Buying a house - some advice please.

[nucastle]

There IS no ladder ..... find me someone who is under 40 who can describe what they did to 'move up the ladder' and ill believe them. There is NO wage inflation that is eroding mortgage debt like it did a long time ago - hence, NO LADDER.

With the biggest financial decision you'll ever make - i think it pays to listen to some balanced opinion, as opposed to taking your cues from people who say 'get on the ladder now, before its too late' ..... quite possibly one of the worst pieces of advice you can give to someone.

Dont ask family, friends or peers for advice about housing either - nine times out of ten you'll get the same line repeated to you over and over and over. 'Ladder' 'Security' 'Rent is dead money....' ..... all completely untrue

There, as resident housing bear, ive said my piece haha.

 

[richard1032]

how long would the lease be on the flat?

Not sure what you mean by this but i would get the option to buy the remaining 35% of the flat after 3 years.

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 scheme has been put in place by the council to help people like myself (and there are many) who cant afford to buy ther own place, i do not pay anything towards the 35% and after 3 years i am given the option to buy the 35% to make the full property my own. Im not sure how but im quite confident the council make money out of this aswell. The way they do it is when companys like bellway, barratshomes etc want to turn a bit of land into a 100 flats then the council will say ok but 10% is to be used for affordable housing. Thats the basics anyway, i dont know the finer details.

Thanks for the good luck, and ill keep you informed

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.

You are right, it's so easy to forget about this. Adds a fair chunk, it's an extra £800 a year for the property i am thinking about and yes that is similar to the way it works here also.

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.

Ive not heard of this before, do you have a link that provides more information on this please?

 

[itsallaboutyou]

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.

Good thinking - but I think people do seem to be missing quite an important point. YES - the market is saturated with flat accommodation - but you only have to look at what Npower have done in terms of rate rises etc - to see that in the future only the affluent or DINK's will able to afford this type of property. This leaves an oversaturated flat market open. For example - the old lady down the road has lived in her large 4 bed semi for about 30 years. Even though she owns the house outright - she is finding it difficult to afford gas, electricity and water bills and has had to move to a smaller property.

My flat was purpose built 3 years ago and sold for £125,000 when new, i bought it for £135,00 just over a year ago - my utility bills are affordable and I'm comfortable there for the moment. Even if the house prices fall - what does it matter - I'm still paying a mortgage and renting is throwing money down the drain imo unless there is no option.

As for not touching a flat - I think the important thing to remember is that getting a mortgage is one of, if not the most important monetary decisions that will be made in a persons lifetime and it should not be taken lightly.

Personally, even though I perceived it to be a struggle - I've managed to pay a mortgage, council tax etc etc for 12 months and I've never been more financially sound.

At the end of the day its up to you - but its the best decision I ever made.

EDIT // Maintenance charges, ground rent etc all add up - which should also be considered as well!

Good luck!

Tom*

 

[Haircut]

OK, you say the mortgage repayments would be around £420 per month.

The flat is £76K, so by my calculations you either have around £11K deposit or you're getting a mortgage at 4.5% interest.
Given that you're on £16K per year that doesn't seem all that likely.

I really hope you're not considering an interest only mortgage!!

PS £420pcm mortgage on £1K take home pay really isn't a lot anyway, I know I'd struggle on that.

 

[itsallaboutyou]

There IS no ladder ..... find me someone who is under 40 who can describe what they did to 'move up the ladder' and ill believe them. There is NO wage inflation that is eroding mortgage debt like it did a long time ago - hence, NO LADDER.

With the biggest financial decision you'll ever make - i think it pays to listen to some balanced opinion, as opposed to taking your cues from people who say 'get on the ladder now, before its too late' ..... quite possibly one of the worst pieces of advice you can give to someone.

Dont ask family, friends or peers for advice about housing either - nine times out of ten you'll get the same line repeated to you over and over and over. 'Ladder' 'Security' 'Rent is dead money....' ..... all completely untrue

There, as resident housing bear, ive said my piece haha.

Good advice ^^ - From my personal experience, I can say that I dont regret my decision.

Others may disagree - so get as many 'opinions' as you can!

In terms of 'The Property Ladder' - I think the term has lost its meaning in it's truest sense. Its now just a term banded around to refer to purchasing property full stop... Just my 2p

Tom*

 

[richard1032]

OK, you say the mortgage repayments would be around £420 per month.

The flat is £76K, so by my calculations you either have around £11K deposit or you're getting a mortgage at 4.5% interest.
Given that you're on £16K per year that doesn't seem all that likely.

I really hope you're not considering an interest only mortgage!!

PS £420pcm mortgage on £1K take home pay really isn't a lot anyway, I know I'd struggle on that.

My deposit is mimimum 13k probably a little more, what can i say im a good saver. I am most definantly not thinking of a interest only morgage, for some people it may be a good option but certainly not for me and £420 a month out of £1k really wouldn't make me struggle at all, infact life wouldn't change for me....could still go out weekends etc.

 

[DJsean]

Can somebody explain, other than for flexibillity (Move at the drop of a hat etc), why renting ISN'T dead money. It's paying money into accomodation you live in at that moment. At least if you buy you have the possibillity (and probabillity, long term) to make a little extra that could see you into your next move up the proverbial ladder.

I still feel there is a ladder if you buy young as I did.

You buy a small property due to mortgage affordabillity, small wages etc, as your earning power increases, and hopefully the properties you own along the way you should be able to buy bigger and bigger (Moving up the ladder) until you perhaps want to move back to a smaller place bought with equity to live mortgage free.

Sean

 

[DJsean]

17% deposit will certainly open doors to the better mortgage rates, what do his wages matter in regards to the rate he is offered? The banks and building societoes offer rates based on the risk they take on in a property %-wise.

Sean

 

[Haircut]

My deposit is mimimum 13k probably a little more, what can i say im a good saver. I am most definantly not thinking of a interest only morgage, for some people it may be a good option but certainly not for me and £420 a month out of £1k really wouldn't make me struggle at all, infact life wouldn't change for me....could still go out weekends etc.

Good for you if you've managed to save that up.
You have to remember it's not just £420 per month though. You'll have various other bills on top of that too.
I would anticipate at least £700 per month (including food) leaving you with only £300.
Remember you'll have council tax, buildings and contents insurance, electric, gas and water bills on top of the mortgage payments plus any other regular expenditure.

You'll probably also need to keep a pot aside for replacement/repair of things in your flat.
If you think you can manage then great, but I wouldn't advise struggling with money just to buy somewhere.

 

[The Mad Rapper]

I have no idea of anyone has already pointed this out as I have only read the first post.

We are in a falling market. DO NOT buy a house now, wait for a while and see what happens over the next 6 months before taking the plunge. The economy is fooked, house prices have and will continue to fall, act smart.

 

[brid]

Renting ISNT dead money compared to mortgage interest, in which BOTH are money that you dont see again.

If you fancy seeing some dead money - multiply the amount your mortage would cost per month, then by 12, then by the number of years your mortgage is for ...... thats how much your mortgage costs - Now deduct however much money you borrowed in the first place to give you some 'dead money'

(You could always divide that figure back out by however many months your mortgage is for to give you a nice monthly 'dead money' average over 25 years).

 

[Ben Cole]

There IS no ladder ..... find me someone who is under 40 who can describe what they did to 'move up the ladder' and ill believe them. There is NO wage inflation that is eroding mortgage debt like it did a long time ago - hence, NO LADDER.

Not quite sure what you mean there. If you want to get into semantics about the term ladder in this context then I'll give it a miss.

However,

For me the ladder means this.

I bought my first flat when I was 26. Second flat when I was 31. First House when I was 33, second house 2 months ago at 35.

If I'd rented all the time I'd have nothing.
If I'd decided just to sell and not buy another property when I bought this one 2 months ago I'd have a big six figure bank balance.

To me the ladder is (for example) small flat, large flat, small house, large house.

Ladder is just a term. Fact is that IF property continues to go up which it inevitably will (even if there is a small drop or two on the way) you are better of owning than renting.

 

[brid]

The 'Ladder' was the idea that you took out a mortgage on something you could afford at the time.

Then as time went by, your earnings increased - After a while you take out another mortgage 'in line' with your now increased earnings.

The 'ladder' was the fact that wage growth was outstripping house price growth, which meant that when you came to remortgaging and buying another house that you could suddenly afford something a lot better, both because you were earning more, and because houses werent going up as much.



That ISNT happening today.

 

[Jonnycoupe]

Even if houses prices didnt more for a century, there is and always will be a property ladder.

Its the bottom rung thats the issue in the current marketplace, although it is changing so personally Im getting taller and can almost reach that rung

 

[Ben Cole]

As Jonny (Gurney perhaps?) says there is always a ladder.

Wage inflation does exist just perhaps not in the form you guys are thinking about it. ie. Promotion or seniority.

 

[brid]

So say someone takes out a mortgage now at the total max end of their income multiplier .... say 5x salary or something.

What about if theres a downturn in the next few years that takes a good 10 to pan out fully, where lenders go back down to loaning out smaller multipliers - your earnings might go up but you may end up not being to borrow any more than you did originally.

Assuming house prices go UP, or even stay totally stable - It once again eliminates this ladder.


People might talk about 'the long term' .... but 10 years is a long long time as well.

 

[Ben Cole]

Another point. Logically it's only people that don't own that will tell you to rent. The telling factor is how many of them have NEVER owned and are just trying to convince themselves that their necessity is their choice.

Human psychology is a powerful influence.

 

[brid]

And conversely, its people who OWN, who try and convince you to own..... to validate their own choices through others.

 

[Jonnycoupe]

As Jonny (Gurney perhaps?) says there is always a ladder.

Indeed Ben,

Hows the family? I had my second yesterday, a daughter to go with my 21month old son

 

[DJsean]

Renting ISNT dead money compared to mortgage interest, in which BOTH are money that you dont see again.

If you fancy seeing some dead money - multiply the amount your mortage would cost per month, then by 12, then by the number of years your mortgage is for ...... thats how much your mortgage costs - Now deduct however much money you borrowed in the first place to give you some 'dead money'

(You could always divide that figure back out by however many months your mortgage is for to give you a nice monthly 'dead money' average over 25 years).

Now let's get back to the OP's situation, he can rent or buy for the same monthly outgoing, i'd rather get 50% of my money back in the form of equity (Using the analogy that a mortgage will end up costing twice the original purchase price) than bugger all which you would get back after 25 years of renting.

Sean