am looking for some advice as there seems to be too many options!

My girlfriend and I are FTB, with £15k saved and saving £1.5k every month. By December we will have £24k. She earns £26k and I am £24k.

We are looking at new build homes. We are interested in one listed at £159k, although identical houses in the development have sold for £140-145k. The developer wasn't for negotiating price until we go to reserve. Is it worth going in early and reserving off plan, or wait until they are built and go in nearer Christmas?

She was also offering the 85/15 shared equity over 5 years. The home would be revalued and the builder taking any increase in their share. Is this worth a thought?

Another option we have is that our parents have capital which they are earning very little interest on. Is there anything similar to Lloyds lend a hand that they could give us a better deal.

We are also worried that if we wait around until December the interest rates and house prices may begin to rise which might put us in a worse position. On the flip side we are thinking if we wait long enough we will get better rates, bigger deposit and bigger house.

We are planning on speaking to a financial advisor, just wondered if anyone has any advice from personal experience.

Thanks.

Yorkie1

This isn't from personal experience, just from reading posts on these boards.

One thing you need to be careful of with an off-plan / new build is where the developer requires you to exchange very early on in the process, with a very long completion date for the house to be built. If you do get an early mortgage offer, that will expire after a certain time - with the risk that it will expire before the house is ready, and if there are changes in lending criteria between its expiry and completion, you may struggle to find a new mortgage yet be committed to the purchase.

Another difficulty you will see repeatedly with new builds are that mortgage companies often value them significantly below the agreed purchase price, leaving you having to renegotiate (developers don't like doing that) the purchase price, find the difference in cash (means you are paying more for the house than it's worth), or walk away.

New builds are not necessarily a bad idea, this is just a couple of things to look out for to be safe.

coz_1967

Yorkie1 wrote: »

This isn't from personal experience, just from reading posts on these boards.

One thing you need to be careful of with an off-plan / new build is where the developer requires you to exchange very early on in the process, with a very long completion date for the house to be built. If you do get an early mortgage offer, that will expire after a certain time - with the risk that it will expire before the house is ready, and if there are changes in lending criteria between its expiry and completion, you may struggle to find a new mortgage yet be committed to the purchase.

Another difficulty you will see repeatedly with new builds are that mortgage companies often value them significantly below the agreed purchase price, leaving you having to renegotiate (developers don't like doing that) the purchase price, find the difference in cash (means you are paying more for the house than it's worth), or walk away.

New builds are not necessarily a bad idea, this is just a couple of things to look out for to be safe.

Thanks for the advice. I didn't realise that. The houses are definately overpriced in my opinion so I could see that being a likely outcome.

ItMightBeUsefulOneDay

You'll find a number of people on here (myself, I confess, included) who are against newbuilds simply because of their often shoddy workmanship and build quality. Additionally they are frequently massively overpriced by developers who are desperate for cash and need to sell high to pay off their own debts. Remember that the mortgage assessor will value the house at the price it would sell "second hand".

However, one fact remains regardless of build (new or old): Don't overpay. If your gut is telling you the house is overpriced, then it is overpriced.

Negative equity (it sounds like you'd be in this from day 1) means no access to the cheaper mortgage deals when the shine of newbuild wears off. It also makes moving house for a new job, a change in life or any other reason nearly impossible.

Shared ownership is just a way of disguising the fact that the property is overpriced IMHO.

g_attrill

I would agree with the above - don't think a house is worth more because it is new - it's not! Compare the houses in detail with you can buy with the same money locally, check the garden sizes, plot layouts, room sizes etc.

Since the price drops the only advantage of a new house is that you get to live in something new, you can't rely on price and housing demand to make any value difference too small to measure. That said they do still seem to be selling well in many areas.

coz_1967

Thanks for the advice. It has confirmed my general feeling that going for a new build, although tempting, is the wrong choice to make. In comparison to similar spec homes locally the new build seems to be around £30k overpriced.

Would probably take 5-10 years for the house to come back up to the value we would pay for it.

We'll keep on saving until the end of year, pick our best mortgage then go and find the best value for money house!

Thanks again for the advice.