Buying a house - some advice please.

richard1032

richard1032

richard1032

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Im looking into buying a flat on a shared ownership scheme where i would pay 65% of the equity and the rest would be payed by the council at no cost to myself. Obviously when i sell i only get 65% of the loss/profit. The flat is valued at 117k and i would have to fork up the 65% share which works out to be 76k. Unfortunantly due to my low wage i would not be able to afford a great deal more, the question I have is in your opinion do you think I would be better off renting for a few more years or do you think buying this property and selling say 3 - 5 years down the line would benefit me? It's a nice flat but it is a little small. I have worked out that the morgage repayments would be pretty much the same as if i were to rent and the flat is in the Centre of Cardiff where there is lots of new flats being build so another thing to consider is the likelihood of being able to sell after 3 - 5 years. I know some of you will say to look for a house in the suburbs but thats not really an option for me. I would appreciate any feedback, thanks.
 
Do you have to pay rent for the other 35%?

Essentially if prices go up, you only get 65% of the profit, but then if prices go down, you're only exposed to 65% of the losses. I know people who have done this in the past and it has worked out well, but without knowing more about your situation it would be hard to say a firm 'yes' or 'no'.

edit: Flat prices in Cardiff down -4.1% from July to September last year. House prices were up in the same period. Rent and save for a deposit for a house.

source: http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/regions/html/region4.stm?f
 
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Generally speaking I would say get on the ladder sooner rather than later. Don't worry about buying flats just do your research on whats the right flat to buy.

I'm looking to buy a second property at the moment. A flat. I can tell you it's a buyers market right now. The only risk is that we do hit a "property crash". In my opinion it'll be a slight dip/plateau, no crash.

BTW.. long term trend in Cardiff is definitely going to be up. Anyone who has been there regularly over the last 10 years could see that.
 
thanks for the replys so far, mixed reviews....

Do you have to pay rent for the other 35%?
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No, the only time this 35% would effect me again is when i come to sell the property then the council take 35% of the profit/loss. The big question is the morgage i would be paying is pretty much exactly the same as if i were renting but over 3 - 5 years will the flat devalue enough for me to make an overall loss or would i gain and would it be possible that the property is unsellable? Cardiff is a lovely ever expanding city and i can only see it going from strength to strength but they are currently flooding the centre/bay area with flats and that is the major concern i have.
 
Surely buying is the best option? For every month you give £500-£1000 to your landlord it could be being paid towards an investment for your future. Besides, who is in a position these days to rent and put money aside? Well unless you consider a house share the way to go? Whether the value of property goes up or down, its still your investment.
 
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martinturner said:
Surely buying is the best option? For every month you give £500-£1000 to your landlord it could be being paid towards an investment for your future. Besides, who is in a position these days to rent and put money aside? Well unless you consider a house share the way to go? Whether the value of property goes up or down, its still your investment.
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Yeah but remember that of that £500-£1k that you are now paying for your mortgage, the vast majority of it will still be "going down the drain" in interest. Nothing wrong with renting if thats what you want to do.

That said, I bought my first home last year and I'd definitely recommend it. Nothing beats the emotional attachment to owning your own property imo, even with the current uncertainty.
 
Generally, I'd be in favour of buying. However, make sure you can reasonably afford to do so.

If your washing machine breaks and floods the kitchen in a rented property, it's the landlord's responsibility to fix it. Could you afford to do so if you were paying the mortgage?

Also, do you have enough money for moving costs, legal fees and stamp duty? Buying a property can be an expensive business and you might want to save up some money first.
 
if you can get a morg for less or same as rent its better to buy

however with shared ownership they tend to be difficult to sell on again. well thats my experience down in devon
 
Tunney said:
Generally, I'd be in favour of buying. However, make sure you can reasonably afford to do so.

If your washing machine breaks and floods the kitchen in a rented property, it's the landlord's responsibility to fix it. Could you afford to do so if you were paying the mortgage?

Also, do you have enough money for moving costs, legal fees and stamp duty? Buying a property can be an expensive business and you might want to save up some money first.
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Yes i have taken all of the above in to account and even though im on a low wage (16k) i have a sizeable amount i can use for a down paymount and some more left over for all the movine costs. I also worked out that my morgage repayments would probs be in the £420 region and i take home £1k a month after tax, NI etc so the affordability is very comfortable. The big question is will i loose out signigicantly over the 3 - 5 years.....man buying a house sure adds to the stress/worry factor, really is playing on my mind this.
 
You would only lose out if there was a slump in the housing market and your flat devalued. Over time it would regain any lost value. So you would only lose out if you sold during it's state of devaluation.
 
Stinky said:
could you afford to buy a place that is not on the share scheme?

it would be a lot more benifical to you if you could
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Not quite, im close to it but realistically i couldn't. If i did then i would be one of those people really really stretching themselves and i think thats a very risky game to play.

In an ideal world i could but i think the only way onto the ladder for me is through the shared scheme unfortunantly.
 
Are you sure you dont have to pay rent on the other 35%?

I know the majority of the Shared Ownership schemes around here are about 60% mortgage + the remainder as rent...

Can only speak for the Wirral though..

As someone mentioned, I've also heard that shared ownership schemes are difficult to sell on - but you're much better off being on the ladder, I bought my flat a year ago - and there's no chance I'd get a mortgage now with rates being what they are - even if property prices remained static.

Good luck - let us know how you get on!

Tom*
 
The unsold equity is rented out at a figure based aroud the RPI of the previous year, this is around 2.9% so its cheap. Some FTBI initatives are government sponsered and dont actuaaly have any charges until year 4 where you pay 1% of the unsold equity per year as rent, yr5 2% and yr6onwards 3%.

Dont forget to consider the maintaince aspect of a flat, my friend pays around £100 a month, that could have got him a 15k larger mortgage and a house instead if he had thought about it properly.

The ones Ive looked at here try to find someone to take over the property if you wish to sell and move on rather than staircase to 100%, its either 6 or 8 weeks after requesting this that you can put it on the open market for a typical type sale.

Look into Openmarket homebuy, you only need 75% and the mortgage provider and government cover 12.5% each as an equity loan you repay on sale. If the price goes down though 5 out of the 6 mortgage providers will want the full equity loan back.
 
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i think you are looking at it the wrong way - there is no ladder - its a made up concept by all those property porn tv programmes.
Buy a house/ flat will be the biggest financial decision of your life and its not something you should enter lightly.
I would have given the same advice last year that house prices don't always go up and i was laughed at. Now the situation is much clearer and pretty much any independent financial observer has agreed that prices at the least are slowing down, and will drop significantly imo.
you don't have to believe me but is there any harm in waiting? we have had 3 months of falls and the economy is looking pretty weak - you can't avoid the bad news stories nowadays.
Renting isn't dead money no matter what some idiot estate agent will tell you. Wait a bit, you won't regret it.
 
I wouldn't touch a flat right now in any major city apart from London, the huge building progrmas for this type of accomadation has saturated the Market and the current credit issues are doing nasty things to the prices, I'd keep your money in you pocket right now as a flate could be a fast track to negative equity.
 
Jonnycoupe makes a valid point about service charges, ground rent etc. Remember to factor these in on top of your £420/month.

I took a mortgage in July 2006 for a flat, purchased at £88k, mortgage at £83k so not so different figures to yours.

After 2 years (When my fixed rate ends) my mortgage is going to be around £79.5k

If I were to sell at exactly the same price now (Not likely cos it's still higher than when I bought, regardless of slow down) then I will get my deposit back and ~£3.5k

Rent for the same period and I'd only have my deposit and unless I was very good at investing it would almost certainly have been 'dipped' into.

Now having said all that, times are different now, but I can't see it being worth less in 3-5years than the price you can get it for now, maybe in the next year, but not 3-5.

Sean :)
 
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