FTB: How much % under to offer?

JenniferMcConnell

Yes the house is in SW London suburbs.
We won’t be doing any restructuring initially, just a basic kitchen and bathroom and fixing the damp. I really hope that the builder on Saturday doesn’t quote £100k for that! I just want to do enough that gets us in the house. Fancy things can come in a few years time.

edward2113

JenniferMcConnell said:

Yes the house is in SW London suburbs.
We won’t be doing any restructuring initially, just a basic kitchen and bathroom and fixing the damp. I really hope that the builder on Saturday doesn’t quote £100k for that! I just want to do enough that gets us in the house. Fancy things can come in a few years time.

A basic kitchen should be no more than 10k, a bathroom another 10k, fixing the damp as far as I'm aware could potentially be one of the money pits with a home renovation, so I think this one might be more difficult to gauge. In any case doing just these things should be well above 100k.

The issue in this case would be possible negative equity. As 5 year fixed mortgages make no sense at the moment, I am guessing you are going in for a 2 year fixed mortgage? If so, predictions currently stand for a 5-10% house price drop later in the year. Worse case scenario, in two years time you might be in 50k negative equity. With a say 30k renovation on top, this means that to proceed without any worries with this, you ideally need to have more than 80k cash at the moment. If not, you are looking into spending the next 2 years going to bed with the thought of (possibly) not being able to remortgage.

Of course, there is always the chance of not having any price drop at all, however small it might be. Bottom line is, you have to be a very big risk taker in order to continue with this.

JenniferMcConnell

The mortgage we have been offered is 5 years at 1.86%

JenniferMcConnell

But I’m hearing a lot of people warn against risk taking and I’m starting to think this is a bad idea moving forward. 

gwynlas

I would be tempted to use covid to your advantage. I do not know what you can afford but would cetainly pt in a low offer given current uncertainty and make thi clear to the EA. Most buyers want to move into  finished home and have not got the funds or skills to take on a project

JenniferMcConnell

Thanks gywnlas, it’s just knowing how much to go under! 

dani17

Having a baby like you, i would avoid buying house in a such condition. i would prefer even a smaller one in better condition. 

Competsoph

@edward2113
Why are 5 year mortgages bad at this stage? If you can fix at a significantly low rate, I struggle to see the issue?

JenniferMcConnell

@Competsoph yes I wondered the same thing! From what I hear, 1.86% isn’t too bad and it’s better to secure that low rate for as long as possible. Unless I have that completely wrong?

snollygoster7

JenniferMcConnell said:

Thanks gywnlas, it’s just knowing how much to go under! 

Be bold. Can always go up but rarely down. Start low