Just bought a house, wrong move?

Reason123

Hey guys

Bit of a long one, but could do with a little advice.
Actually only registered today after seeing an add in the sun!

Ive read for a few hours through various posts, and im now a little worried.
To be honest i wish i come across this site for advice a few months ago!

Basically both me and my GF are in our early 20's. Been renting for a few years and decided to buy.

Combined salary of 42k, debts of 12.5k, No deposit, saved 3k for fees

We have bought a 2 bed house in essex for 143.5k. around the area its on the cheaper side as it needs restoration (full decor + new bathroom & Kitchen).

but plus 12.5k debt. so they (countywide with northern rock) worked out 95% house value £136'325 mortgage + £19'675 loan to cover 5% deposit and debt.

so total borrowing 156k.

As i was told by the selling agent the house would be worth 155k with the kitchen/bathroom/decor done, countrywide said that with the current market increase on average of 5% my house in 2 years time 'should' be worth 170k. I have taken a 2 year fixed rate at 6.95% interest only.
He therefore sold it to me that in 2 years time my 156k borrowing with be about 90% of the house's futue value. Then being able to get a good deal/rate elewhere...

So my question is, have i been !!!!!!ed? Or will I in 2 years be !!!!!!ed? Especially with whats happening over in the US and the stock market etc.

Any advice or msg like 'you idiot' welcome.

Many Thanks

izzybusy23

Reason123 wrote: »

Hey guys

Bit of a long one, but could do with a little advice.
Actually only registered today after seeing an add in the sun!

Ive read for a few hours through various posts, and im now a little worried.
To be honest i wish i come across this site for advice a few months ago!

Basically both me and my GF are in our early 20's. Been renting for a few years and decided to buy.

Combined salary of 42k, debts of 12.5k, No deposit, saved 3k for fees

We have bought a 2 bed house in essex for 143.5k. around the area its on the cheaper side as it needs restoration (full decor + new bathroom & Kitchen).

but plus 12.5k debt. so they (countywide with northern rock) worked out 95% house value £136'325 mortgage + £19'675 loan to cover 5% deposit and debt.

so total borrowing 156k.

As i was told by the selling agent the house would be worth 155k with the kitchen/bathroom/decor done, countrywide said that with the current market increase on average of 5% my house in 2 years time 'should' be worth 170k. I have taken a 2 year fixed rate at 6.95% interest only.
He therefore sold it to me that in 2 years time my 156k borrowing with be about 90% of the house's futue value. Then being able to get a good deal/rate elewhere...

So my question is, have i been !!!!!!ed? Or will I in 2 years be !!!!!!ed? Especially with whats happening over in the US and the stock market etc.

Any advice or msg like 'you idiot' welcome.

Many Thanks

God, if you are worried reading this website then don't venture over to the housepricecrash website then... that will have you quaking in the corner!

Personally I don't think its the right time to buy as interest rates are hitting home, a mass credit crunch is underway (especially after stock market took a nosedive last week), repossession are on the rise and so are IVA's and bankrupcies as people are finding times hard.

I believe we will see a mass correction in the housing market, but thats not helping your fears at present, apologies. As long as you have bought your house as a home and not an investment and have factored in all your overheads and debts properly and have some sort of cushioning then you should be safe from any downward turn.

Gorgeous_George

you idiot





Seriously, you could have come on here 5 years ago and been advised not to buy as a crash was imminent. I never recommend 2 year fixes.

GG

Doozergirl

Well, at least you've only borrowed 3x joint salary and you know what you will paying for the next two years, which is currently over the odds because of the amount you borrowed.

I suggest you do your best to save, save, save over the next two years - no-one is in a position to tell you what your house will be worth at all. I'm more annoyed that you used Countrywide instead of a whole of market broker, which you will do in two years time!

In two years, if the house is worth the same, you will need some sort of deposit to put towards your remortgage if you want to get a better (equivalent) interest rate at that point.

You must not accrue further debt or you could get yourself into trouble! If anything does happen to the market/economy, I doubt a 100%+ mortgage would be available at that point.

Reason123

Izzybusy23 - Thank you indeed have added to my worry. But its a home ive bought. Not intending to sell to make a buck. But ive been over to Housepricecrash and had a look at there graphs. For outer london its all up?? The month of August has a slight drop as has the last 5 years Augusts though? Maybe im looking at the wrong part?

GG - Thank you for the idiot comment. Yeah people at work mention that a crash was coming for the past 5 or so years although never come? Not to sure what the means? Suppose its round the corner until its comes...
Why would you not recommend 2 years fixed?

Cheers

Lavendyr

Reason123 wrote: »

Combined salary of 42k, debts of 12.5k, No deposit, saved 3k for fees

If you'd come on here with those figures (especially if that 42k income is before tax) I expect most people would have advised you not to buy just yet, but to clear the debt and save a deposit first - myself included, I'm afraid.

Reason123 wrote: »

We have bought a 2 bed house in essex for 143.5k. around the area its on the cheaper side as it needs restoration (full decor + new bathroom & Kitchen).

So you need to spend yet more money on it to do it up? How much will that be exactly? Is it something you are planning to do in order to increase the value of the house, or are you relying purely on house prices going up?

Reason123 wrote: »

so total borrowing 156k.

Are you on an interest only or repayment mortgage? How much are your monthly repayments and what is your monthly income (i.e. take-home, after tax/NICs)? How much of your 12.5k debt are you paying off per month? What happens if your girlfriend falls pregnant, or one of you falls ill and cannot work, or if you lose your job, or if you split up, or if interest rates are whacked up after 2 years? Have you got enough left over from your income to be able to cope?

Reason123 wrote: »

As i was told by the selling agent the house would be worth 155k with the kitchen/bathroom/decor done, countrywide said that with the current market increase on average of 5% my house in 2 years time 'should' be worth 170k.

Even if you do the restoration work, there is no such thing as "should" in house prices. What they have said to you only holds true if the future mirrors the past, and there is absolutely no guarantee of that. You say you've heard about the Northern Rock and Countrywide share slumps in the past week - the value of their companies has been plummeting because they have been lending money to sub-prime prospects (that's you) and now can't get it back because those same sub-primes can't afford the repayments.

Reason123 wrote: »

So my question is, have i been !!!!!!ed? Or will I in 2 years be !!!!!!ed? Especially with whats happening over in the US and the stock market etc.

You could be in a difficult situation, especially if you have no financial 'slack' in case something goes wrong. However, the market may continue to rise after all. At the end of the day it's impossible to tell. I will give you my situation: my OH and I earn nearly £50k before tax, have no debts aside from my student loan, and have substantial savings, and we would not buy in the current climate, preferring to rent and save the difference between the rental and the mortgage towards a bigger deposit - meaning that we will eventually have to borrow less when we do come to buy. It''s just too uncertain.

I hope things work out OK for you and your GF, I really do, but I would not be certain that taking on a mortgage in your situation, betting on house prices rising, was a sensible thing to do at this time.

Reason123

Doozegirl - "used Countrywide instead of a whole of market broker" Unfortunatley the first estate agents i walked in to have a look at houses pushed me towards their countrywide advisor, and the rest is history.
But what do you mean about a whole of market broker?

daphne_descends

Reason123 wrote: »

But its a home ive bought.

Personally I think if this is the case, the value of your house in the market doesn't mean much. It's a marathon, not a sprint.

Lavendyr

Whole of market broker is just that - someone who looks across the whole market to find you the best deal.

Have a look at Martin's article here:

http://www.moneysavingexpert.com/mortgages/best-mortgages-cashback

Reason123

Lavendyr - Of course i realise that the best way to buy is debt free and a deposit. But because of my debt and needing to save it would be at least 5 years before we could buy. I compared the difference with the last 5 years house price increase and felt sooner the better.

Because most of my family and friends are in the building trade, i get work done for a case of beer. So materials of about £1000 over the next couple of years ive budgetted for.

Im on interest only 926 a month.
after alls bills etc between us we are left with about 800 a month to play with. The 12.5k is working out to be 125 a month inc in the 926 a month

And i realise im the high risk...

Reason123

Ah, so you mean Countrywide are stuck to a panel of half the market say?