Frustrated First Time Buyer-Is First Buy Worth it?

If_I_was_a_rich_girl...

My husband and I are currently saving for a deposit on our first house, but I have become a bit addicted to right move of late seeing what is out there :shhh:

I have seen a couple of building developments near us offering government backed "First Buy" 20% equity loans and I wondered if anyone else had had any sucess with these, is it worth it or should we just carry on paying rent and saving? They also offer 5% "gifted deposits".

I guess I am feeling tempted because I am a little impatient, I estimate it will be April 2014 before we can stump up a 25% deposit on a decent 3 bed 200K semi-detached/end of terrace in our area. This does not even include fees, moving costs etc and that assumes house prices don't go up again! Also we are both 28 and would like to start a family soon, but ideally don't want to do this from private rented accomodation as there is no security.

The house we are looking at is either the end of terrace "Tweed" at 230K or the mid terrace "Thame" at 240K - not sure if these are likely to retain their value in the future but not planning to move for a good 5-10 years.

Our joint income is just under 60K and we both have student loans (pay approx £100 each per month) but that is currently our only debt as our credit cards are paid off in full each month, checking on Experian we both have excellent credit ratings. We pay £600 a month in rent which is pretty good for our area in a small midterrace cluster house. We are manging to save about £1500 jointly a month and so far have about £12K (we got married last year which took up some of our previous savings and both started higher paid jobs last July). We cannot move to a cheaper area because of my job and also my husband commutes to London for work so ideally want to be less than 1 mile from a mainline train station.

With the first buy we would put down a 4% deposit (on the Tweed this works out as £9200), would take the 20% combined equity loan from the developer Bellway vs goverment of £46000 which is interest free for the first 5 years. The remaining 76% would come from a mortgage at £174800.

We spoke to the New Homes group who gave a rough estimate of £1060 per month payments on the mortgage itself which seems quite high to me for a 76% LTV but they said they should be able to get some better deals. I phoned Natwest as we bank with them but they wouldn't accept anything under first buy or gifted deposit schemes and want at least a 20% deposit - there doesn't seem to be anything for a 10% deposit with a lower rate.

Does anyone think this is a good idea to persue further or forget it? I can't help thinking that by April 2014 we will have paid £16,200 in rent - probably more as it will likely go up! We cannot move in with our parents as they live too far away and they cannot help us with a deposit. Would love to have a home of our own we could put our own stamp on, not have to worry about our landlord deciding to sell up giving us 1 month to move, and not have estate agents coming round to do quarterly checks. Oh and a little garden I could plant up would be nice I know there are many of you out there who are in the same predicament and have probably saved more than us so perhaps should just stop lusting after something we can't realistically have yet!

UrWntr

If_I_was_a_rich_girl... wrote: »

My husband and I are currently saving for a deposit on our first house, but I have become a bit addicted to right move of late seeing what is out there :shhh:

I have seen a couple of building developments near us offering government backed "First Buy" 20% equity loans and I wondered if anyone else had had any sucess with these, is it worth it or should we just carry on paying rent and saving? They also offer 5% "gifted deposits".

I guess I am feeling tempted because I am a little impatient, I estimate it will be April 2014 before we can stump up a 25% deposit on a decent 3 bed 200K semi-detached/end of terrace in our area. This does not even include fees, moving costs etc and that assumes house prices don't go up again! Also we are both 28 and would like to start a family soon, but ideally don't want to do this from private rented accomodation as there is no security.

The house we are looking at is either the end of terrace "Tweed" at 230K or the mid terrace "Thame" at 240K - not sure if these are likely to retain their value in the future but not planning to move for a good 5-10 years.

Our joint income is just under 60K and we both have student loans (pay approx £100 each per month) but that is currently our only debt as our credit cards are paid off in full each month, checking on Experian we both have excellent credit ratings. We pay £600 a month in rent which is pretty good for our area in a small midterrace cluster house. We are manging to save about £1500 jointly a month and so far have about £12K (we got married last year which took up some of our previous savings and both started higher paid jobs last July). We cannot move to a cheaper area because of my job and also my husband commutes to London for work so ideally want to be less than 1 mile from a mainline train station.

With the first buy we would put down a 4% deposit (on the Tweed this works out as £9200), would take the 20% combined equity loan from the developer Bellway vs goverment of £46000 which is interest free for the first 5 years. The remaining 76% would come from a mortgage at £174800.

We spoke to the New Homes group who gave a rough estimate of £1060 per month payments on the mortgage itself which seems quite high to me for a 76% LTV but they said they should be able to get some better deals. I phoned Natwest as we bank with them but they wouldn't accept anything under first buy or gifted deposit schemes and want at least a 20% deposit - there doesn't seem to be anything for a 10% deposit with a lower rate.

Does anyone think this is a good idea to persue further or forget it? I can't help thinking that by April 2014 we will have paid £16,200 in rent - probably more as it will likely go up! We cannot move in with our parents as they live too far away and they cannot help us with a deposit. Would love to have a home of our own we could put our own stamp on, not have to worry about our landlord deciding to sell up giving us 1 month to move, and not have estate agents coming round to do quarterly checks. Oh and a little garden I could plant up would be nice I know there are many of you out there who are in the same predicament and have probably saved more than us so perhaps should just stop lusting after something we can't realistically have yet!

Is your heart set on a new build?

My advice would be to avoid these schemes and if you're too impatient to wait, take a 90% LTV mortgage and overpay.

You'll likely still be financially better off versus renting and you'll get to start your family sooner.

If_I_was_a_rich_girl...

Is your heart set on a new build?

My advice would be to avoid these schemes and if you're too impatient to wait, take a 90% LTV mortgage and overpay.

You'll likely still be financially better off versus renting and you'll get to start your family sooner.

Thanks for the fast response Is there a particular reason for avoiding first buy UrWntr?

We are not quite there yet with a 10% deposit (which was why first buy was seeming so attractive right now - unless we went for 5% gifted deposit!) but we would have 10% plus money for fees, moving etc by november time on the sort of house we want. Maybe house prices might go down in the meantime or hopefully (for us!) at least stay stagnant.

I am concerned that we don't want to overstretch ourselves with a higher mortgage in case interest rates go up as presumabley the rates will already be very high on a 90% mortgage if we can get one?

Obviously if we did go down the first buy route we would still have to pay off the 20% equity loan and would incur fees after the 5 year period (I calculate we would not be able to pay all of it in this time if our salaries remain the same).

No we are not set on new build, personally i'd rather have a victorian terrace with a bit of character, my husband isn't too bothered with things like that though! We had not considered new build prior to finding out about first buy as thought many are built like tiny boxes but the ones at the development in the link were actually quite nice. Also I have been told that new builds don't tend to hold their value as often over priced from the beginning, plus we do not know what the neighbourhood will be like as some of the properties are still being built. Would be good to have a new boiler, kitchen, bathroom etc to move in to though as hopefully lower repair costs whereas an older property might be cheaper but costs us more if needs new heating sytem etc.

Anybody else agree with what UrWntr has said?

brit1234

If_I_was_a_rich_girl... wrote: »

Thanks for the fast response Is there a particular reason for avoiding first buy

Its a overpriced scam that will make you over pay, hit negative equity and is designed help the builder only not first time buyer.

Save a deposit for a couple years, house prices will be cheaper so not only will you have that 25% deposit but you would of saved your other costs.

G_M

Trouble with a new build is it's like buying a brand new car. As you drive it off the forecourt it drops in value buy 20-25%.

'cos it's no longer 'new'.

EscapetoSnowdon

Don't despair! We are newbie FTBs finally after saving up for a deposit. We know it is very hard but you will get there, the property and mortgage market will not be like this forever although it will not be as unregulated as it was with 110% mortgages etc.

My recommendation would be to consult an Independent Mortgage Adviser before deciding on viewing properties to determine what your budget is and whether there are any exceptions. Some IMA have a narrow market but some look at the whole mortgage market and can access specialist deals at favourable rates. We have used one from a national estate agents and found them to be better than the small local IMAs. We have managed to secure a 2 year fixed rate FTB mortgage, 10% deposit at an interest rate of 5.99% but after the 2 years reverts to 3.89% SVR. You may be able to get a better deal as our property was a Grade II listed property which was an additional headache as some mortgage companies requested 20% deposit. Something we have also learnt is the 10% deposit deals advertised for FTB don't materialise in reality as the goal posts can be moved after submitting an application and may decline and request a lower LTV even in our case where we both have exemplary credit rating and history.

My advice would be to avoid high-street mortgage companies that will only allow you to use a solicitor on their panel as this can prove costly if you have already decided on a solicitor which we had as we have several in the family to reduce conveyancing costs. If the solicitor is not on the panel, your preferred solicitor can outsource the work to a solicitor on the panel but this will come at an additional cost if you are trying to keep conveyancing costs low.

You also have to weigh up the benefits of whether it is more important to get on the property ladder now, gambling on a variable APR mortgage or fixed rate so you will know what your mortgage payments are to accommodate for expected and unexpected expenses such as DIY, maintenance and repairs, redecoration, household appliances, furniture etc. Find out also what the IMA is getting out of the deal, they should print you off a Key Facts Sheet detailing all the charges and any good IMA will also go through the list with you before proceeding.

Hope this helps and good luck!

Sheffield_Marketeer

@If I was a rich girl
Hi

i just wanted to share my experience with buying a new build and First Buy.
My husband and I are in the process of buying a new build and are going with the shared equity scheme, which is similar to the First Buy scheme.
While there is a lot of negative sentiments associated with new builds in the Uk, as evident with the 'reasons' given already by some of the posters, I will still say that in some cases buying a new build can prove a better decision than an older place.
Go for a new build-
1. if you think that you are happy with the sizes and the layout and you do not think that they are shoe box sized. In our research, we did find quite a few that were on the smaller sized.
2. if you think that the price you pay for the new build is atleast comparable to a 10-15 year old older house. e.g- get on Rightmove and research house prices around this development and see if the new build compares price wise with the older properties . Say if a mid terraced property is priced 15-20K lower than the new built. I would say 15-20k is a valid premium that you should be paying for a new built. In my case I found that my new build property was priced LOWER than older properties!
3. if you feel you would like to be pampered with something brand new, flashy and low maintenance. Why should'nt one pay a premium for a new, shiny product, if they liked it enough?? and for the privilege of being the FIRST inhabitants of the place.
4. Finally with regards to FirstBuy, please Please make sure that you are most definitely ABLE to pay back substantial amount of the equity loan by the first 5 years and the WHOLE amount in 10 years.

There's loads against new builds, it took me a while to be NOT swayed by these sentiments, but when I finally made a choice to go for new built, I made it with conviction.
Hope this helps.:j

kingstreet

If_I_was_a_rich_girl... wrote: »

I have seen a couple of building developments near us offering government backed "First Buy" 20% equity loans and I wondered if anyone else had had any sucess with these, is it worth it or should we just carry on paying rent and saving? They also offer 5% "gifted deposits".

You will not get a lender to accept a second charge and a builder gifted deposit. One or the other.

If you want a 20% equity loan you'll have to put the 5% down yourselves and get a 75% mortgage.

kingstreet

Couple of examples;-

Nationwide

Builder Cashback/Deposit
We will not accept equity share cases where a builder deposit/cashback is offered even if it is in addition to the acceptable deposit sources listed above. If the deposit is found to have come from an unacceptable source and a mortgage offer has been issued this could result in the withdrawal of the offer.

Halifax

Client must pay a 5% personal deposit towards the purchase of the share (excluding any deposit provided by a builder or housing association).

pioneer22

We have debated this for a while but we decided to do it. If you are planning on staying long term do it, the amount you might lose would be the amount you would have to spend on new kitchen building work etc

Ignore Brit there won't be a house price crash any time soon, and they are not a scam. But you can get good discounts on them, only do it if you are there long term.

If_I_was_a_rich_girl...

You will not get a lender to accept a second charge and a builder gifted deposit. One or the other.

Kingstreet we were not expecting to use both! :rotfl: I guess I didn't word that very well, we have our own saved 5% deposit now on the new build or will have a 10% deposit thereabouts on a similar priced property by the end of the year. If we need a 25% deposit then this would be in three years time. The reason we are tempted by first buy is because it would bumph our 5% deposit up to 25% with a 5 yr interest free 20% equity loan (10% from government and 10% from builder) allowing us to get a 75% mortgage (better rates) but we would still have 100% title to the property unlike shared ownership. This would allow us to buy now with our 5% deposit. Allthough it appears not many lenders will accept the shared equity deposit even though it is part of a government scheme - Halifax sounds as though they do.

The alternative option is 5% gifted deposit from the builder which gives us our overall 10% deposit (along with our saved 5%) for 90% LTV mortgage, again though the lenders not keen on this, not sure why they are quite happy to accept parental gifted deposits, suppose as they don't hold an interest in the property? Plus rates are still poor on these 90% mortgages.

The other alternative is keep saving and paying rent and hope mortgage lenders relax their criteria for decent rate 85/90%LTV mortgages to come back on the market so we can buy soon and hope property prices remain the same or don't go back up (South East so I cannot imagine them dropping significantly but who knows?).

if you think that the price you pay for the new build is at least comparable to a 10-15 year old older house

They are pretty comparable for the area and the other houses seem to be selling pretty well on the development.

Please make sure that you are most definitely ABLE to pay back substantial amount of the equity loan by the first 5 years and the WHOLE amount in 10 years.

We think we should have about £800 per month after bills, mortgage payment and food etc to save for paying off the equity loan which should just about do it in the 5 years but of course if property prices go up we may go over the 5 years or if interest rates rise rapidly more would go into paying of the mortgage. I guess it will be camping holidays in the UK from now on (if we bother with holidays!) but it would be worth it to own a house and be able to start a family!

If you are planning on staying long term do it, the amount you might lose would be the amount you would have to spend on new kitchen building work etc

Yes we would definitely stay for a while assuming that the estate did not turn into a nightmare or something awful (which would affect the house price and our equity!) - I don't think so as it's a nice area but you only need some of the wrong people to move in but then that could happen anywhere. Many of the older houses we have looked at in the same price bracket would need work doing so dosh spending on them.

But you can get good discounts on them

Can you still ask the builder for discount/ extras such as carpets if you are going with first buy?

Thanks every one for all your helpful input - it is useful to get different perspectives on this!