Final stages of buying (Advice needed)!

sp_84

Hi everyone, 
I've been reading the forums for weeks and everyone seems really responsive so I thought I would try to get some opinions on my current situation. Sorry for the post being so long, but I want to give an accurate feel for the situation.

I am a FTB and have been sale agreed since August 2019. The sellers did not want to move out before Christmas and when things got rolling in the New Year, COVID stopped everything in its tracks. 

The house is in a highly desirable area and others had been bidding. The seller went with my wife and I - even though we offered 1k less than another bidder. The house was highly sought after and is in a great school area for our daughter. It is a house we plan on being in for 10+ years (if not forever).

To give some context, we moved back to the UK 4 years ago after living abroad. We have been living with family ever since moving back and it is time we had our own place. It feels like life has been on pause now for quite a while.

We are putting down an 11% deposit and now that the housing market has reopened, we are only waiting on updated certificates and searches before signing. 

Obviously my biggest fear (like many others) is negative equity, especially when I go to remortgage in 2 years time. I have been assured by several people that even if I am in negative equity, banks will still give you "deals" - to avoid going to the standard variable rate. I have worked it out that I would need the house to be worth 13% less in 2 years time, than it is now, for me to be in negative equity. 

Obviously other than the initial outlay of the deposit, the mortgage cost per month will be cheaper than renting.  My solicitor is wanting me to put it in writing that I want to proceed ... about negative equity ... And stating that they accept no responsibility if that does happen. (I know this is also them covering their backs). 

I have weighed up the pros and cons ... And the ONLY con, is the effect on property prices. 

We are in Northern Ireland (just outside Belfast). From what I have read (and I know it's not an exact science) - many are saying that because we haven't had a property "boom" here, there may not be a "crash". House prices here have not risen artificially to anywhere near what they were in 2007/2008 and so our base starting price would be lower than say, parts of England. 

I'm just curious to hear some opinions - our options involve 1) going through with it and signing for the house 2) renting ... we can't stay in the living situation we are in at the minute, purely through needing more space. 

Thanks !!

moneysavinghero

The sellers seem to be messing you around big style. Sale agreed in August , you should be in the property by now. Even if you did mutually agree to wait until after Christmas, that's a whole 3 and half months between Christmas and Lockdown hitting. Did you not do all the legal work in the 4 months between August and Christmas? So all you had to do was move in after Christmas. Something seems very fishy. At the very least you should be requesting a discount considering the price agreed almost a year ago.

sp_84

moneysavinghero said:

The sellers seem to be messing you around big style. Sale agreed in August , you should be in the property by now. Even if you did mutually agree to wait until after Christmas, that's a whole 3 and half months between Christmas and Lockdown hitting. Did you not do all the legal work in the 4 months between August and Christmas? So all you had to do was move in after Christmas. Something seems very fishy. At the very least you should be requesting a discount considering the price agreed almost a year ago.

Thanks for the reply! 
It was actually nothing to do with the sellers - the reason they didn't want to move out before Christmas was because the house they are moving into, is an absolute mess. Needs a lot of renovation and they have 2 small kids. They wanted one last Christmas in their home. Which was fine with me. 

Then after agreeing a mortgage with a 10% deposit, my bank moved the goalposts and wanted 15% instead. I asked the sellers would they be ok waiting on me trying to get another lender. They were accomodating and said that was ok as long as it didn't drag on.

I ended up getting a new lender in  January- my mortgage broker was able  to get me another lender at 11% deposit. This is the offer I have on the table now.

All the paperwork and approval for that offer came through around 5th March ... Then lockdown. 

With regards to all the legal side of things ... Everything was already done before my new mortgage offer. But the searches and certificates have since expired.

I believe that here in NI those cannot be applied for electronically and we had to wait on land registry re-opening (which they now have) - we are a little behind the times compared to the rest of the UK!

I know the price isn't necessarily relative to the rest of the UK ... But to give you an idea. It was put up on the market for £155k and we got it for £159k (another bidder offered £160k). A detached house in the same area just went on the market a few days ago for £180k. Ours is a semi. 

I'm not even worried about a short term dip in prices, seeing as I plan on staying there a long time - it's more at the stage when I go to remortgage at the end of my current deal - so 2022. 

Hope that makes sense. 

sp_84

I would also like to add because I know that many people here will be from England so the market (in terms of pricing) will be different. 

What I mean about no "boom" therefore no "crash" in relation to Northern Ireland ... Is that in 2007 my brother bought a 2 bed apartment for over £200k ... Prices have not risen to anywhere near those levels again. The house I have agreed is a semi-detached with a double garage for £159k. 

Windofchange

If it were me I would just buy and get on with my life. We are in a similar position, though haven't waited quite as long as you since having our offer accepted in January. Our chain is complicated with another vendor insisting they can't move until Autumn, so we could be looking at about a year from offer to completion if it ever happens. Prices would really need to tank for me to consider pulling out at this stage. The thing with negative equity is it only matters if you need to sell. We are also looking to be in our new house for 20 + years whilst we bring up a family, and it is large enough for us to grow into. Any short term dip in prices now is going to be of little consequence to us, and working in the NHS we both have secure jobs. Speaking with our broker about re-mortgaging in 2 years, he confirmed what you said in that the bank will offer us a new rate regardless of circumstance. It is only if you want to re-mortgage with another lender that you will need to go through the usual checks. With a 10% deposit and 2 years of payments we should have 15% equity by the time it comes to re-mortgage, and I personally don't see prices in London going down anything like that. In short though, I don't care as unless something horrible happens like divorce or one of us dying then we aren't planning to sell up anyway. 

sp_84

Windofchange said:

If it were me I would just buy and get on with my life. We are in a similar position, though haven't waited quite as long as you since having our offer accepted in January. Our chain is complicated with another vendor insisting they can't move until Autumn, so we could be looking at about a year from offer to completion if it ever happens. Prices would really need to tank for me to consider pulling out at this stage. The thing with negative equity is it only matters if you need to sell. We are also looking to be in our new house for 20 + years whilst we bring up a family, and it is large enough for us to grow into. Any short term dip in prices now is going to be of little consequence to us, and working in the NHS we both have secure jobs. Speaking with our broker about re-mortgaging in 2 years, he confirmed what you said in that the bank will offer us a new rate regardless of circumstance. It is only if you want to re-mortgage with another lender that you will need to go through the usual checks. With a 10% deposit and 2 years of payments we should have 15% equity by the time it comes to re-mortgage, and I personally don't see prices in London going down anything like that. In short though, I don't care as unless something horrible happens like divorce or one of us dying then we aren't planning to sell up anyway. 

Yea that sounds very similar to me! We already have 1 little one and would like to grow as a family. That's just not possible with our current living circumstances. We want to get on with life, but the fear of being in negative equity has just thrown a spanner in the works. We will have 13% equity in the house in 2 years time. 

Obviously predictions of % drops are different for each region. For NI the worse case scenario has predicted a 16% fall - but even then, that won't be across the board, only in certain areas. 

If I pull out of the transaction and go rent (which is the only alternative) - I may find that lending criteria is stricter in say 1 years time.

Also a lot of what I have been reading (I'm no expert obviously) says that house prices are dependent on supply and demand. Here, demand would outweigh supply, I'm sure like parts of England. At the end of the day - people need a place to live.

The ONLY thing that is giving me second thoughts is that I see some people online, (armchair economists) predict that prices will go down 30%-50% !

I know those numbers are just probably pulled from thin air - but it still makes for uneasy reading 😟😟😟

Douve87

Nobody knows what will happen with house prices. Before covid it was brexit, after covid it will be brexit again and after brexit it will be something else. People are always predicting crashes and eventually they are right as capatalism is boom and bust. But imo that shouldn't stop you living your life especially if youre not buying it as an investment or to sell on in the short term. As property value drops wont affect you (barring the circumstances the other person said death and divorce that may necessitate a sell). Again as youve been told your existing lender will have to offer you a new  product at the end of exisiting product even if negative equity occurs, you just may not be able to change lender. The rate of a new product may be higher than now but once again that could be the case in the future anyway(even if youre in a lower ltv bracket). Ultimately its your decision but i wouldnt let it stop me living my life.

Miranda25

Douve87 said:

Nobody knows what will happen with house prices. Before covid it was brexit, after covid it will be brexit again and after brexit it will be something else. People are always predicting crashes and eventually they are right as capatalism is boom and bust. But imo that shouldn't stop you living your life especially if youre not buying it as an investment or to sell on in the short term. As property value drops wont affect you (barring the circumstances the other person said death and divorce that may necessitate a sell). Again as youve been told your existing lender will have to offer you a new  product at the end of exisiting product even if negative equity occurs, you just may not be able to change lender. The rate of a new product may be higher than now but once again that could be the case in the future anyway(even if youre in a lower ltv bracket). Ultimately its your decision but i wouldnt let it stop me living my life.

After brexit will be second wave of covid:
https://www.theguardian.com/commentisfree/2020/jun/21/beijing-coronavirus-second-wave-virus-china

sp_84

Miranda25 said:

Douve87 said:

Nobody knows what will happen with house prices. Before covid it was brexit, after covid it will be brexit again and after brexit it will be something else. People are always predicting crashes and eventually they are right as capatalism is boom and bust. But imo that shouldn't stop you living your life especially if youre not buying it as an investment or to sell on in the short term. As property value drops wont affect you (barring the circumstances the other person said death and divorce that may necessitate a sell). Again as youve been told your existing lender will have to offer you a new  product at the end of exisiting product even if negative equity occurs, you just may not be able to change lender. The rate of a new product may be higher than now but once again that could be the case in the future anyway(even if youre in a lower ltv bracket). Ultimately its your decision but i wouldnt let it stop me living my life.

After brexit will be second wave of covid:

Oh lovely 😐😐😐 !!! That is also an obvious fear for everyone when it comes to property prices ! And something that is itching in the back of the mind. 

I am also of the opinion that I need to live my life - growing the family, getting our own space, great location, good school area etc are important and are all offered at this house. Plus I'm not getting any younger. I'm sure there are thousands in the same boat. 

Correct me if I'm wrong, but I have also heard people say that unlike 2008 - the banks do have money this time. Meaning they are willing to lend to those that meet their lending criteria. Meaning that, because people need somewhere to live - there will be demand for mortgages and homes???

Also on a separate point - I know you have said that negative equity also matters in death ... But wouldn't a decreasing life insurance policy, with critical illness cover ... Wipe out any negative equity in that event? 

colink24

sp_84 said:

Miranda25 said:

Douve87 said:

Nobody knows what will happen with house prices. Before covid it was brexit, after covid it will be brexit again and after brexit it will be something else. People are always predicting crashes and eventually they are right as capatalism is boom and bust. But imo that shouldn't stop you living your life especially if youre not buying it as an investment or to sell on in the short term. As property value drops wont affect you (barring the circumstances the other person said death and divorce that may necessitate a sell). Again as youve been told your existing lender will have to offer you a new  product at the end of exisiting product even if negative equity occurs, you just may not be able to change lender. The rate of a new product may be higher than now but once again that could be the case in the future anyway(even if youre in a lower ltv bracket). Ultimately its your decision but i wouldnt let it stop me living my life.

After brexit will be second wave of covid:

Oh lovely 😐😐😐 !!! That is also an obvious fear for everyone when it comes to property prices ! And something that is itching in the back of the mind. 

I am also of the opinion that I need to live my life - growing the family, getting our own space, great location, good school area etc are important and are all offered at this house. Plus I'm not getting any younger. I'm sure there are thousands in the same boat. 

Correct me if I'm wrong, but I have also heard people say that unlike 2008 - the banks do have money this time. Meaning they are willing to lend to those that meet their lending criteria. Meaning that, because people need somewhere to live - there will be demand for mortgages and homes???

Also on a separate point - I know you have said that negative equity also matters in death ... But wouldn't a decreasing life insurance policy, with critical illness cover ... Wipe out any negative equity in that event? 

Im also NI based, and looking to buy in the next 6-12 months. I am originally from England, and owned a property their during the recession in 2008. 

The issue with house prices in NI, as you correctly say, is a little different from the mainland. NI was hit harder back during the last recession, and the economy here, such as jobs etc, will likely be hit harder due to the nature of it being an island!

I expect prices to come down, but I dont believe selling prices are recorded in the same way they are in England, so we have to wait for the data to come out. Its going to take many months before we see a picture of where we are.

Good area's are more important in NI as well. Choice is more limited. Saying that, I am seeing house building accelerate at an impressive rate, so this should help with supply.

Petriix

One option is to fix your mortgage for as long as possible (5 or even 10 years). That way there is no possibility of ending up stuck on the standard variable rate in the near future. After the initial period, hopefully you will have paid off enough of the capital to be able to access better rates.

Obviously you would pay more initially so its best to think of it as an insurance against the possibility of things going really wrong rather than the cheapest option. We fixed for 10 years in 2016 and it has cost us about £2k over the cheapest rates we could have had (assuming that we had continued to meet the affordability criteria). At the time we were very unsure what Brexit might do to the economy and interest rates etc.