New Buy Mortgages- Advice Needed

BeachCat

Hello all, I'm quite new to this forum so please be gentle

My boyfriend and I are saving to buy a house costing around £200k, we are first time buyers and earn enough to be able to get a mortgage for that amount.

We want to go for a new build house and we are interested in the New Buy scheme. We currently have a 5% deposit (plus enough to cover stamp duty, legal costs etc) and so we could buy a house now if we wanted however the mortgage rate would be quite high at 5.5%. If we saved a 10% deposit (which would take us a further year) we could get a rate of around 4.35%.

My main question is, is it worth taking the plunge and getting on the property ladder asap by accepting the higher rate and buying now with a 5% deposit?

OR

waiting a year to save a 10% deposit and waste another year's worth of money on rent (£750 pcm between us) to get the lower rate (and obviously borrow less) but potentially miss out on the nice houses we've found and love?

Any advice you could give would be much appreciated, thanks in advance

brit1234

Better off waiting a year and saving a bigger deposit. You are not waisting money by renting, buying now you will be in negative equity with the price falls and be on even higher mortgage rates by the time to remortgage.

The euro crisis will push up mortgage rates further and when the spotlight turns to the UK they will go even higher.

Bigger deposits are best all round.

ACG

Ignore Brit - look at his posts on this forum...hes a very biter person because he cant get on the property ladder himself.

you need to work out how much extra it would cost you mortgage payments to get a mortgage now compared to on the lower rate in 12 months time - this will help to work out the cost difference.

Things that can change are:
Rate available in 12 months time compared to now (could be better or worse).
New builds do tend to lose value when theyre bought for the first few years...if your not planning on selling then it shouldnt be an issue, so long as your happy where your living it doesnt matter at the value.

kingstreet

Who is lending 90% on a newbuild at 4.35%, or does the 10% deposit mean you'll go second hand?

brit1234

ACG wrote: »

Ignore Brit - look at his posts on this forum...hes a very biter person because he cant get on the property ladder himself.

ACG you are wrong. I can afford to get on the property ladder easily its a choose not to. See by saving a large deposit and costs I have the freedom to buy when the time is right.

By saving a deposit I am not dependant on dodgy schemes like Newbuy which will leave you worse off.

Surely you being a mortgage advisor would recomend the biggest deposit you can get in a certain time. At least you have backed me when you informed the OP that new builds fall in value after purchase.

gingeralan

The big problem with the newbuy scheme is what are you going to do once thir initial deal has ended? If you don't overpay then you won't pay off very much of the mortgage so it will be difficult/impossible to get a competitive rate come renewal time.

I will nail my flag to the mast and state that I have bought a property about 6 months ago so I am not bitter or jealous before any of u start. I do not think new buy is very good, high rates and an almost certainty of negative equity. This attitude of just being able to afford the monthly payment had led to this horrendous situation where people are up to their eyeballs in debt as they just look at the monthly payment and not the inevitably large amount they are borrowing.

Save for your deposit, look around there are plenty of properties around, don't feel rushed our worry about losing a property, the right one will be there when the time comes.

Regards

harvey115

This is more of a personal choice. I would deal with the situation this way:

1) Have I found the right home to buy?
2) Am I going to need to move out of the house within a few years?
3) Do I have enough money to afford the house?
4) Will there be any restrictions on borrowing if you select certain house?


The problem with NewBuy is that you have to select the right developer and the right lender. Both should be in the scheme and should be connected through the scheme as well.

One thing to keep in mind. If you have found a good house in a New Build area. Find out if there are more houses releasing in the future. You might get a better house in the next release cycle when you might also have better deposit and may not even require this scheme at all. All is dependent on the right time for you, if you think it is the right time for you then go ahead.

BeachCat

Thanks everyone. As both myself and my boyfriend are both quite risk averse, we have decided to aim for the 10% deposit. We would still hope to get a mortgage under the Newbuy scheme as we would need a 15% deposit to get a 'regular' mortgage with a similar rate.

One option that the developer (Taylor Whimpey) has suggested to us is 'gifted deposit' where they could potentially gift us 5% deposit to top us up to 10 or 15%.

Does anyone have any experience of this and do mortgage lenders treat the cash like a regular deposit we had stumped up ourselves?

JPB123

BeachCat wrote: »

Thanks everyone. As both myself and my boyfriend are both quite risk averse, we have decided to aim for the 10% deposit. We would still hope to get a mortgage under the Newbuy scheme as we would need a 15% deposit to get a 'regular' mortgage with a similar rate.

One option that the developer (Taylor Whimpey) has suggested to us is 'gifted deposit' where they could potentially gift us 5% deposit to top us up to 10 or 15%.

Does anyone have any experience of this and do mortgage lenders treat the cash like a regular deposit we had stumped up ourselves?

As long as you are putting in funds from your own resources, there are a number of mainstream lenders who will do this for you. Others will just net the 5% deposit from the purchase price and apply the usual LTV criteria.

Max LTV on New Build will also be affected by whether this is for a house / flat.

I am an Independent Mortgage Adviser


You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.