Advice for a first time buyer - making an offer

adamzetec

poppy10 wrote: »

Where's that Star Trek "sigh" picture when you need it :rolleyes:

Am I not allowed an opinion? Renting to me means paying off someones mortgage, I am in the fortunate position where I have been offered my own mortgage to pay off.

Anyway, let's not let this stray off topic. The purpose of this thread is to find out how much I should be offering, not discussing the merits of renting v buying.

hotrod21

Hi, just reading your post, i was in a similar situation a few months back. My boyf and I had combined income of £45,000pa (take home combined pay of approx. £2600pcm) but only 5% deposit saved, and we were offered a maximum loan of £187,000. When we worked out our finances, it was way too much for us to cope with. (bear with me here, i go on a bit!)
We eventually saw a 2 bed flat we liked for £155,000. Now being 8 months ago, this was the height of the market boom, so not wanting to lose it, we offered £153,500 and were accepted straight away. So, a quick run down on our costs will hopefully give you some comparisons:
Our cheque to the solicitor for fees, searches etc, stamp duty, and 5% deposit came to £10,000.
Our mortgage on a 5 year fixed 35 year term is £808 per month. Factor in insurances, council tax (£102pcm) etc brings the total to approx £1100pcm.
Our service charge (grrr) is approx £150 pcm.
Ground rent is £75 pa
Adding on our food (and we now have to shop at Aldi, not anywhere expensive like waitrose etc) and our utility bills our total monthly outgoing is in the region of £1350 - £1450 per month.
I would like to give you a couple of points I wish I had known about/think you should consider before you buy:
1) Why did the previous sale fall through? Was it something on the survey?
2) No matter how much you budget etc, it will always cost more than you think! Food & petrol have gone up noticably in the last few months, and may do again! Factor in a contingency fund!
3) Is your 10% deposit all the saved cash you have? Our fees, stamp duty etc cost an extra £3000 on top of our deposit...
4) Don't count on renting out the room, if something happens and it's not rented for even a couple of months, will it leave you in a bad position?
5) I don't doubt for a second that you could get £450pcm for the room, but watch your tax threshold...better to claim less tax-free, than get stung by the tax man?!!

The final thing I would like to add (told you I can go on!) is that when we were buying, everyone said "Go with the absolute maximum you can afford, you never lose money on a house...." So we did, and I now pray that house prices don't drop by 5% or we're in negative equity...
On the whole, I agree with you that I'd rather be paying money off my own mortgage than renting and paying off someone elses, despite the current house climate.
Good luck with it, I hope I have been of help (to you or someone else anyway!) Buying your first house is nerve wracking but exhilarating! Hope you'll let us know how you got on!!!!

Lotus-eater

Tbh, housing market aside for a minute, you only started looking last Wednesday, that is way too fast to buy a house. You need to look for alot longer.
I don't know where you are living atm and if you have to move out quickly, but you should really wait a month or two, keep looking at houses and deciding what you and your gf will want out of a house........ and keep watching the housing market.

se999

It's worth looking at the arguments put forward by Robert Kiyosaki author or "Rich Dad, Poor Dad". As an homeowner he argues that your house is a liability not an asset.

You should be able to find out about it by googling, otherwise look for the book in the library.

It did change my view on owning houses.

Lotus-eater

se999 wrote: »

It's worth looking at the arguments put forward by Robert Kiyosaki author or "Rich Dad, Poor Dad". As an homeowner he argues that your house is a liability not an asset.

You should be able to find out about it by googling, otherwise look for the book in the library.

It did change my view on owning houses.

Just looked at it on Amazon, look what was a sponsored link on the page


Free property workshop,
wwwinsidetrack.co.uk Worried About A Property Crash? Find Out How You Can Still Profit

dannyboycey

adamzetec wrote: »

Am I not allowed an opinion? Renting to me means paying off someones mortgage, I am in the fortunate position where I have been offered my own mortgage to pay off.

Unless it's interest free, you too are !!!!ing away money - to the lender.

ZZzzzzzz........

carolt

adamzetec wrote: »

The idea of renting doesn't appeal to me, it's wasted money. By that logic if I were to rent for 6 months at £750pcm that would be £4500 that could have been used towards my mortgage.

Renting can be wasted money in a rising market, certainly, or even a stagnant market. That's assuming that the cost of the rent is the same as or more than the interest payment on the mortgage.

But in (bizarre and unusual) conditions like the present, where rent in nearly all the country is far, far cheaper than the interest you would be paying on your mortgage, and house prices are likely to fall, that doesn't apply.

Don't forget that when you buy a house, only a very, very small percentage of a repayment mortgage actually goes towards repaying the loan. The vast majority of it goes towards paying the INTEREST on the loan. That is every bit as much 'wasted' or 'dead' money as rent is. It's just renting from the bank instead of a landlord, that's all. And when it is cheaper to rent, it makes sense to save the extra each month and put it towards a future deposit.

Also, whilst it makes sense to buy and therefore 'fix' the price of the house in a rising market (particularly when interest rates and mortgage rates are low or likely to fall) - as you then ensure you will not be paying more than you are at present, and are likely to be paying less - in a falling market, and one where mortgage rates are unlikely to fall much and may rise (due to the credit crunch) there is no sense in fixing the amount you will have to repay. By doing so, you expose yourself needlessly to the risk of losing large sums of money - potentially far more than the £4500 quoted above - if the property falls just 5%. If it falls more, your downside risk is that much higher, and potentially you could end up in negative equity.

That would make you, in the best case scenario, unable to move, and in the worst case scenario, if you changed jobs/lost a job/had kids/split up with your girlfriend/found you couldn't get a tenant, etc, liable to have your house repossessed and be chased for years to come with thousands of pounds worth of debts, unable to get credit and through no fault of your own other than that you had taken a very risky gamble on the housing market at precisely the worst point in time to do so.

I'm sure you know lots of people who have made lots of money on property, and lots who advise you that property can only ever go up, it's always better to buy, etc.

The fact is, it's all about timing - and this is the VERY WORST time for a FTB to be buying at the moment.

It's not that you've missed the boat, just that the boat has set sail, and will be back, in much better shape, in a year or 3.

My advice - and I, like you, am a would-be FTB, albeit one old enough to remember the last crash only too well - is to hang on and be patient.

Buying a home to live in IS a sensible thing to do, in the long term - just not NOW.

You're still young - save yourself some money, and avoid needless risk. Look at it this way - if you could get the same house, 6 months down the line at 5% off, you will have, by your calculations, have been living rent free!

beecher

My personal advice is, as others have said, to leave it for 6 months and buy then. I think it is absolutely crazy to contemplate spending 58% of your takehome pay on a mortgage. I earn £200 less than you and think that £350 is a lot to spend!

Though I do not agree with the thought that renting is wasted money, I do feel that I'd be unhappy in renting a spare room in someone's flat, and paying half their mortgage for them. That maybe sounds daft, but I'm maybe not the only one to feel that way. Isn't there a limit to how much you can get without having to pay tax anyway?

Carol's point about the fact that if prices go down 5% in 6 months you'd have saved yourself 6 months rent is a really good one, and one to think about.

BobProperty

se999 wrote: »

It's worth looking at the arguments put forward by Robert Kiyosaki author or "Rich Dad, Poor Dad". As an homeowner he argues that your house is a liability not an asset.

You should be able to find out about it by googling, otherwise look for the book in the library.

It did change my view on owning houses.

Do a bit of research and Googling of Robert Kiyosaki and you'll "change you view" on "Rich Dad, Poor Dad".
http://johntreed.com/Kiyosaki.html

moneysavinmonkey

you do seem to be rushing into this... I think people usually spend a few months at least looking at different houses, checking out different areas and monitoring the market before they buy.

The market it totally dead at the moment so your in no rush. Take you time, do your research. This is the biggest purchase of your life - i spend more time picking a holiday than you have spent on picking this house!!

In the strange world of property at the moment a mortgage can be a big liability... try an online calculator to work out exactly how much of your loan gets paid off and how much of your mortgage payments are just servicing the debt... link especially in the early years you are mostly just working for the bank, and it's even more expensive than than working for your landlord!!

That aside, given the current mortgage market conditions I'd be very surprised if you manage to get a mortgage at 5.6 x (:eek: ) your income with less than 10% deposit.. that's pretty much subprime at the moment and your going to be hit with higher interest rates and fees if you do find something.

To me your numbers don't look right. A mortgage of £185k @ 5.86% interest (and your going to be looking at an interest rate higher than that) is 1,172.81 (over 25 years)(link)

I earn £1300 and my boyfriend is on slightly more than you and we pay £350 rent each for a 3 bed semi worth circa £200k+

If you are talking about interest only then you are either crazy or haven't told us the full story e.g. are you waiting an inheritance or due some kind of mega city bonus?? If you aren't paying off the mortgage and house prices dip even a little (pretty much a given) your going to be in serious subprime territory!