opinions please, which is better?

JQ. · 11 December 2009 at 6:08PM

erm. . . A £75,000 mortgage at 7.29% with repayments at £450pcm works out to be something like a 45 year mortgage. Is that correct? Ouch. Pay down the mortgage ASAP.

alibongo54 · 11 December 2009 at 6:16PM

If you decided to repay your mortgage and its on an annual review - this means the interest is calculated and added to your balance at the end of each year. Save £50 a month obtain interest what ever amount you can get and then pay the lump sum to your mortgage company in Nov of each year. Then your balance is reduced and the interest is calculated on the lower balance.

That way if you decide you dont wish to reduce your balance you can renew your bathroom or Kitchen as the money will be in savings....

LittleMissAspie · 11 December 2009 at 6:23PM

Brallaqueen wrote: »

Liggins - i think so. Basically my mortgage agreement states £450 per month for the mortgage so I'm going on that??

You don't know how much you're borrowing??? Are you sure you are making repayments because 75k at your interest rate over 25 years is £455 a month - interest only.

tomstickland · 11 December 2009 at 7:21PM

Whilst a nicer bathroom and kitchen can help sell a property then don't really add much to a flat.
When I'm looking at things to buy I won't say "oh yea, that's worth £5K more because it's get a new bathroom."

If it was bad I would think "I might need to spend a few hundred sorting that out" if it's a bit manky.

I'd forget about adding value and just ask yourself whether you'd prefer a nicer bathroom.

Manual_Reversion · 11 December 2009 at 8:29PM

Are you renting at the moment? If so, how much is your rent and how does it compare with the interest portion of your mortgage payment? This is an important comparison.

I'd echo princeof pounds' sentiment with regard your mortgage rate. It's eye-watering; nearly 7% above base rate. You'd expect that kind of rate on an unsecured loan, not on a (secured by definition) property purchase. (In 'normal' times a mortgage rate would generally be around 2% above base)

I'd be extremeley wary of purchasing anything at the moment, particularly an ex-local authority flat, unless you can see yourself happily living there for five years or so as we go through this painful transition, and have enough cash (20% with good credit rating) to secure a decent mortgage rate.

Lastly, I realise this post is bearish/pessimistic and perhaps not what you want to read. I apologise in advance for any offence taken, as none is intended.

Kind regards.

tek-monkey · 11 December 2009 at 8:40PM

I'd organise a sit down with your IFA and find out exactly what you are paying for here, the sums don't add up.

Fire_Fox · 11 December 2009 at 9:09PM

Brallaqueen wrote: »

Hi everyone,

I'm a FTB, single income approx £18K and thanks to my IFA I have secured a loan for £75k for a two bed flat with garage. It's ex-council and a bit dated, but the area is OK (best I could afford).

I'm trying to plan ahead a little bit and would appreciate any insight into my situation.

My mortgage is a monster at 7.29%, fixed for three years. My repayments will be £450, and I'd ideally like to move on when my fixed term is up.

The question I have is - would I be better off

A) over paying my mortgage by £50 a month (~£1,800 over three years, assuming regular payments)

or

putting that £50 a month towards improving the flat - a white bathroom suite would not go amiss?

Can anyone offer their expertise with this?

Why are you buying a flat that you sound distinctly underwhelmed by, that needs work that you cannot afford, with a loan at a high interest rate, in an unstable market, when you don't intend to stay put very long??

Are you looking for a home or an investment; this sounds like neither? Have you factored in all the costs of buying and selling, mortgage interest and service charges, additional travel costs, will you actually be better off than you are renting?

What are you going to do if the council start consulting on major works before you have a chance to offload the flat? Council freeholders are notorious for spending thousands and even tens of thousands of pounds of leaseholders' money getting their properties up to the current 'decent homes' standards. :eek: Your £50 a month float is a drop in the ocean. Do you have three months salary set aside in case you are made redundant, get pregnant unexpectedly or fall ill long term?

I would suggest you read this website thoroughly and also run a search on this board to gain a better understanding of the possible disputes between council freeholders and private leaseholders.
http://www.lease-advice.org/

Brallaqueen · 13 December 2009 at 5:32PM

Hi Everyone, thanks for all your replies about this. you have all given me a lot of food for thought.

I'm sorry I didn't put enough detail in the original post, the breakdown is as follows-
Flat - 75k
Deposit - 7.5 K (10%)
Mortgage terms- 67.5 K over 35 years at fixed rate of 7.29% interest for 3 years. Eyewatering, I know, but I couldn't afford a flat any other way.

To rent an equivalent property I would be paying £425-50. I don't drive so I intend to rent the garage and the second bedroom out to offset my outgoings.

If I sound underwhelmed about things it's due to worrying over the numbers rather than the flat itself - I fell in love with it on the first viewing. I'm just aware that things are going to be a bit tight, and I want to make the best use of the money I have left every month.

The kitchen is functional, just beige and dated. The bathroom again is functional, electric shower over the bath etc, it's just champagne coloured! Is it worth changing them?

Again, thank you all very much for your insight.

Brallaqueen · 13 December 2009 at 5:54PM

Fire_Fox wrote: »

Why are you buying a flat that you sound distinctly underwhelmed by, that needs work that you cannot afford, with a loan at a high interest rate, in an unstable market, when you don't intend to stay put very long??

I love the flat, I'm just concentrating on the money side at the moment. I haven't been able to afford to buy (high prices, no partner to pool income) until the recent price drop so I jumped on it. I would prefer a house, no question, but in three years time I don't HAVE to move if the numbers don't stack up.

You were right about money, I don't have three months wages in reserve at this point, which is making me antsy. However, I intend to get a lodger asap and thanks to this site I'm getting better at budgeting. My job appears to be safe for the moment, and I'm not about to get pregnant unless it is the second coming of Christ.

BitterAndTwisted · 13 December 2009 at 5:56PM

Before you commit yourself you really should find out what refurbishment plans the council have for the next five years. There have been so many horror stories of leaseholders being stung for HUGE amounts and I'm talking about tens of thousands in some cases albeit high-rise ones. My dear departed mother was one of them and at the time of her death was disputing the amount demanded of the leaseholders as the total value of the works divided by the number of properties could not be justified, even by a five year-old child with fewer than ten fingers.

opinions please, which is better?

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