Worth buying my council flat? Help appreciated!

Riddar

Hi all,

Completely new to all of this, I wont babble on too much, I'll do my best to keep it straight to the point so you don't have to read a wall of text

I live in a council flat, 1st floor in a converted house, so there is only one neighbour downstairs (who is also council, and lovely btw). They have their own garden and so do we, so as far as communal areas are concerned, there aren't any really. The area is very good (houses average at 210k and hardly any council properties left) and the same/similar flats to mine have sold in the last 5 years at 100-120k.

Now, we are due to be a council tenant for 5 years next July, which means we qualify for a 50% discount. I value our flat at around 100-110k, so if we keep it at 100k for super basic maths, we would be offered it for 50k. Now, long term plan is, after 5 years (so we don't have to pay any of the discount back), we put the flat up for sale. For arguments sake, lets say the value is exactly the same in 5 years as it is today, that's 50k profit, right?.

The following points are what I understand so far:

• 125 year leasehold.
• After 5 years, sell, don't pay any of the discount back, = 50k profit.
• Flats sell well in the area, so resale shouldn't be an issue.
• Council will give us a figure on service/maintenance charges for the first 5 years.
• Mortgage payments will be £200 a month. Allowing us extra money to, I imagine, easily pay any service/maintenance charges.

I'm hoping after 5 years, sell the flat, and use whatever money I get from selling the flat (50k + whatever I've paid of the mortgage I assume?) as a deposit/equity? to buy a house on the same estate.

I'll leave it there, think I've covered everything. Please remember this is all VERY new to me and I'd really appreciate any advice/suggestions/concerns you may have with what I have said above.

Thanks everyone

darrensurrey

If someone sold me a house at 50% of its market value, I'd tear off their arm and shoulder with a bit of clavicle, too...








Off-topic but what I'd like to see is any profits being paid to the council rather than them just giving £50k away assuming no rise in value, seeing as the coffers are apparently empty.

SailorSam

When Maggie first brought the 'right to buy' thing out my Mum bought her house, i think it was about £6.5k she paid. Years later sold it for £25k and that gave her the step up to buy a nice house in a nice area.
People will say it's not right and social housing should always stay that but anyone that doesn't take advantage of the law as it is is an idiot. Imagine how much you'll waste if you carry on paying rent.

itch_for_a_glitch

It is a no brainer, buy it and sell on asp, the sooner all the social housing is sold off the better.

Riddar

SailorSam wrote: »

When Maggie first brought the 'right to buy' thing out my Mum bought her house, i think it was about £6.5k she paid. Years later sold it for £25k and that gave her the step up to buy a nice house in a nice area.
People will say it's not right and social housing should always stay that but anyone that doesn't take advantage of the law as it is is an idiot. Imagine how much you'll waste if you carry on paying rent.

That's my views exactly. My rent is £380 a month, yet the mortgage payments would be £200. Then when looking into the long term, it will give me that extra money to throw into a decent sized house in the same area. To me, its like a win/win.

But

I've always been one to believe, if it sounds to good to be true, it probably is. So just want others opinions to make sure I'm not missing anything important that would screw me over.

Thanks all for your replies, appreciated.

SailorSam

We still see some of my Mums old neighbours occasionally, a couple who didn't buy use to say they didn't care how much the rents went up 'cos the social security would always pay and those people who had got a mortgage were not always able to get that much extra in any benefits that they were paid. But that same next door neighbour is on her own now in a 3bed house, what's happening the bedroom tax comes along and she can't claim the full rent, so may end up getting evicted.
Hindsight is a wonderful thing.

somethingcorporate

Use a broker to make sure you get the most appropriate mortgage, from what I have gathered on these boards R2B mean only certain providers offer mortgages. If you continue to pay the same level of rent towards your mortgage you'd have quite a bit of equity knocked off over 5 years too, although you will need to start to factor in maintenance costs.

Riddar

somethingcorporate wrote: »

Use a broker to make sure you get the most appropriate mortgage, from what I have gathered on these boards R2B mean only certain providers offer mortgages. If you continue to pay the same level of rent towards your mortgage you'd have quite a bit of equity knocked off over 5 years too, although you will need to start to factor in maintenance costs.

I don't fully understand this equity thing. I'm guessing its what you've paid off the mortgage?

As for paying the £380 (what I pay to rent) towards the mortgage (£200 over a 25 yr period), would I be charged a fee for paying an extra £180 towards the mortgage each month? Or would it be better off having a shorter term mortgage? Just checking online with Tesco/Natwest/Barclays if the mortgage term was over 10 years, I'd only be paying on average £420 a month, which I can afford no problem. Would this be the wiser choice?

I'll be sure to use a broker and will be in touch with the council to see what the maintenance costs will be (they have to give you 5 years estimate on maintenance cost when they accept your right-to-buy application apparently which would be great considering I'll be selling it as soon as the 5 years are up).

Thanks for all your help everyone. Really do appreciate it.

Yorkie1

Riddar wrote: »

I don't fully understand this equity thing. I'm guessing its what you've paid off the mortgage?

It's the difference between what you owe on the mortgage and the value of the property.

As for paying the £380 (what I pay to rent) towards the mortgage (£200 over a 25 yr period), would I be charged a fee for paying an extra £180 towards the mortgage each month? Or would it be better off having a shorter term mortgage? Just checking online with Tesco/Natwest/Barclays if the mortgage term was over 10 years, I'd only be paying on average £420 a month, which I can afford no problem. Would this be the wiser choice?

You can usually overpay by a certain amount without a fee. You pay more interest over a longer mortgage term but don't put yourself in a position where if interest rates went up you'd be struggling. Overpaying = more flexibility but more discipline needed.

I'll be sure to use a broker and will be in touch with the council to see what the maintenance costs will be (they have to give you 5 years estimate on maintenance cost when they accept your right-to-buy application apparently which would be great considering I'll be selling it as soon as the 5 years are up).

Thanks for all your help everyone. Really do appreciate it.

Riddar

Yorkie1 wrote: »

It's the difference between what you owe on the mortgage and the value of the property.



You can usually overpay by a certain amount without a fee. You pay more interest over a longer mortgage term but don't put yourself in a position where if interest rates went up you'd be struggling. Overpaying = more flexibility but more discipline needed.

Thanks for clearing that up for me Yorkie1, appreciated.

JimmyTheWig

Riddar wrote: »

I've always been one to believe, if it sounds to good to be true, it probably is.

You are right. It is too good to be true. This £50k doesn't just magic out of nowhere.
The problem, as you have identified, is that there are

Riddar wrote: »

hardly any council properties left

Fortunately, for you, you aren't the one losing out on this offer that sounds too good to be true.

I'm not in favour of the scheme, because it depletes the social housing stock which isn't replaced, but for an individual it's a great thing to be able to do.