dilemma - any advice

mcdermott_c

Hi

Hope you guys can give me some honest advice about the situation I find myself in.

Currenty have 65k mortgage on a property worth £125000. We could do with more space and have found a new build property selling at 211000. I earn 30000 and the wife works part time and earns 6000. We do not have any other debt other than a car loan of £150 per/month (although we could potentially get rid of this as its a 2nd car) so can make our current mortgage payments of £420 easily and have enough cash left over each month to enjoy ourselves.

I dont think a lender would lend us £151000 to buy the property outright nor do i think we could afford the repayments. They do however have a new intiative where you can buy 75% and they fund the other 25%. You have 10 years to pay back the other 25%, can make regular small payments to reduce the amount or after 10 years you get the property valued and payback 25% of the new value (even if its gone down in value)

If we bought 75% we'd increase our mortgage to 100K (roughly £750 a month) plus increase Council Tax, House insurance, life insurance etc.. Money would be tight for us but we would have a nice house with the space we need. My question is would you advise staying put or going for the new house and less disposable income ? Without this scheme I just can't see ever being able to afford to move up the property ladder.

On a side note i heard they were doing an initiative before summer where if you could complete within a short time they took 20000 off price, which took it down to 191000 so would need a 131000 mortgage, meaning higher repayments but owning 100% of house

Any advice would be much appreciated as i cant make my mind up between more disposable income or nice big house ?

cheers

seraphina

The only thing I would say is steer clear of the buy 75% and worry about the 25% later. It basically means that the new house builder thinks that the real market value is only 75% of the price they are trying to sell it for.

Only you can decide whether a larger house will be worth the extra financial committment. To be honest, especially if you have young kids, I wouldn't overextend myself financially - you're looking at a large increase in mortgage payments. And I'm not sure you'd enjoy a house you were constantly worrying about how to pay the mortgage.

I sympathise - we're going through this dilemma too at the moment!

clutton_2

new builds are ALWAYS overpriced - why do you have to move from a £125k to a £210k house ? surely there is something priced inbetween these two amounts, which will leave you with more disposable income and less complications in terms of selling this 25% business - the only people to profit from this complex arrangement will be the developer - not you.

mcdermott_c

thanks for quick replies clutton and seraphina.

clutton - ideally the next step for us would be around the £150-£160000 mark but nothing in that price range - well nothing suitable for us anyway.

On first looking the scheme sounds great cos its allows you to move up the property ladder NOW but wasn't sure if it really was a good idea or not.

Seraphina I hadn't thought of it like that before that the developer probably really prices the houses at 75% mark i.e. its 25% overpriced. They were doing an incentive of 10% off before christmas which would suggest they are at least 10% overpriced.

I guess I could sell my house rent for a while and see what the market is like in 6-12 months time - who knows prices may have dropped and i'd be better off but then again they may have increased and i;d be worse off

thanks again

mcdermott_c

forgot to ask

what would be an average fee for selling/buying a new property

I've heard...

Selling fee 1% of selling price of property
buying fee 1% of purchase price of new property
stamp duty 1% of new property

cheers