Frustrated First Time Buyer-Is First Buy Worth it?

pioneer22

Q Can I own a FirstBuy home and buy a second home?
No – FirstBuy is designed to assist you to get on the housing ladder. If you wish to purchase another home you will have to repay the FirstBuy equity loan.

How could the enforce this?

tom9980

If_I_was_a_rich_girl... wrote: »

Our joint income is just under 60K and we both have student loans (pay approx £100 each per month)..................... We are manging to save about £1500 jointly a month and so far have about £12K

Where is your money going to? you are saving less than me and my partner and our income is nearly half yours. I can say with certainty that somewhere there is a lot of wastage or underestimation in the above. IF you really want it its much better to really tighten your belts for a few years now and get into some good money saving habits!

GDB2222

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.

So, if I have this right, you are paying say an extra £35,000 in order to participate in this scheme, and you seem to cheerfully accept that you probably will not get that back. Supposing that you stay in the house for say 7 years, that is an extra £5000 per year (plus mortgage interest on that, etc). Obviously, if you stay there longer you can amortise the £35,000 over a longer period, but it is still going to be several thousand pounds a year more, plus interest. Personally, I would not pay that. I would just be patient for another year to 18 months. At the end of that period, you should have saved up about £40,000, which is enough for a decent deposit on a standard mortgage on a standard house. You will be in a great position to negotiate a decent discount off the house you buy, rather than paying through the nose now, just because you are impatient.

The other thing to worry about is what happens if your circumstances change? You know that if you buy the newbuild house you will be in negative equity from day one. So, what happens if one of you has to move? Maybe, your job situation will change, a relative will become ill and you have to move nearer, or you may just split up as a couple? So, then you would not be able to amortise the £35,000 over 7 years, or 5 years, but maybe only over one or 2 years. instead of having a decent amount of equity, or a decent amount saved up, you would be in negative equity, either locked into the house or paying off the negative equity for years after you had left it.

stavromueller

They don't offer these schemes because they are good for the buyer, they offer them because they are good for the sellers.

I would save the extra deposit before buying. (Which is, in fact, what I am currently doing!)

UrWntr

stavromueller wrote: »

They don't offer these schemes because they are good for the buyer, they offer them because they are good for the sellers.

I would save the extra deposit before buying. (Which is, in fact, what I am currently doing!)

Plug your figures into this spreadsheet before you decide to continue saving the extra deposit.

http://www.box.com/s/y9h2fnlc0r82cnoi7okj

Make sure you adjust the interest rates accordingly if you get a better LTV. I use moneysupermarket.com to get a representation of mortgage interest rates.

If you decide to add a figure for savings, you should consider adding a figure for mortgage overpayments.

This should give you a feel for whether waiting to buy is a smart move or not.

If_I_was_a_rich_girl...

tom9980 wrote: »

Where is your money going to? you are saving less than me and my partner and our income is nearly half yours. I can say with certainty that somewhere there is a lot of wastage or underestimation in the above. IF you really want it its much better to really tighten your belts for a few years now and get into some good money saving habits!

Tom I can say with absolute confidence that there is NO wastage as I have budgeted for everything. Everyones circumstances are different. I said just under £60,000 - after tax and student loans joint income of about £3886 per month though varies as my husband gets over time some weeks depending on shifts he works.

Ok here are some examples:

Council tax £130 pcm
Bills about £250a month - british gas, EON electricity, anglian water BT broadband/phone (no we cannot change no coverage in our area)
Rent: £600 pcm
Food: £60 per week tesco - used to be lower before prices went up, try to eat healthy and fruits and veg - no garden and no time for allotment to grow our own)
Pay as you go phones x2 £20 pcm
House contents insurance - £120ish for the year so about £10 a month
Husband commutes:
Train fare £356 per month first capital connect
Tube zone 1 £40 every three weeks
Need to teach him to overcome his fear of taking tupperware on the train as he spends about £10 a day on food and drinks in his work cafe or local places - No communal kitchen unfortuantely, works unsocial hours and only privatised cafe on work site, not allowed drinks etc in studios have to go to cafe for break. I bought him a "man bag" but he wasn't impressed, if it doesn't fit in a pocket he will not take it.
We have a vauxhall astra we share between us but I have to use for work
Car insuance £63pcm,tax, break down, service/maintenance
Petrol £1.35pL £100 per month
i could go on, e.g. small gifts for birthdays/christmas, sometimes have to buy stuff like clothes/shoes as they wear out, especially to look smart for work.

Please tell me where we are going wrong, I would love to know how you are saving more than us on half our salaries, please tell me your secret!

ultrarunner

If you're both spending £20 a month on PAYG phones you may as well get on a contract for a cheap phone

Car-share with colleagues?

The lunch issue is £200+ a month, that's 2.5k a year

Wickedkitten

If_I_was_a_rich_girl... wrote: »

Thanks for the calculator So looking at the document I was right except I didn't allow for the additional reduction in value of the equity loan but used the original amount? So instead of 47000 equity loan in the example earlier it would become 20% of 200,000 so £40,000?

Aye, if the house dropped in value from 254k to 200k, then you would only owe them 40k rather than 47k

So valued at 200k after 2 years, the outstanding amount on the original £180,480 mortgage is £173,500, combined with equity loan of 40,000K is £213,500 so we are technically we are in negative equity as 173,500 mortgage gets paid off BUT can only pay £26500 towards equity loan leaving a short fall of £13500 , however if the house sale at proven market value won't cover all of the equity loan the rest has to be written off. At least I hope that's correct. Therefore we have effectively rented a nice property for two years for 327881.57 not including initial 4% deposit of £9400 =£37281.57= 1553.40 a month.

Mind as well, that you have rented a nice proerty at almost 3x as much as you are paying for the property you have rented now, plus you will also have to start all over again saving a deposit for another house.

In the other example of 200K property with saved deposit £50,000 and take out 75%LTV of £150,000 sell after 2 years at £165000, outstanding amount on loan is £141,082.71 we have £23,917.29 equity still or about 15% of the total property value? Is it really achievable to get the low interest rate quoted for a first time buyer of 2.45% at present? (hopefully would still be same in 3 years time but I reckon may go up! :huh: )

You can certainly do a lot better than what they are quoting with a 25% deposit. 4% and they are offering you 5.99% yet add another 21%and the best they can do is 4.25%?

So now using the real example New Homes have quotes for 4.25% 75% LTV mortgage with 20% equity loan and 5% deposit

Property price 230K drops to 200K after 2 years when sell, still owe £164,409.89 plus £40000 for equity loan so still in negative equity by £4409.89.

But what if: Price is 200K after 5 years and have paid off all equity loan by which time we should have £150,911.85 outstanding on mortgage (of course this all assumes rate stays at same at 4.25 which is unlikely); then would still have £49088.15 equity. If we hadn't paid off any of the loan we would have £9088.15 left.

Bear in mind though that you are managing to save 1500 a month now. Your rent is £600 and your mortgage payment is going to be going almost £600 more that so aside from any increased costs when it comes to needing building insurance, life assurance, and perhaps higher utility costs and the like in order to pay off the original 47k in 5 years, you would need to be able to save £785 a month and bear in mind the reduced income if you are wanting to start a family and also any child care costs if you are planning on returning to work quickly.

I think what I am saying is that as long as we pay off the equity loan within 5 years or so and don't sell until after then won't we be in the same position as if we already had the 25% upfront as the rate will have changed by then anyway to regular variable rate or we could remortgage? It's just that we got to live in our property whilst we saved the additional 20% up? Granted the price of the property will likely go down as often happens on new builds but this would have happened anyway whether or not the 25% initially put down was all our own, the non first buy properties of the same type look exactly the same and are the same prices yet seem to be shifting? I suppose that higher interest rates are the price you pay for getting in early? It's just about possible in the longer term that the price could also go up then we would be better off (assuming paid off equity loan) and still owning our own property?

If only we could put all the different possible future scenarios into a computer and it works out the best possible option for you at that time!!

Ok so what I really am asking for is a crystal ball, but then I guess I would just look at the next euromillions numbers :rotfl:
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As far as remortgaging goes, don't forget that they do base it on LTV, so that's another reason why you wouldn't want to be in negative equity even if you aren't planning on selling after two years

If_I_was_a_rich_girl...

ultrarunner wrote: »

If you're both spending £20 a month on PAYG phones you may as well get on a contract for a cheap phone

Car-share with colleagues?

The lunch issue is £200+ a month, that's 2.5k a year

Sorry I mean it is £20 a month between two of us ie £10 per month top up each. Wouldn't bother with contract as don't use mobile enough, have a work mobile as well.

Car share, cannot give up our car, our families live a fair distance, no-one at my work lives in same village, where I work is in the middle of the countryside. I would cycle if I was brave enough but i don't feel it is safe especially not in the dark which it would be on the way there and back at present. Plus I am pretty wobbly on a bike!