Help needed - Due to exchange and baby on the way

Whty271

Hi Everyone,
My wife and I are looking for a bit of advice/ideas/guidance:
- We have been renting a few years and saved up a deposit for a house.
- Late last year we found our dream (new build) house and made a reservation before they started building, 
- We moved in with my wifes parents in January to save a few extra quid for a few months before we move in, 
- We were due to exchange just as the lockdown started so have held off, and were due to complete around end of April (would be about 5 weeks after the builders go back now).
- We are buying with a 5% deposit and 20% Help to buy equity loan so am obviously concerned that we could be in negative equity when we go to remortgage adding in the equity loan in 5 years.
- We also had the great news a few weeks ago that we are pregnant with our first baby due in October, so we really need to be in some sort of home before September.

Now we are trying to work out what the best option is for us, so far we have:
a) Exchange once lockdown finished and complete asap. + stable house for our new family     - but possible negative equity in 5 years/overpaying considering expected house prices drop.
b) Rent for a year or so and buy next year. Looks like HTB will be extended for another year for non FTB (I purchased in 2007 and lost out). + may be able to buy a better house next year if prices drop and minimise risk of negative equity           - but will waste another year in rent money and moving around a fair bit with a pregnant wife or baby.
c) Buy somewhere cheaper now so our risk is minimised.

We don't really see staying where we are living with my wifes parents as an option with a new born.
We're now not really sure what to do, any ideas or backing any of the above options may really help us to come to a decision.
Thanks

Comms69

Tbh if you arent going to be moving for next 4-5 years then the house price is a smaller concern. 
But if you are risk averse, renting is a sensible option. 

steampowered

While you describe rent as "wasted" money, you would also be wasting money with the house purchase. Mortgage interest; lender fees; solicitor fees; remortgage fees; cost of getting rid of the equity loan - this is all "wasted" money too.

If you think you will be in the house for at least 5 years I'd go ahead. If not, I'd look into renting for a year or two, especially if you could use that time to save a higher deposit.

RelievedSheff

If this is to be a long term home then it really doesn't matter if prices do dip.

You say it is a "dream home" so really would you risk losing it?

When the time comes to pay back the 20% of the HTB loan you only pay that on what the property is worth at the time you remortgage I believe so you wouldn't really  lose out there.

Plus you need to factor in what an extra year or so of renting will cost as that will be dead money.

Whty271

Thanks for your replies, we plan on living there for 5-8 years.
My worry is at the 5 year mark, if prices dip 20% over the next 12 months (also factoring in we are buying a new build) and only recover 1-2% per year after then we would be very close to negative equity at the 5 year mark.

Socajam

Late last year we found our dream (new build) house and made a reservation before they started building,

Why do people think their first home or a house that someone else renovated is their "dream" house?
How does one explain a "dream" house.  You could move into the house and then find out all manner of things that is wrong that you never expected.
For me my "dream" house is something that I have designed and built myself, containing all of the things that I expect to make my life extremely comfortable - especially in this corona virus age that we are living in.

GDB2222

I disagree with the notion that it doesn't matter if prices drop by 20%, provided you plan to stay in the house a few years. You'll obviously be saving a fortune in mortgage payments if you buy this house or a comparable one in a year's time for less money. That saving will swamp what you pay in rent for a year.

There are risks of waiting, of course. The HTB scheme may end, you may not be able to get a mortgage, or the supply of properties on the market may dry up, or prices may stubbornly refuse to drop. On the other hand, if you proceed now, the developer could go bust, and you could end up on a half-finished estate. Or you could end up in negative equity, paying the SVR on your mortgage for years.

Whty271

Cheers, sounds like 2 votes for carrying on and 2 for renting - a tricky one. Thanks everyone for your input

GDB2222

Whty271 said:

Cheers, sounds like 2 votes for carrying on and 2 for renting - a tricky one. Thanks everyone for your input

That's a reasonable summary of the consensus view.

[Deleted User]

BUT the house could be as you expect, house prices might not drop as much as people say (or could rise much faster than the very low level you are quoting if they do drop).  If you are planning on living there 5-8 years, I'd carry on.  Remember there are a lot of people putting off moving right now because of nervousness about house devaluations, and they are all going to come back onto the market once this lockdown ends, eager to buy.  This has to cause house prices to rise again.Obviously we are in unique circumstances, no one can predict what will happen but people will always need somewhere to live, so house prices will recover.

macman

Subject to finance being available, it's probably a good time to be an FTB. You can cut deals with the vendor, the conveyancer...and vendors should be able to negotiate much cheaper deals with EA's at present than the standard 1%.