Help and advice on Mortgages/buying a house

pjgoober

beecher2 wrote: »

You'd have to be sure you were in a position to pay back the 25% in 10 years time. This means ensuring that you put enough money aside, and you need to factor this is as an essential 'payment' when looking at your budget and weighing up the costs.

Something important to think about is that you would have to pay 25% of the value in 10 years time, rather than the value now which is also something to keep in mind.

Yes, but if the value of the property went up after 10 years and the (say) £25k you'd saved up wasn't sufficient, you would be in a reasonably good position anyway as the value of your property has risen, which is a good thing - no? (i.e. you could sell it as the value of your 75% would have increased more than the value of the 25%!)

Or am I missing something?

getmore4less

Exit plans,

Do they have any say who buys the place off you?

Is the place freeehold?

The only way to get to 100% is to be able to afford 100% so that mean more money either through pay rises or windfalls.

If the job does not have this "pay rises are going to be good" future then you get trapped, with high LTV and crappy mortgage deals

beecher2

pjgoober wrote: »

Yes, but if the value of the property went up after 10 years and the (say) £25k you'd saved up wasn't sufficient, you would be in a reasonably good position anyway as the value of your property has risen, which is a good thing - no? (i.e. you could sell it as the value of your 75% would have increased more than the value of the 25%!)

Or am I missing something?

You'd said you would want to stay in the house more than 10 years so I was basing it on the fact that you wouldn't be wanting to sell up in order to pay off the 25%. If you did sell up, where would you move to if you've had to pay Barratts 25% of the sale price? You'd surely be back at step 1 with no deposit, and at best would have to dramatically downsize.

edit: you probably have to save around £200/month for 10 years to get 25k so use that when you're doing your sums.

pjgoober

Meeper wrote: »

You have answered your own question. That is exactly what it means. So - what exactly do you want from anyone here other than affirmation or warning?

Really, that is what I am looking for.

I'm not entirely sure (or at least wasn't) that that was what it meant. As far as I can see there aren't any hidden catches or anything. I'm cautious, because it is a big deal.

There seems to be a lot warning, which is not unexpected, although generally I can't see quite why this would be such a bad deal.

If the house price (after 10 years) has dropped, then you can pay it off with the money you would have to have saved in respect of the £25k loan. You then have to stay there, as the house price has dropped.

If the house price goes up, then ok, you might not have enough saved to pay off the loan, but you could surely sell the property at a profit and you'd have £20k saved up (+profit on sale of house) as a deposit on a new house?

I suspect I've missed something somewhere though? :-S

pjgoober

beecher2 wrote: »

You'd said you would want to stay in the house more than 10 years so I was basing it on the fact that you wouldn't be wanting to sell up in order to pay off the 25%. If you did sell up, where would you move to if you've had to pay Barratts 25% of the sale price? You'd surely be back at step 1 with no deposit, and at best would have to dramatically downsize.

edit: you probably have to save around £200/month for 10 years to get 25k so use that when you're doing your sums.

I'd figured we'd need to be saving at that rate as well.

Surely you would only have to sell if the price went up (so that your saving didn't cover it) so in that case, you would still have your £20k saved up for a new deposit, and you'd be selling for more than the value of your mortgage (as the price has gone up) surely this would put you in a position to upsize after 10 years?

No?

beecher2

pjgoober wrote: »

If the house price goes up, then ok, you might not have enough saved to pay off the loan, but you could surely sell the property at a profit and you'd have £20k saved up (+profit on sale of house) as a deposit on a new house?

I suspect I've missed something somewhere though? :-S

You'd hope in 10 years time that you'd be almost half way through paying off your mortgage, not in a position where you still only have a pretty small deposit.

Say you buy now at 100k, and it is worth 150k in 10 years (totally made up numbers).

In 2021, you've got around75k of your mortgage still to pay off, and you have to pay Barratt 37k, leaving you with £38k deposit. If you've saved up 20k, that gives you about £50k deposit. Buy the same sort of house for 150k, and you have a mortgage of 100k - which is what you started with in the first place. From the way I look at it, you haven't moved on at all. Also, Barratt may value the house at 150k, but you actually sell it for less - you still have to come up with the 37k though.

pjgoober

beecher2 wrote: »

You'd hope in 10 years time that you'd be almost half way through paying off your mortgage, not in a position where you still only have a pretty small deposit.

Say you buy now at 100k, and it is worth 150k in 10 years (totally made up numbers).

In 2021, you've got around75k of your mortgage still to pay off, and you have to pay Barratt 37k, leaving you with £38k deposit. If you've saved up 20k, that gives you about £50k deposit. Buy the same sort of house for 150k, and you have a mortgage of 100k - which is what you started with in the first place. From the way I look at it, you haven't moved on at all. Also, Barratt may value the house at 150k, but you actually sell it for less - you still have to come up with the 37k though.

Ok.

How do you work out that after ten years I would still owe £75k - if the house is only worth £100k to begin with on this deal the INITIAL mortgage would only be £70k, why wouldn't it be going down (assuming its a repayment, not interest only mortgage - but even on interest only it should still be the same, not gone up, right?)

Also, how is going from a £5k deposit now, to having a £50k deposit in 10 years not moving on at all. Surely with a £50k deposit in 10 years time I would be able to get a significantly better house?

Edit - sorry if that comes across as defensive - i'm not trying to be. I'm just a little confused here?

beecher2

pjgoober wrote: »

Ok.

How do you work out that after ten years I would still owe £75k - if the house is only worth £100k to begin with on this deal the INITIAL mortgage would only be £70k, why wouldn't it be going down (assuming its a repayment, not interest only mortgage - but even on interest only it should still be the same, not gone up, right?)

Also, how is going from a £5k deposit now, to having a £50k deposit in 10 years not moving on at all. Surely with a £50k deposit in 10 years time I would be able to get a significantly better house?

Edit - sorry if that comes across as defensive - i'm not trying to be. I'm just a little confused here?

Sorry, that's completely my fault - I didn't take away the deposit. I think that leaves you about 15k more than I thought, but to be honest I don't trust my maths anymore! I suppose these are all sums that you have to do yourself, and you need to work out all the scenarios. I would 't touch it with a bargepole as after 10 years I don't think you're any further forward and if you work out you'd need a larger mortgage to own the same house once you've paid of the loan then I really dont' see the point.

kier333

pjgoober wrote: »

Ok.

How do you work out that after ten years I would still owe £75k - if the house is only worth £100k to begin with on this deal the INITIAL mortgage would only be £70k, why wouldn't it be going down (assuming its a repayment, not interest only mortgage - but even on interest only it should still be the same, not gone up, right?)

Also, how is going from a £5k deposit now, to having a £50k deposit in 10 years not moving on at all. Surely with a £50k deposit in 10 years time I would be able to get a significantly better house?

Edit - sorry if that comes across as defensive - i'm not trying to be. I'm just a little confused here?

I personally would do what suits your situation, I remember when i was buying my first property and posted questions on here, I found there to be a lot of negative feedback as i only had 10% DEPOSIT, how prices were going to drop hugely, how everything basically was terrible. I continued on with what i felt suited my needs, and TBH i have not regretted it. I purchased the house with a 10% DEPOSIT Aug 2009 on a 2 yr fix @ 6.79% and have re fixed for 5yrs today @4.79% HSBC says my house has increased in value by 15k, hence giving me a 80% ltv. Like i say dont listen to anyone than yourself, if it suits your situation and you can afford the repayments why not?? It has to be better than paying of your LL Mortgage, and at the end of the day, you may make a profit, there again you may not, but hey is that not like anything in life? Just look into everything throughly.

Good Luck

pjgoober

kier333 wrote: »

I personally would do what suits your situation, I remember when i was buying my first property and posted questions on here, I found there to be a lot of negative feedback as i only had 10% DEPOSIT, how prices were going to drop hugely, how everything basically was terrible. I continued on with what i felt suited my needs, and TBH i have not regretted it. I purchased the house with a 10% DEPOSIT Aug 2009 on a 2 yr fix @ 6.79% and have re fixed for 5yrs today @4.79% HSBC says my house has increased in value by 15k, hence giving me a 80% ltv. Like i say dont listen to anyone than yourself, if it suits your situation and you can afford the repayments why not?? It has to be better than paying of your LL Mortgage, and at the end of the day, you may make a profit, there again you may not, but hey is that not like anything in life? Just look into everything throughly.

Good Luck

Interesting.

To be honest, I'm not that interested in making a profit. I'm not looking at this as an investment (If I was, I don't think it would be a sensible one tbh) I'm looking at it as a home for me and my family.