Mis advised- FURIOUS

Courtmill

The agreement is done on percentages, and the T&C's state that if we sell up, and the value is less than their original input, that's all they get.
We don't have to pay back that minimum amount... it's 20% of whatever it is at that time. Obviously, they are banking on us not selling it at a lower price, because then we're also losing out.

Trust me on that one thing, I did check. It's 20% of the market value, regardless of whether that is less or more.

To quote from their website:


What if the property price goes down?
Your repayment will be 20% of the market value - whether that is more or less than the purchase price.

arby

no, some deals are arranged so it's 20% of the property value after 5 years. so it might be a bit more or a bit less.

to the op, that's a good amount to save in a year, but as you were both redundant a year ago, are you not concerned that could happen again?

Courtmill

Well, surely isn't everyone Arby?

We weren't made redundant because we sucked at our jobs... my boyfriends company went bust, and my company had to make some very quick cutbacks to avoid going bust.

Who knows what the future holds, but should any of us spent our lives wondering "what if I get made redundant (again) or what if house prices fall, or interest goes up"? If we did that, we'd never get anywhere.

This is a calculated risk- just like the ones everyone else is taking when buying a house!

beecher2

The risk is a lot lower for people with a healthy deposit, who are paying the mortgage back over a shorter term and who aren't buying a new build which on face value looks over valued.

Just make sure the risk you take is calculated - ie you know what the worst case scenario regarding negative equity and soaring interest rates. Some things you can't control, but you need to know you can cope with them if/when you need to.

InMyDreams

Courtmill wrote: »

This is a calculated risk- just like the ones everyone else is taking when buying a house!

Indeed, but everyone is calculating with different figures and won't get the same answers. And many do get the sums wrong, both ways. But the implications are rather more serious if you buy a house and then regret it rather than not buy a house and regret that. You have to stop thinking about what everyone else does or has (you probably don't know half their circumstances, even close friends) and work things out rationally for yourself.

For some people, risks they shouldn't have taken have paid off and they may never really appreciate how lucky they were. For others it has been their financial ruin. (You don't have to look further than this forum for examples of what can go wrong.)

Their are very real risks and questions that need answering based on YOUR circumstances, not anyone else's.

Whatever you are told by your mortgage company, do NOT assume that you will be able to remortgage. Assume you will be stuck with the 35 year contract you are signing. If you manage to get out of it and remortgage in 2 years time, that will be a bonus.

Also, do NOT assume that you will be able to sell your property at it's 'market value' whenever you want in the future. (Again see this forum and the house buying/selling one for evidence that it's not always that easy, especially if you are under any financial or time pressure.)

LittleMissAspie

Courtmill wrote: »

The plan is to save £30,000 in the next 5 years, and then pay off a large chunk of what is left. Hopefully if house prices don't rise too much in 5 years, we'll only owe Persimmon a fraction more than we do now, and can basically buy out nearly their whole portion.

After the 5th year, so in the 6th we have to pay interest, as a separate payment. It's fixed at a low rate, something under 2% and we pay that monthly until we've brought out the 20% share.

After 2 years of repayments you will have repaid approx 3k of your 112,500 debt. With the premium you pay for new-builds it is pretty likely that you will be in negative equity at the end of your fixed rate and you will probably be stuck on the variable rate, whatever that may be. I would suggest paying your 30k savings off the mortgage as the rate on will be higher than the <2% rate you will be paying on the other 20%.

SouthCoast

Why does reading this thread make me feel that it will all end in tears?

arby

because the mantra that buying a house is always the right decision is finally being questioned by more and more people.

SouthCoast

arby wrote: »

because the mantra that buying a house is always the right decision is finally being questioned by more and more people.

Time to be nice to some more grandparents!

And grandparents helping the OP to jump into the mortgage debt pit.

Conrad

arby wrote: »

because the mantra that buying a house is always the right decision is finally being questioned by more and more people.

I was reading a short version of a Shakespear tale a while back - one of the main characters was a landlord with 4 small properties.
Shelter is a key commodity and those than own will always enjoy equity in the long term.

Take me; I could invest in a pension that dies when I die (in retirement) and have all the worry of stock markets and whether the annuity provider would survive a serious world crash - or I can carry on gradualy building my own equity that will always have a value in terms of rental. Depsite the odd hassle I'm in the driving seat and I can pass it on to my children.

People who think property has had its day are truly delluded.