New Build Disaster - help needed!

sm9ai

If you go down the letting route do not expect rental to cover the mortgage plus other expenses. You might get around 70-80% covered.

Newbuilds are like new cars, they loose a lot of their value early on.

However where they differ is that the land a newbuild is on goes up.

You paid a premium to live in a nice shiny new apartment. Unfortunatly there is probably more depreciation to come.

Not very helpful but probably useful to know what is happening.

haymans74

Thank you for all the help and advice folks.

sm9ai, if we could only get 70/80% covered, is it possible to get a lender to agree to that? We would subsidise and cover the rest of the mortgage payment as with reducing our residential mortgage we will have some spare cash. I was under the impression that you need at least 100% rental income to secure a BTL mortgage?

devils_advocate

You're in a situation through no fault of your own, and because of your need to move, it could be painful to get out of (sorry to be blunt).

I don't think that even the most optimistic bull on here will think that you can get £245,000 for your flat. You say you can't afford to sell it for less than this, but you may have to, and take the hit. You dont say how affordable the mortgage payments are to you at the moment, but assuming you're on inteerest only, its costing you £871.56 per month.

But this is a fixed rate mortgage, taken out last june before the recent interest rate rises. So allow me to do a crude valuation of your flat in the current interest rate enviroment.

When you got your mortgage, base rates were 4.5%. Your fixed rate was 0.19 of a % above this. Base rates currently are 5.75% so assuming the same circumstances apply to a new buyer as you, assume they can get a fixed rate mortgage at 5.94%. If they can afford the same as you, £871.56 per month, this would support an interest only mortgage of £176,072 at a rate of 5.94%. Taking this 'loss of purchasing power' from your original price
means that the flat value is £198,073 at todays interest rates.

My advice to you is to sell for as much as you can get at the moment. Look on whatever is in excess of £198,000 as profit. There is a timebomb waiting to go off due to interest rate rises. If you're one of the first to realise it, your hurt will be less than those who realise later.

Edited to add : if you take the loss of purchasing power from the appraised value, its current value is therefore £183,073.

haymans74

We're on a repayment mortgage - so £1135 per month (taking into account a small mortgage break we took to get married and pay for the wedding).

Guy_Montag

haymans74 wrote: »

Thank you for all the help and advice folks.

sm9ai, if we could only get 70/80% covered, is it possible to get a lender to agree to that? We would subsidise and cover the rest of the mortgage payment as with reducing our residential mortgage we will have some spare cash. I was under the impression that you need at least 100% rental income to secure a BTL mortgage?

Kensington (we'll take your first born's soul as deposit) Mortgages will do those. If you're already subsidising the rent you're in trouble - how can you compete against people who don't need to do that?

Try to be objective, make a business decision.

Doozergirl

Lenders are going to be tightening their criteria for BTL. I think by even attempting to let the flat, you are digging yourself in further. The fact that your current mortgage company will not give you consent to let means that they do not think that BTL is a viable investment.

I wouldn't ignore that fact. You made one quite large mistake when you ignored their initial valuation which, it turns out, was an appropriate one. Now you don't want to listen when they are suggesting that BTL is a further waste of your money.

New build apartments have finally appeared in the news as being bad news in terms of investment and we have recently seen a lot of people in a similar situation to you on this board. I agree that shiny flats do turn into just regular, run of the mill flats and that any premium will continue to dwindle over the next few years. And they still continue to build them - an astounding 1 in 2 new builds is a flat! The market will be saturated further.

That money has gone; you must try and see that. You are lucky that you are planning to move to a cheaper area as it means you may actually be able to afford to move and are not stuck. If you did move, you would stand as much chance of recouping that loss on your next house as you would on this new build.

Dead_Eye_Jones

Quick check of the OP's earlier posts and this thread actually seems for real. Sorry for my cynicism but there are plenty of people wishing for a collapse in the housing market and this is just the sort of thread that they would conjour up! So yes there are a few people in this predicament but sadly some are just winding us up! Kind of sick really.

If I were you, Id cut my losses and move. tbh Id never buy a flat because the risk of getting stuck there is too great and no one wants to live in a flat for the rest of their lives. Its a shame because there are still towns in London where you can buy a whole house for the price of that 1 bed flat - thats what you are competing with!

phlash

There will be alot more stories like this and worse in time to come. It may not feel like it now, but you might really kick yourself if you don't sell at around the £220K mark. The flats in your area only have to go down 10% for you to then owe £22K.
Taking the hit may be painful, but its not as painful as being in negative equity.
I do feel for you, but you might be one of the lucky ones who can stop their loss and limit the damage.
Good luck.

keeperbear

haymans74 wrote: »

We paid £245,000 for a 2 bedroom, 2 bathroom flat. We put down 5% deposit, Barratts matched our 5% plus paid our legal fees and stamp duty.



We have a mortgage of £223,000 on a fixed rate of 4.69% until Feb 08.

The price you paid does seem high for a property located in Feltham, but it was a new build. Unfortunately, you are hardly ever going to break even on a property purchase where you need to sell immediately. At least you didn't pay the stamp duty and legal fees. I would cut my losses on the property and move, but can you delay moving?

haymans74

Yes we can delay. It's not immediately urgent. It's a two bedroom flat so even if we decide to have children in the near future we can stay here a couple of years before it becomes more urgent to move to a house. IDEALLY, we would move now. But unfortunately we don't live in a perfect world.