Head or heart? Close to exchange on FTB but should we pull out?

Jimuth

Hello

I've been devouring these forums for days now and slowly giving myself an ulcer with worry...

Please could I bounce my thoughts off you and get some advice? I've got a feeling I know what you're all going to say, and that's why it's head vs heart... but I'm so unsure of what to do, maybe even just typing it out will make me see things more clearly...!

Been renting (and totally sick of it!) for 10 years. Have made an offer for a house my wife & I both really like for 159K. Have a 100% mortgage with Mortgage Express at 3yr fixed at 6.79.

The reason we went 100% is that we're both sick of renting and also find ourselves useless at saving unless we really have to. My plan to get past the potential drop in house price was to overpay like mad for the next 3 years. From the mortgage calc here ( http://www.jeacle.ie/mortgage/uk/ ) I figured that a £400 overpayment per month could get us down to about £130 in 3 years - hopefully giving us a little more flexibility when we come to renew.

Together our gross is £65K pa at present, so the next 3 years would be tough, but we are most definitely nesters not investors... I would expect us to be staying at this home for over 5 years, probably 10 (we can't have kids, so that's not going to change).

I'm not sure whether house prices will affect my area too much, as it's always been exceptionally well-insulated (AONB, very good schools, a lot of wealth here) ... but I am getting more worried about the risk we're undertaking with stretching ourselves so much.

However, the other problem is that it'll be another 2 years at least before we can save up for a deposit (again, this would be just as tight as mortgage+overpayment, as it'd be rent+£1K saved per month)... and this decision isn't just mine - my wife is desperate to have our own place, cats, garden etc. It could also be that even if house prices come down, the requirements to get them go up (i.e. higher deposit amounts)...

So, the question comes down to ... stay on the deal, even though it's going to be tight (all things being equal) or pull out, lose the money,already spent and lose the chance to have our own home for what could be the next 3 years or more?

Thanks for reading. Hope you can offer some good advice.

glen8

only YOU can decide that

but.......

financially it may not be the best time to buy, house prices are dropping and if you wait two years you 'MAY' be able to afford something better

that said.........lenders are picky and require large deposits, high product fees and highER interest rates than the previous few years

on the other hand, we only get one shot at life so we have to make the most of the time we have. If you think moving into this house will enhance your lives and you can afford the monthly repayments (do lots of research and budget for the worst case senario) then go for it

NOBODY can see into the future, this could be the best move you'll ever make.......on the other hand....

pinkshoes

Jimuth wrote: »

The reason we went 100% is that we're both sick of renting and also find ourselves useless at saving unless we really have to.

If you are useless at saving unless you really have to, then I would have thought that if you really wanted to move out of rented, you would have saved at least a 5%, if not 10% deposit!

You've been offered a rubbish fixed rate, have no deposit, prices might drop...

My advice is to save a deposit. Prove to yourselves that you CAN do it. You earn decent salaries, so live like hermits for a few months and see what you can save.

If you have a nice deposit, you'll get a much better fixed rate too!

Tozer

Not so sure. You need somewhere to live. You want your own house. Your mortgage rate is fixed for 3 years. If it is going to be a long term move, then proceed as you are doing - BUT DO MAKE OVERPAYMENTS. I can't see house prices suffering in the longer term as fundamentals (e.g. shortage of supply, low interest rates, low unemployment) will always create a demand.

neas

as above poster has mentioned... saving a deposit will save you alot of money. Literally every pound you put to deposit will save you double of what you would repay.

Also you would be comfortably buffeted... If you've been renting for 10 year you must've had 5% or 10% deposit now? Or do you buy new cars every year?...

Come on man *Splashes water on you* Wake up!.

chappers

I don't very often say this when people are buying a long term home but as pinkshoes says that is a rubbish rate also are you sure Mortgage express will honour that offer.

Saving £1k amonth would give you a 7.5% deposit in a years time if the house stays the same price and even more if there is a fall and more importantly would open you up to a whole host of other lenders and better rates.

save loke demons you may even be able to get a 55 deposit together even quicker if you really do knuckle down and live like hermits.

Jimuth

neas wrote: »

Come on man *Splashes water on you* Wake up!.

:rotfl:

The OH and I have only been able to start saving properly over the last couple of years since we've started earning decent money. I totally lived beyond my means in my 20's and well, I just wasn't grown-up enough to realise how much money I was wasting by not paying off those debts quickly enough. I wish I could say Je ne regrette rien, but I do... :mad:

I've done some sums, and it really should help me convince my OH about this...

For current set-up, 7.25% for comparison, no overpay I get £344,778 as total amount to be paid
If I whack on a just-about-affordable £400 a month overpayment, this comes down to £248,903

If I say 20K (deposit) off, but give it 6% as interest rate, (plus the lost fees and rent for the next 2 years) the total amount comes in at £288,606, and with £400 overpayments it's £219,373.

I'm sure by then we could afford more overpayments or a better place anyway, and it's all presuming prices stay the same...

One last question... say for a £160K buy, 20K deposit, would we be expecting interest rates of around 6% in 2 years time?

As people have said, we've got a stinker from ME at 6.79 for 3yr Fixed and then 7.25 SVR... what would be a good rate for a £160K property with 20K deposit at the moment?

Thanks for all your help again... I'm going to break our vendor's hearts, but this is all looking way too risky.

mightymouse

Hi

I would be interested to know how old you are and how much rent you are paying now.

The rate may not seem attractive to some but where else would you get 100% mortgage at any rate now.

Rent may rise and property may fall but if its going to be a home for ten years then does it matter provided you can afford it .

If you save for a deposit and pay rent then technically both are dead money as the deposit only becomes spendable when it is realised.

Any better rate you might get by saving a deposit is only for a limited period anyway but in 5 years time the rent will certainly be higher and what rate would be considered a better rate now say 5.75%? for 3 years? .

Hardly enough to decide whether to buy or save for a deposit.

You obviously have had enough renting.

ruggedtoast

I think you should look at your savings - not to be rude but if youre both earning more than £30k a year, dont have dependents, and you havent managed to save any part of a viable deposit for a £160k house, then you must be pouring money away somewhere.

That mortgage deal you've got sucks too. I'm painfully aware of how grim it is renting but as youve stuck it this long you may as well wait another year and save some cash. Prices may be significantly lower then too.

Commonsensesearcher

Tozer wrote: »

Not so sure. You need somewhere to live. You want your own house. Your mortgage rate is fixed for 3 years. If it is going to be a long term move, then proceed as you are doing - BUT DO MAKE OVERPAYMENTS. I can't see house prices suffering in the longer term as fundamentals (e.g. shortage of supply, low interest rates, low unemployment) will always create a demand.

Interest rates are currently below the historic norms - it is this cheap credit that has been the cause of the housing bubble to carry on as it has. But it can't carry on - you may or may not be aware that property in the states is falling despite the Fed slashing rates. Here we see the lenders hiking rates and tightening their lending criteria - again despite rates reducing. So in the longer term, it is likely that rates will be higher than they are today. Shortage of supply is the age old spin of the property industry - just do some research on Japan and you will see that the overcrowded nation, not making any more land etc argument is futile. And then we have the old low unemployment chestnut - if ever there was a figure that is fiddled by this government then that is it yet even Brown & Co will admit this to start rising over the coming months. So, the easily trotted out 'fundamentals' line is complete [EMAIL="!!!!"]!!!![/EMAIL] in my opinion and could mean that prices drop and stay dropped for many years to come...

chappers

Jimuth wrote: »

:rotfl:

One last question... say for a £160K buy, 20K deposit, would we be expecting interest rates of around 6% in 2 years time?

Now that is a question all in its self and one that would only be answered by someone with a crystal ball.

As people have said, we've got a stinker from ME at 6.79 for 3yr Fixed and then 7.25 SVR... what would be a good rate for a £160K property with 20K deposit at the moment?

At least 1% below that