FTB - Should I pull out?

NickDurham

Long-time lurker, first time poster!

Really need some advice. My wife and I have a 10-month old daughter and have been renting for 5 years. We're keen to get out own place so we can decorate the nursery, generally DO THINGS to the house we live in. We are planning to live in the Durham area for a long time and certainly stay in our 1st house for 5 years.

We've got a VERY good mortgage deal - a 100% mortgage 5yr fixed at 5.45%. We have a 5% deposit anyway (about 7.5k), but won't need to use it with this mortgage, so we can do modifications with that money.

We've found a house which is 130k, offer accepted. It has a possible problem with sulphate attack (floor heave), and if this turns out to be a potential problem in the future for reselling, we will pull out. If it's not a problem, I'm still considering whether it's better to pull out, the reasons being:

1. the seller is not desperate to sell as he is not paying any mortgage on it and so I don't feel we've got a great deal - the mortgage company valued it at exactly 130k 2 weeks ago, but this means when we exchange we'll effectively already be paying over the odds.

2. could we still be in negative equity even in 5 yrs when hoping to move or least remortgage?

3. prices will drop and if we wait 2 or 3 yrs we could get somthing better and cheaper

On the other hand:

1. We really do like the house

2. even if prices do drop, the deals may not be anything like what we have at the moment, and so we could end up having similar monthly payments.

My third option (apart from going ahead or continuing to rent and see what things are like in 2 or 3 yrs) is to take advantage of the mortgage we've got and put in a low offer on a house where they ARE desperate to sell, and get a bargain, meaning that even after a 10% drop we still won't be in negative equity. My head says this may be the best option, give that rates may make buying in 2 or 3 yrs tricky too.

Any advice is VERY welcome...
[Any advice re sulphate attack welcome too!]

glen8

That's a great mortgage deal you've found :eek:

NickDurham

glen8 wrote: »

That's a great mortgage deal you've found :eek:

I know - got it on the last day you could about a month ago - 30 minutes before they stopped accepting applications. We didn't even have a house in mind for sure then, but it gave us 2 weeks to put the address of the house down and I figured it was worth this risk to get the mortgage. Hence why I'm thinking it's better to get ANY house we like to take advantage of the deal. This is also why I'm wondering if we should get a better deal than the one we've got on this property - since we are in a stronger position than pretty much anyone buying at the moment and would surely be able to get a low offer accepted on a house where the buyer was actually interested in selling (which this one appears not to be!).

MrDT

I was under the impression that 100% mortgages had gone the way of the dodo. Can we get some more details please?

If the house is what you want and you think it's worth what you'll be paying for it just go for it I suppose This will be a very personal decision I suspect.

edit - you can ignore most of this post, I should refresh the page before posting a reply lol!

NickDurham

MrDT wrote: »

I was under the impression that 100% mortgages had gone the way of the dodo. Can we get some more details please?

If the house is what you want and you think it's worth what you'll be paying for it just go for it I suppose This will be a very personal decision I suspect.

The deal has gone now - it was Stroud and Swindon - available until about 3 or 4 weeks ago.

moneysavinmonkey

Are you definitely sure your mortgage deal is valid and hasn't been withdrawn?
AFAIWA 100% mortgages had been completely pulled, and certainly weren't offered with such a competitive rate!

given that you have a 10 month old daughter i would say the decision is finely balanced. Depends really on your salary and career... with a 100% mortgage and the current state of the housing market it is a real possibility you would be in negative equity in 5 years time. But if you are able to overpay on your mortgage you could put yourself in a better position.

if in 5 years time you want to move to a bigger house, falling houses will still work in your favour even if you buy, although you would be in a better position financially if you had rented- depends how strong the urge to nest is with a little one and your attitude to risk!

Final point is, could you use the concerns over the flooring to re-negotiate the price?

NickDurham

moneysavinmonkey wrote: »

Are you definitely sure your mortgage deal is valid and hasn't been withdrawn?
AFAIWA 100% mortgages had been completely pulled, and certainly weren't offered with such a competitive rate!

given that you have a 10 month old daughter i would say the decision is finely balanced. Depends really on your salary and career... with a 100% mortgage and the current state of the housing market it is a real possibility you would be in negative equity in 5 years time. But if you are able to overpay on your mortgage you could put yourself in a better position.

if in 5 years time you want to move to a bigger house, falling houses will still work in your favour even if you buy, although you would be in a better position financially if you had rented- depends how strong the urge to nest is with a little one and your attitude to risk!

Final point is, could you use the concerns over the flooring to re-negotiate the price?

It's in black and white - valid for 3 months as of 7th April. The house we're renting has damp/roof problems, and a landlady who doesn't seem to want to fix them, which makes us even keener to move. I don't think the risk is great, as my job is secure and salary rises pretty much mapped out - so in the worst case we'd just have stay put, as the payments aren't massive (it's interest only by the way, but we're planning on makig overpayments of about 150-200 quid a month).

The owner won't budge on the price even with the flooring issue. And part of the reason I'm thinking we should buy a different house at 10% below asking price is that it will cushion the impact of the forthcoming price drop.

BiggaThanBen

NickDurham wrote: »

And part of the reason I'm thinking we should buy a different house at 10% below asking price is that it will cushion the impact of the forthcoming price drop.

Are you sure that amending the mortgage offer (new price / new property) will not affect your offer conditions ?

p.s. I do not know, just asking ...

moneysavinmonkey

NickDurham wrote: »

It's in black and white - valid for 3 months as of 7th April. The house we're renting has damp/roof problems, and a landlady who doesn't seem to want to fix them, which makes us even keener to move. I don't think the risk is great, as my job is secure and salary rises pretty much mapped out - so in the worst case we'd just have stay put, as the payments aren't massive (it's interest only by the way, but we're planning on makig overpayments of about 150-200 quid a month).

The owner won't budge on the price even with the flooring issue. And part of the reason I'm thinking we should buy a different house at 10% below asking price is that it will cushion the impact of the forthcoming price drop.

it's a hard call.. need to do some serious number crunching with those figures. The mortgage you have is a serious find, with only a 5% deposit you'll struggle to find something at that rate so a different house would probably cost you a lot more- the difference of which you could overpay in this house... such a shame you can't port your mortgage to a different house!

If your only on Interest only without overpayments you will almost certainly be in negative equity in 5 years time. You definately need a strategy on top to pay off the capital
Even if you made overpayments of £250 quid a month over 5 years that would be £15k. or just 11.5%.
Depending on whether you believe the statistics or not house prices fell on average 2.5% last month alone, so until the housing market looks a little rosier I would look at how you could ramp up your overpayments even more.

NickDurham

BiggaThanBen wrote: »

Are you sure that amending the mortgage offer (new price / new property) will not affect your offer conditions ?

p.s. I do not know, just asking ...

No. When I got the mortgage I asked whether I could transfer it onto a different property within its validity period. I was told yes. The original amount we were pre-approved for was 11k more than the price of the property we currently have been accepted for. Again I asked whether, if the new property was more than this one, whether the deal remained, and I was told it was, up to the original amount of the mortgage. Does this mean you would advise looking at a different house and getting a better deal (we have a couple in mind)?

NickDurham

moneysavinmonkey wrote: »

it's a hard call.. need to do some serious number crunching with those figures. The mortgage you have is a serious find, with only a 5% deposit you'll struggle to find something at that rate so a different house would probably cost you a lot more- the difference of which you could overpay in this house... such a shame you can't port your mortgage to a different house!

If your only on Interest only without overpayments you will almost certainly be in negative equity in 5 years time. You definately need a strategy on top to pay off the capital
Even if you made overpayments of £250 quid a month over 5 years that would be £15k. or just 11.5%.
Depending on whether you believe the statistics or not house prices fell on average 2.5% last month alone, so until the housing market looks a little rosier I would look at how you could ramp up your overpayments even more.

The mortgage is portable (I was told), the only thing being I would have to pay for any subsequent valuation as they only paid for one free. Does this make the third option I outlined (buying a different house at a bargain price) the most attractive one in your opinion?