Mis advised- FURIOUS

Courtmill

Aw, glad to see you're all still so cheerful.

You'll be pleased to know you all managed to put me into a complete nervous spiral and I spent a pretty much sleepless weekend worrying about "If's Buts" and "Maybe's"

But, I couldn't help but come back this morning to fill you all in.

In short- you all made good points, but you all need to realise a key thing here.

I'll break it down into a nice little example for you. This is only hypothetical.

Buy house for £150,000. Mortgage is for £112000. Persimmon currently have 20% share in house.
Over the next 5 years, house prices fall dramatically and the house is worth £1000,000. We're stuck, oweing more than the house is worth and unable to remortgage.

However... if we overpay on the mortgage by £6000 a year- the amount we were planning on saving, in 5 years time our mortgage would be £79,000. House prices have still fallen to £100,000. We owe Persimmon 20% of £100,000. We remortgage and pay off the £20,000 we owe Persimmon- meaning our mortgage is only £99,000. Okay, borderline, but still not in negative equity.

Realistically, even if house prices don't fall THAT much, which they shouldn't, as long as we overpay considerably, and reduce the mortgage amount, we'll be in a win win situation. If in 3 years the house is worth £130,000, Persimmon only get 20% of that. If we've got a mortgage for £91,000 and we remortgage to pay of persimmon- our mortgage would be £117,000.

We will never actually have a mortgage for £150,000- the house will never cost us that much... overall it will cost us... but we will never feel the pinch of £150,000 in ONE go.

It may be riddled with if buts and maybe's... but if you look at it thay way then as far as I can see things will work out exceptionally well for us. If in 3 years we have a mortgage fo £117000, on a house worth £130,000, and we no longer owe Persimmon anything... then I believe good people... we're the ones who win.

SO, thanks for your fear instilling advice. I mean that in all honesty, because it made me think and it helped me realise that actually, as long as we're sensible then we're getting the best our of this.

Peace out

arby

i agree with your sums, however in your example it will mean that you've handed over £38,000 and not have a thing to show for it (ie, a 100% mortgage with nothing paid off). Obviously that was for your worst-case scenario, I'm just saying there are two ways of looking at each situation. I've said since the start that if you both keep your jobs and save hard then this venture will have a happy ending, and your sums show why I said that. If you do what you suggested you'll be fine.

edit: sorry, on top of the £38,000 there's also 5 years of mortgage payments, so you'll have handed over ~£70,000 in the 5 years and have nothing to show for it.

kai666

You do what you want, no need to justify it here. Everyone has their own agenda's when they reply, but please please get independent advise before you sign anything. You are not getting it from the people you are talking to at the moment. It's the only way you'll be sure you are getting the best out of it for yourself

InMyDreams

Courtmill wrote: »

We remortgage and pay off the £20,000 we owe Persimmon- meaning our mortgage is only £99,000. Okay, borderline, but still not in negative equity.

In the current climate you would not be able to remortgage, even if the house was still worth £100K. £99K on a £100K house is still 99% LTV. Simply not possible any more. For good reason.

What makes you so confident things will be so much easier in 5 years?

As I've said before, just look at all the threads on this forum from people caught out by assuming that they would be able to remortgage.

I totally agree with you though that you shouldn't do ANYTHING based on what some strangers on an internet forum tell you. Let alone anything so potentially catastrophic as buying a house or not. Don't listen to our advice or let us shape your decisions at all. But please, for your own piece of mind, see someone INDEPENDENT and take their advice. Persimmon, the bank, the estate agent, are just going to tell you what you want to hear, whatever it takes to get you to sign that paper.

olibrofiz

Interesting info.

IMO the OP seems dead set on buying this house, regardless of what advice has been given. She appears convinced her views, and decision, is the correct one.

Figures on paper always work out to your advantage if you really, really want something, you can convince yourself all will be fine, regardless of what other people say. The reality is that life often throws you a curve ball.....

And as for renting - I may be wrong but isn't rent money 'all in'? You don't have to fork out for unexpected maintenance costs on the house (& they're not cheap), and there's the ever increasing cost of bills/petrol/food etc not to mention car upkeep. Wages don't seem to go up in line so however much you, on paper, can save now, won't necessarily be the case in a few years time.

Trollfever

if we overpay on the mortgage by £6000 a year-

Please come back to this thread in three years time and let us know how this works out.

QTPie

Agreed completely....

Especially since the property us VERY likely overvalued to begin with (your lender came back with a valuation of "between 130 and 150k"....). New builds do generally tend to be worth less and depreciate quicker - you often pay a premium to be the first owner if one...

The other thing to remember is that you are looking to fix for only 2 years. Interest rates are unusually very low at the moment: you will go onto your lenders SVR in two years time and that is very likely to be considerably higher than you current rate: so you planned overpayments will be cut quite a bit. You will not be able to fix again, at that point, because you will not have enough equity.

I think it us good that we have made you think very hard: it us a huge decision and could very well be very costly. People are not here to upset you or to be glum about things: we just don't want you to make a decision that you could seriously regret.... (I know that sounds odd - people caring about a stranger, but it happens....).

QT

InMyDreams wrote: »

In the current climate you would not be able to remortgage, even if the house was still worth £100K. £99K on a £100K house is still 99% LTV. Simply not possible any more. For good reason.

What makes you so confident things will be so much easier in 5 years?

As I've said before, just look at all the threads on this forum from people caught out by assuming that they would be able to remortgage.

I totally agree with you though that you shouldn't do ANYTHING based on what some strangers on an internet forum tell you. Let alone anything so potentially catastrophic as buying a house or not. Don't listen to our advice or let us shape your decisions at all. But please, for your own piece of mind, see someone INDEPENDENT and take their advice. Persimmon, the bank, the estate agent, are just going to tell you what you want to hear, whatever it takes to get you to sign that paper.