Advice on buying a new build apartment!

hazyjo

I first bought in 1991 for £65k when the property market was 'severely depressed'. Sold at a loss 4 years later (£58,500 after a year on the market) as prices dropped further.

There are no guarantees. All the OP can do is buy something that will suffice for as long as possible - especially with a new build.

The OP said "What doesn't loose I]sic[/I money the minute you purchase it?" - well, second hand houses shouldn't. Obviously prices can go down, but you don't lose money the second you own it. You usually pay a premium for a new build. The second you walk through the door, it's second hand and you can lose far more. Obviously not the case for all new builds as there are bargains to be had, but it's generally the case.

Even more so as the OP is buying with a 95% mortgage. Could find themselves in negative equity very quickly if not buying at a rock bottom price! Obviously that only really affects them if they're going to sell in the foreseeable future. Would hate them to end up having to find money to make up the negative equity difference as well as saving a deposit on top. If there's that much cash floating about, they'd do better to save, save and save, then buy a 2 bed or have a larger deposit.

Don't presume you'll be allowed to rent it out. Freeholder, management company or mortgage provider might say no. Plus you'd have to buy or rent elsewhere - you might not be permitted a second mortgage, or you might not have the spare cash to rent.

Jx

GlynD

The one thing about property is that it will always gain in price. It may take time (market dependent) but it will go up. It's still the best investment you can make.

I still say OP is doing the right thing.

hazyjo

GlynD, do you think at 24, buying a one bed house/apartment is a good idea?

Agree with you to a certain extent, but only if he doesn't need to sell. If he meets someone (which he says he hopes to do), how long do you think a one bed apartment would suit them?

I just think he needs to think long term if buying small with a tiny deposit.

Jx

GlynD

hazyjo wrote: »

GlynD, do you think at 24, buying a one bed house/apartment is a good idea?

Agree with you to a certain extent, but only if he doesn't need to sell. If he meets someone (which he says he hopes to do), how long do you think a one bed apartment would suit them?

I just think he needs to think long term if buying small with a tiny deposit.

Jx

Jo I can't applaud the young man's ambition enough. Whether or not he has the common sense to let his life plan mirror that of his economic one is beyond me. Yes there are things you can't plan for but the same can be said of my own experiences; going from 1 bed flat to 2 bed, to 4 bed house and finally luxury bungalow. It's a path you have to plan and you have to keep the plan in mind all the time.

I really wish I'd had the good sense to start at 24 instead of waiting until I was 27.

Chimpofdoom

GlynD wrote: »

I really wish I'd had the good sense to start at 24 instead of waiting until I was 27.

What's wrong with starting at 27, calling me old?

I'm wondering how the OP arrived at 613.29 pcm...

My calculations get me at £630.18 for the first two years
(using 35 year repayment (maximum natwest allow), Mortgage at £128250 (5% deposit = £6750) and interest rate of 4.79%

19lottie82

GlynD wrote: »

The one thing about property is that it will always gain in price..

Really? I'll tell that to my friend who paid £148k for a new build and is now only worth about £106k.

She lives with her Bf now so rents it out. She can't sell it as she is in negative equity and loses about 4k a year on it.

She'll be delighted to know that!

T-faz

Acc72 wrote: »

To the OP - as this is the only post that you have "thanked" I guess that you have already made up your mind ?

I am not really sure what is going to happen in 4-5 years time but good luck.

My intention is to buy a house this year and not necessarily through this scheme or this particular apartment.

I have to decide upon the most suitable solution within the next two months so that I can get onto the property ladder. I also have my annual employment review coming up this July, and I could be in a better financial position after it. But, I want to budget everything with the income that I have now and not what it could be.

I went to see this apartment last week and I was told, by the sales team, that a similar block will be open for sale later this year. This leaves me with ample time to find the best deal or save enough to increase the deposit amount.

I am looking at all options that are available to me, and I will go through with purchase of a house this year.

So far I have gathered that a higher deposit would be better. Some have even stated that a second hand house would help save me against negative equity, but house prices might fall further later this year so that is an assumption.

I would also welcome any alternative suggestions to mortgage that members might have. Perhaps something like part buy part rent could be more affordable at this stage?

Chimpofdoom

T-faz wrote: »

I went to see this apartment last week and I was told, by the sales team, that a similar block will be open for sale later this year. This leaves me with ample time to find the best deal or save enough to increase the deposit amount.

Did the sales team give you an idea on factor fee's? Do they have an idea what band of council tax/water charges this property will incur?

All useful info for that budget

T-faz wrote: »

So far I have gathered that a higher deposit would be better. Some have even stated that a second hand house would help save me against negative equity, but house prices might fall further later this year so that is an assumption.

Higher deposit, lower mortgage is usually better, but it depends on circumstances.

Older properties have the advantage that a lender will be able to see the trend in house prices over the years, is the area popular and if it will be easy to sell should they need to repossess

New build don't have that luxury, for all you know, you could be buying a new build that turns into a run down estate (some councils are buying up unsold properties for new council housing).

T-faz wrote: »

I would also welcome any alternative suggestions to mortgage that members might have. Perhaps something like part buy part rent could be more affordable at this stage?

It all comes down to your situation. I'm 3 years older than you and I've got a 10% deposit, but property prices up here are significantly lower than london.

bitsandpieces

OP: if you're set on going for the new build, make sure to negotiate for the best possible deal. There's some advice here http://www.moneysavingexpert.com/team-blog/2012/04/17/my-new-build-tips-and-tricks/ If you don't negotiate a good price, there's a big risk you could be in negative equity from the minute you move in. You may find it's harder to negotiate if the flat is through the NewBuy scheme.

Make sure you've worked out your budget right - including things like service charge, and also giving some slack for events which may cost you money (not getting as big a bonus as expected, interest rates rising, maintenance needed on flat, etc). It sounds like you'll be tight financially.

In your situation, I don't think I'd buy the place. I'm slightly older than you and in a better situation with savings etc., but don't see the housing market shooting up - so am happy to rent for now. This means I can live in a nice flat, remain easily able to move when I need to do so for work, and save money for when I do eventually buy (my savings are worth more now than they would have been had I invested them in property a couple of years ago, even without the cost of buying/selling property etc.) Your situation may be different (rents are pretty reasonable here) but don't assume that you need to buy or that you need to hurry to buy now.

A significant risk in your situation is that your 5% deposit 'buys' you a flat that is worth less than the mortgage by the time you move in - you could literally end up paying for something that's worth less than nothing. Negative equity isn't such a problem unless you want to sell (or borrow more money) - but would you really want to stay in a 1-bed flat forever? You may choose to keep the property and rent after you have moved on, but you risk a situation where the rent doesn't cover the mortgage and you keep having to put more money in. If you need to move from the area, you could wind up renting a lousy place yourself in order to have enough spare cash to subsidise your money-losing flat rental! If you run into financial problems and can't sell due to negative equity, you could end up bankrupt.

You might feel house prices are going to rise quickly in the near future - in which case, buying ASAP would make sense. If not, though, I'd really consider how waiting a little longer and saving a bit more could let your achieve some of your goals without what looks to me like a pretty eye-watering risk of serious things going wrong - with consequences which might have negative effects on your life into your 30s and beyond.

GlynD

19lottie82 wrote: »

You said property is the best investment that you can make.

Does that sound like the best investment that she could have made?

Likewise in regards to the multiple posters in this forum that are trapped by properties that are in negative equity.

Buying property is not always the best path to take.

And there is no need to resort to personal insults.

You are not listening. You have a fixed point of view and are failing to note that there have been three recessions where property prices have crashed in the last 25 years. On all occasions they have come back up and will again. Your friend's property will too. In the meantime she takes the same risks as everybody else.

You introduced the sarcasm too. If you don't want someone to get shirty with you then stay polite.