Mis advised- FURIOUS

Dinah93

Okay I appreciate that you are excited about your first home, and aren't likely to take in a blind thing anyone on here says, because we're all full of doom and gloom, but I have to say something because this is like watching lemmings jump off a cliff. All I ask is you read it, and understand people are posting out of concern and want you to be aware of what you are taking on, that you didn't understand negitive equity and are buying a new build staggered me to be honest.

Courtmill wrote: »

I want a home, and one day a family. I figured it was best to start with the home... get something for all that money I would be throwing away in rent, just like I have done for 6 years!

Courtmill wrote: »

We are just looking to get on the market, what's so wrong with that? We could not, and we could live in a flat, chucking money down the toilet in rent... and attempt to save up however many tens of thousands of pounds we need as a deposit... by which time, I'd probably be nearly 30, and have wasted the last few years saving for something, and having no money for something, which will then leave me with no money anyway.

Oh and with regards to the value of the property- I think the valuation carried out by Halifax is midly incorrect at the moment anyway- bearing in mind the house is still mid build- and they haven't accounted for it being a coach house with a very large garden. (Of which there are no others in the area, therefore giving no real room for comparison)

But anyway- apparently everyone on here who brought a house now seems to regret it-

Courtmill wrote: »

Arby, I've been paying rent for the last 6 years... and all of that money has disappeared. I have not benefited from that money... I have lost it, never to see it again.

We don't have to pay off the builders amount in cash, we can always remortgage, or sell the house- but that obviously depends on the situation at the time.

House prices are lowish at the moment, and so are interest rates. It is a good time to be a first time buyer. The situation is going to get more financially challenging, but that's going to affect everyone, one way or another.

If we can afford to save £500 a month once we're in the house, which we can, then that money is going to cover us for all eventualities. We are hoping to overpay the mortgage slightly, save up as much as possible and see where we go. We'll have a fund to either save our butts if we're in negative equity and paying over the odds, or if we're okay, to chuck at Persimmon. In the 6th year, we start paying minimal interest on Persimmons part, and we've got until the 10th year to pay it off...

I've quoted the bits that particularly stick out to me.

You're hoping house prices stagnate so you don't have to pay more off the loan. Bad move. New houses are like new cars, across the board they drop around 20-30% the minute you take ownership of them. Therefore you are reliant on house prices rising so that when you come to sell it you get back what you paid for it. But then you need to pay more off the loan meaning you need to save more. So you have three scenarios:
House prices rise: Owe more on the loan, but house is worth the same or more than what you pay for it today
house prices stagnate: You owe the same as what you paid for the house, but it is worth significantly less than what you paid for it, you are trapped there until you can pay off the shortfall between what it is worth and what you paid for it (this is money you really never see again - much worse than rent)
House prices fall: You owe less on the loan, but the house is worth a lot less than you paid for it, so again you need to pay off an even bigger ammount which you never see again to enable you to move.
Personally I'd be hoping for a huge rise in house prices, and interest rates to miraculously stay as low, as the increase on the 20% should be cancelled out by the increase on the loan meaning you could sell to release money to pay off the loan.

In all scenarios you don't really have any more equity in 5 years than you do right now, but you've thrown a collossal ammount of money at the morgage company and persimmon for the right to live there.

You are only buying a 2 bed, presumably you are planning to move or only have one child? You are 21 now, but you are ruling out children for the next 5 years as they're expensive blighters and you need to save everything towards paying off the loan. Hope you don't plan on any other major expenses like a wedding either.

Did you know most banks will not lend a morgage to someone who has a substantial loan or debt? Especially if that loan was taken out recently and could have been used to 'top up' a deposit. It is considered extremely risking lending practice. In Ireland this was the norm for first time buyers up until the recession, then it all imploded and their nice new build boxes are 60-70% down from their peak price in many areas.

This is effectively what you are doing, only it is a private loan rather than one from the banks, it's just the modern equivalent of a 95% morgage, only at least most of those went on older properties that you could add value to or that at least didn't immediately loose value.

The 'rent is dead money' statement - oh this one gets me everytime! Do you think the interest paid on your morgage plus maintenance (not improvements, just maintenance) on your house will be significantly less?! Interest is dead money, and being locked into a staggeringly expensive morgage means if your area goes downhill (I get the impression the estate isn't finished, as a planning officer I have seen companies down tools in the middle of an estate and leave them unfinished for literally years) you're still stuck there.

Be aware house and contents insurance is likely to be significantly higher by being over garages owned by someone else.

Finally the idea that we all regret buying property - I don't. I bought my first house with my soon to be husband a few months ago aged 25. We only had a 15% deposit (which made me nervous as we could have put down 20%, but we got a 4 year fix which reassured me a little), however we have used £8000 of our savings in doing the property up, adding a bathroom where there was a cupboard, generally improving the decorative order, putting in wood floors, stove etc, and have been advised when completed we will have added around £24-£28k to the property, meaning we have a nice cushion when it comes to remorgaging in 4 years time, or to limit our exposure to any falls in the market. It did take us a couple of years to save up so much money, but we're more secure because of it.

I do wish you the best of luck, but I think realistically this is a purely emotional decision that you need to recognise as such, as every way you look at this it is really bad for anyone financially.

arby

A quote from an article today is given below. this guy knows a lot more than any of us, and he's not telling you not to buy, rather he's saying he can see why people are questioning whether it's right. You're not questioning it which means you're not seeing things he is and this should worry you.

Building Societies Association head of mortgage policy Paul Broadhead said: “All of a sudden, it seems the support is unravelling, which will make consumers far more cautious about whether they should upsize now and whether they should even get on to the ladder.”

iB1

Just one thing:

I'm 21... and will not be having children anytime soon

I've been paying rent for the last 6 years

You've been renting since you were 15??? :eek:

In all honesty, don't get too put down by some of the naysayers and doom and gloomers. It sounds as if you're going into this with your eyes open and you're asking questions which is the most important thing. As long as you have some sort of savings or emergency fund to cover you in case of an emergency, then you should be fine.

The only thing that I would pick up on that some others have echoed is that new build places can drop in value quite sharply, so you may not have a lot of wriggle room in 2 years time if house prices have not risen in that time.

RecoveringAlcoholic

Has anybody mentioned...........................

...............................relationship breakdown?



.

arby

or cholera?

Dinah93

RecoveringAlcoholic wrote: »

Has anybody mentioned...........................

...............................relationship breakdown?



.

I was very careful not to. While no one thinks it will happen to them, most people have been in happy long term relationships, a morgage is harder to get out of than a marriage, but realistically how many are with the same person we were with at 21?

Courtmill

iB1.. yeah I was paying rent to my parents from 14 actually, and then got forced to leave home at 16 and have been renting ever since. I have made it through the last 6 years without getting into any financial problems, no debt no overdraft no nothing... better than a lot of people would have managed

But thats another issue...

I do 100% hear what people are saying, and I am checking with our mortgage advisor about the equity situation. This is clearly a difficult time to buy a house- but I think that will always be the case. I have looked at mortgages on and off for the last year, and in order to get a affordable repayment mortgage rate, we would be looking at putting down somewhere in the region of- £25000 deposit. Now credit where it's due. I work with someone who has saved £30000 so far with her fiance, and they are planning to save annother £10000 on top of that. She's having a baby soon now, so that may be harder than they thought.

She is looking at buying a 2 bedroom house, maybe 3 in an okay area.. and she's been told this week that her deposit isn't enough for what they can afford- and they are considerably better off than me and my partner.

That doesn't sound like fun to me- plus they are living at his parents, meaning they're paying no rent.

I'm okay with the set up... we have no problems with money- not yet anyway. No black marks, no debts, no loans, no credit cards- nothing. We've got plenty of cash stashed away, and in other "assets" if we need it. (i.e boyfriend will be selling his car for a less sporty, much more economical one soon, and that will give us £1500 min to chuck in an ISA once he's brought a little run around.)

So, unless we win the lottery tomorrow (although I don't buy tickets because that £2 is part of the pennies we're busy saving) I am going to go ahead and buy a house.

And seriously... I may be a woman, but don't start on the kids thing with me! I only do things I can afford- so no weddings and no babies until we CAN afford it. Besides, I'm very happy with just my cat and my man for now thanks....

undaunted

Conrad wrote: »

Courtmill, it is possible to make the case that rent can be cheaper than interest (dead money) on a mortgage. The difference can be saved to put down as cash on a house later.

Possible but dubious surely!

As Courtmill states you pay rent & at the end of it have nothing left to show for it.

You pay interest (lots of it) but your house is traditionally likely to rise in value over time, especially now, as house prices have fallen in the last couple of years but will probably rise again. Getting a mortgage may be a problem these days but for those that do I reckon buying (wisely) is a far far better than renting myself. (my house, though not a new build & direct comparison, is currently worth 2 or 3 times what I paid for it despite the down turn in the last couple of years. I bought it less than 10 years ago & it certainly hasn't cost me that in interest) I'd therefore say Good luck to you Courtmill

Courtmill

Ah ha, cynics

Thanks for not mentioning the relationship breakdown thing, as I would not be going into this if I thought there was any risk of it going wrong between me and my partner. Let's face it, we could have been together for 12 years and it could still go wrong. People don't hit a certain age and become immune from relationship breakdowns!!!

FYI, I've already done a 4 year relationship... which broke down and ruined my life. I was homeless, jobless and was abandoned by the man who was "going to marry me one day"
I learnt my lesson ta very much.. and I would never make this decision lightly...

And yeah... no one's mentioned cholera... or smallpox...

Lance

Thrugelmir wrote: »

And now?

These same people are trapped with negative equity on 5% plus interest only mortgages.

NR will be remembered in the years to come for its poor lending practices which created problems for a whole generation.

Yeah I know, it was 'irony', however I suspect if it was still around they would have loads of customers 'desperate' to get on the housing ladder.