Offer we can/can't refuse

jade-evie

Background information: My OH and I live in Essex (an expensive part ) and live in a privately rented property. It is a 2 bed detached bunglaow with building potential and a good size garden.

We rent the bungalow from my aunt who bought it in May 2009 for 143000. It was on the market for £179000. A similar semi-detached property across the road recently sold for just shy of £190000.

My aunt has offered to lend us £20K as our deposit if we buy the property for £170k. This means we would have to secure a mortgage of £150k.

Combined we have debts of just under £140000 which we hope to clear within 18 months. We are getting married next month and we are under the impression we will get some cash gifts which we have now decided to use against these debts to allow us more breathing space. My credit rating isn't brilliant (I had a default back in early but since then I have improved my rating with a cashplus card loan, vanquis, next account and a car on HP which I pay every month on time) but OH's is fabulous despite his share of the debt being over 80%!

We are looking at this happening in August next year when our debt will stand at approx £5000 (about 4k loan and a little on a credit card) and our combined income (with predicted pay rises - I'm public sector) of around £48k. Our daughter will be at school so we will have no childcare costs.

Has anyone trying to clear their debts managed to secure a mortgage before doing so? This is realistically our only chance in the next 3 years of being able to buy a property and although it would effectively be a 100% mortgage (we would eventually have to repay the £20k) we would be borrowing £40k less than the house is worth...

The whole idea has thrown me- it seemed to be a very distant possibility but if it is possible it would making sleeping at night a lot easier knowing that in 12 months we could completely turn our situation around!

runninglea

Are you sure you are getting a good deal? If your aunt bought it for 143K in 2009 then I dont know whether it is worth 180 - 190K now.

Has a lot of work been done to it? You are basically giving your aunt a 20K plus profit that she is lending to you so you have a mortgage of 150K, 20K owing to your aunt and also 14K of c/c etc.

I know you have a decent combined income but the mortgage will have to be over 3 times your combined salary!

dancingfairy

Does your aunt have to sell now? can she wait until next year and continue renting to you until then? does she need to charge more rent in order to make this happen?
Can you wait until after the wedding is over and you know where the lie of the land is etc. When you don't have wedding plans on your mind you can devote your time and energy to perhaps buying a house.
Perhaps you could come to a compromise to perhaps try and buy in 6 months time (having paid off a substantial amount of the debt by then?).
Are you sure that taking on such a big mortgage and adding 20k to your debt is such a good idea anyway?
df

dancingfairy

Ah - hang on is it 140k you owe or 14? I read your post as owing 140k and wondered why you wanted to take on more. 14k seems much more reasonable.
df

jade-evie

dancingfairy wrote: »

Ah - hang on is it 140k you owe or 14? I read your post as owing 140k and wondered why you wanted to take on more. 14k seems much more reasonable.
df

eeek- no- 14k!

Around £1400 of it is mine- the rest is OH's which we are jointly paying off to get rid of it as quickly as possible!

Aunt can wait until next year- we are paying £695 a month rent. A quick glance makes it seem that mortgage repayments would be only slightly more which would be affordable next year without our massive childcare fees!

NeverAgain_2

df,

From the OP's signature, it's £14K, which I think can be largely ignored for this purpose, particularly as the OP seems to be quickly reducing it.

I agree with runninglea, this doesn't seem to be a very good deal.

No reason why aunt should sell the house at a discount to anyone, but I think the OP should research what £170K would buy locally, not asking prices, what a first time buyer could actually get for the money.

Aunt may still be prepared to lend the OP the deposit because she will still be able to sell the bungalow.

Or the OP could lower her sights a little and buy something which would mean a mortgage more in keeping with income.

dancingfairy

jade-evie wrote: »

Combined we have debts of just under £140000 which we hope to clear within 18 months.

I think an extra 0 got added which is what confused me - I wasn't looking at the OP's signature at the time. Lol. :rotfl:
df

runninglea

at 6% interest only the mortgage would be 9K per year so £818 per month. This is higher than your rent and also not reducing the mortgage

jade-evie

NeverAgain wrote: »

df,

Or the OP could lower her sights a little and buy something which would mean a mortgage more in keeping with income.

In this postcode the average house price is £225k...! OH will not move out of the area, the school here is excellent and worth the extra £10k on house prices alone and we both work relatively locally.

3 times our income with a £20k deposit would buy this locally: http://www.rightmove.co.uk/property-for-sale/property-29844598.html

The house we are in now is in better condition, a better area and detached.

runninglea- we know we will pay more on a mortgage than renting but we already pay discount rent and when our DD starts school next year it will save us approx £500 a month on childcare.

I do agree about looking locally though- my thoughts are that houseprices may crash next year and we may get more for our money. I think my aunt would still lend us the £20k to buy another property- we haven't spoke about it but in the end she wants to sell the bungalow and may well get more for it if she sells it to somebody else!

As a side note- what on earth is that on the bed in the main bedroom photo :eek:

NeverAgain_2

...As a side note- what on earth is that on the bed in the main bedroom photo...

OK, it needs a bit of updating, but the blue suite could be described as trendy in a retro sort of way.

Not sure what's on the bed, might be a vacuum cleaner hose, which I'm told some people use in the bedroom, but best not to go into that any further on a family forum.

jellybean39

Hi there can see your dilema.
If the house you are buying is in that condition, not being funny how long would you be able to live with it like that before wanting to spend money on it. At a guess to make it habitable new carpets bathroom kitchen and thorough decorating it would be about 20k. I would keep an open mind til next year and see what the housing market does and get an independent valuation done so you know what is a good offer. looking at your debt which compared to your income is not hurrendous anad as you say it is all being paid, if you could get maybe the smaller laon paid off by then and have no childcare you would be in a better position. ~But be aware houses prices have dropped ours was worth 360k last year but same in our road cant sell at 299 at the moment and ours our big 4 bed houses and that is cheap as we are in dorset. Ask your aunt if she can wait because you really dont want to be taking a 100pc mortgage not that a lot of companies will even do that now unless you pay higher intrest rates. its just not worth it. good luck x