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HappyMJ

dotexe wrote: »

Thankyou all for your advice.

We've decided to ditch this idea and aim for something smaller and more affordable. It might not be our dream house but we will be able to live comfortably, overpay while the rates are low and won't be scared to death when they rise and stay well clear of that dreaded negative equity.

Just an example. We could buy a house for 105k, get a mortgage for 85k (£420pm) and if we wished to overpay by £400 we'd have the thing paid off by the time I'm 36.

Meanhwhile we are together, able to focus on improving those salaries and who knows, maybe even get married and start a family a little sooner.

We'll get that dream house one day. Just might not be the direct route.

Which comments put you off? I know this is a debt free board but I would buy the best house you possibly can for the money you have. Buy once. I would not be making small steps up the housing ladder due to fees and charges and the difficulty and stress in selling houses along the way although small houses do sell quickly. It will stretch your finances but a good 5 year fixed rate mortage will give you certainty for the next 5 years and during that time you will do as much as you can to increase your earnings as well as normal inflation based pay increases. In 5 years the mortgage payment will feel small compared to your new income.

dotexe

So many conflicting opinions, ha!

There weren't any particular comments that put me off. I took them on board but had pretty much already made my decision.

For me there was just too much risk involved in buying a new build where the value may fall (proven by identical houses in same area selling for 15k less), where any rate increases would have us struggle and unfortunately I do not have enough confidence in myself to believe I will be in a much superior position job-wise in the next 5 years. In fact (and I know a lot of people are in this position) I don't even have much faith in my job security.

If things do change for the better however, we can look at moving then.

dotexe

I've been thinking (one of my worst habits) and it hit me that maybe if the only difference between living in our ideal house and a smaller one that we will one day have to move from is £200 a month. Maybe it's worth the gamble. :undecided

Unfortunately the other worries still remain. The value has further to drop, job security, interest rates after the fixed period, etc.

Wow this is really chewing me up.

InDeepDebt

If a new house from the builder costs £140k and they drop approx £15k if someone moves out - can you find a nearly new one like the one that you're after for £125k?

Obviously it won't be quite as new but you won't get the new build premium hit if you move out.

dotexe

Yes InDeepDebt that's exactly what I'm looking at now.

There's an identical house located in the same area (although not quite as good a location as the new one) and it's up for 129k. It has been reduced from 139k.

Perhaps they would go under the stamp duty threshold? Saving us £1400, 10k on the house price and all the other bits like carpets/garden etc to boot.

edit: If a MOD reads this feel free to move my thread I guess it has little to do with debt now. (If it ever did.. sorry!)

HappyMJ

dotexe wrote: »

So many conflicting opinions, ha!

There weren't any particular comments that put me off. I took them on board but had pretty much already made my decision.

For me there was just too much risk involved in buying a new build where the value may fall (proven by identical houses in same area selling for 15k less), where any rate increases would have us struggle and unfortunately I do not have enough confidence in myself to believe I will be in a much superior position job-wise in the next 5 years. In fact (and I know a lot of people are in this position) I don't even have much faith in my job security.

If things do change for the better however, we can look at moving then.

I agree with not buying new build. They appreciate less than older properties but they are nice.

If you don't feel as if you have job security then I would not buy at all. I f you become unemployed now the council will pay your rent. However, if you had a mortgage you have to pay it from non existant income. i.e from your savings for the first 13 weeks and that help only lasts for a year then you are forced to sell to maintain your credit rating.

dotexe wrote: »

I've been thinking (one of my worst habits) and it hit me that maybe if the only difference between living in our ideal house and a smaller one that we will one day have to move from is £200 a month. Maybe it's worth the gamble. :undecided

Unfortunately the other worries still remain. The value has further to drop, job security, interest rates after the fixed period, etc.

Wow this is really chewing me up.

The value of the property only matters if you sell. If you bought today at £140k then the property's value drops to £100k it just means you are stuck there but as this should have been the right dream house in the right area then it shouldn't matter. Over time the value will increase again back to £140k and you will continue to repay the mortgage so your LVR will always increase.

Interest rates after the fixed period. I really wouldn't worry about interest rates. They are supposed to reflect inflation and usually do. So if they go up then your salary goes up too and the debt in effect shrinks in relation to your income. It's a strange thing but inflation that exceeds the interest rate is good for debt.

dotexe wrote: »

Yes InDeepDebt that's exactly what I'm looking at now.

There's an identical house located in the same area (although not quite as good a location as the new one) and it's up for 129k. It has been reduced from 139k.

Perhaps they would go under the stamp duty threshold? Saving us £1400, 10k on the house price and all the other bits like carpets/garden etc to boot.

edit: If a MOD reads this feel free to move my thread I guess it has little to do with debt now. (If it ever did.. sorry!)

Stamp duty land tax thresholds. Right....this is a difficult one. If you buy just under the stamp duty threshold it actually makes it more difficult to sell for a bit above the threshold so you need to wait until it's worth much more for someone to offer you much more. i.e if you buy for £125,000 no one will be interested in paying £130,000 they will offer you £125,000 for it to avoid stamp duty. I would try and go much higher if you can at around £150,000 so that stamp duty doesn't affect the value. Yes it'll cost you £1,500 but you won't be stuck with a property people don't want due to the threshold. That's the problem with my house it's worth £130,000 but I wouldn't buy it for £130,000 I would offer £125,000 so I need to wait until it's definitely worth £140,000 or more to be able to sell without having buyers offering £125,000 just like you are thinking of doing with the house that is on the market at £139,000. Have I confused you? Sorry...just trying to explain the problem with that. I'd find a house worth £160,000 and offer £145,000 and then finally settle somewhere in between.

dotexe

I understand about the stamp duty yes.

About the house value. There's a chance we could be unlucky in that the value drops around the time we remortgage, surely that would have an effect? Especially if interest rates have increased by then.

rising_from_the_ashes

dotexe wrote: »

About the house value. There's a chance we could be unlucky in that the value drops around the time we remortgage, surely that would have an effect? Especially if interest rates have increased by then.

It may well depend on the lender ...... I remortgaged at the end of last year. I was advised a valuation would need to be done (which was fine).

Houses are really struggling here - they should really sell for £185k but there's been a few sitting (for ages) so I put a conservative value on the application at £160k.

When we went through the application & got to the valuation bit, "the system" came back with an automatic valuation at £185k (they may have valued others in the street at some point).

HappyMJ

dotexe wrote: »

I understand about the stamp duty yes.

About the house value. There's a chance we could be unlucky in that the value drops around the time we remortgage, surely that would have an effect? Especially if interest rates have increased by then.

You don't have to remortgage every 5 years. I recommend that you find a good fixed rate mortgage with a good revert to standard variable rate so that there is no need to remortgage constantly. I took out a mortgage 10 years ago with the intention of never remortgaging on what was a good SVR. It's now a poor SVR compared to the rest of the market but as the mortgage is now less than half what it was at the beginning remortgaging makes little financial sense as the fees outweigh the savings. Besides due to these banks being even more restictive with lending than they were I doubt they would lend to me anyway.