95% Newbuy

samtr

Could someone please let me know the cons of these schemes? Everything I seem to read is bad on here, but in reality if it gets us on the ladder, and stop paying high rent then it is step in the right direction?

Im 25 and my partner is 24, we have a 6 month old son, and currently pay £600 rent a month. Where we are based, there is little on the rental market, and our current place is soon to be sold by the landlord.

We have been gifted £10,000, but with it being so hard to save much more we will struggle to raise that significantly.

Im after pro/con's so I can way up honestly if the schemes are worth it.

Thanks in advance

Sam

ItMightBeUsefulOneDay

samtr wrote: »

Could someone please let me know the cons of these schemes? Everything I seem to read is bad on here, but in reality if it gets us on the ladder, and stop paying high rent then it is step in the right direction?

They are bad for two main reasons. Firstly, newbuild houses on the whole are cheaply made, crammed together with others on some awful rabbit hutch estate, have tiny plots and even smaller rooms. To the extent that the showhome is often built larger, without internal doors and shown with specially made furniture that's smaller than real life. Some would say it's deliberate deception on the part of the builders.

The other reason is that newbuild houses are often overpriced, substantially. Like a car, that new premium disappears the moment you take possession of the keys. Lots of these building companies paid a massive premium for building land during the boom years which means they must sell for a certain price to get their money back, even if the houses they've built simply aren't worth that. This leads them to cut quality even further and cram houses onto plots even more densely. They are now desperate to keep the prices as high as possible, sell by any means possible in order not to make a huge loss on their land purchase. Hence the invention of newbuy or firstbuy or whatever they dress it up as.

These two facts mean your newbuild house will lose value very quickly. If you only have 5% equity to start with, that can swiftly put you into zero or negative equity. That means you will stuggle to move and struggle to change mortgages when your deal runs out. You end up "trapped" in an unsuitable house for your growing needs / wants while the bank ratchets up the pressure with premium interest rates for high LTV mortgages.

kidmugsy

From the ybs website:

The maximum LTV for mortgages on new build flats/apartments is restricted to 75%
The maximum LTV for mortgages on all other flats/apartments is 85%
We are unable to lend on ex-local authority flats/apartments
The maximum LTV for mortgages on new build houses is 85%
The maximum you can currently borrow on Interest Only is 75% LTV

Casp12er

I would suggest that you consider all the facts rather than others opinions good or otherwise on new build homes.

1. New build house prices have decreased faster than second hand in the last five years
2. New build houses are required to be built to a minimum standard, At today's levels, and are independently valued
3. All new build houses come with a 10 year NHBC Guarentee - this protects you as a purchaser and is something you don't get with a second hand house unless it's under 10 years old. This mitigates the risk of having to fork out for expensive repairs
4. NewBuy is only available on a capital and interest basis. Provided you are not moving within a couple of years your loan will start to reduce improving your loan to value and affording more remortgage opportunities
5. Under NewBuy once any fixed or discount term expires you can either remortgage or revert to the lender SVR ... All are currently at pretty low rates and you don't have to move your mortgage if you don't want to
6. NewBuy is a standard mortgage so no shared equity or second charges

At the end of the day you've got to like the place you are buying and be happy to live there. All this scheme doe is make sure you don't have to have a huge deposit. You still have to be able to afford the mortgage and meet the lender under writing criteria.

Hope that helps.

leveller2911

Casp12er wrote: »

3. All new build houses come with a 10 year NHBC Guarentee - this protects you as a purchaser and is something you don't get with a second hand house unless it's under 10 years old. This mitigates the risk of having to fork out for expensive repairs


The NHBC warranty has major issues in that it excludes more faults than it covers.The NHBC scheme is financed by the developers so there is a conflict of interest. I would also point out that many of the on-site checks that should be made by NHBC inspectors are never carried out and just signed off as being inspected.

I wouldn't put too much value on an NHBC warranty and there has been a fair few programmes on TV regarding the "Issues" the scheme has. There is little protection in truth from the warranty.