Mortgage/Valuation issue

[Jez]

don't even think about interest only, bad idea at best of times and government announced today that they are going to put pressure on banks to stop them

Interest Only mortgages are completely retarded and should be banned. .

I am both confused and surprised at those comments from you two, IO mortgages certainly have their place in the market, and are the best repayment mechanism for the financially astute buyer. My mortgages are on an IO basis albeit with no tie in period nor overpayment clauses. This is by far the most flexible way to service a debt. You are free to repay capital as, and when you like, to the tune which suits yourself. Repayment products have no purpose other than to force small, usually insignificant monthly repayments, which could and should be paid on an IO loan anyway.

That aside, i agree with the advice here, this whole plan is flawed and frankly isnt worth pursuing as it will not go ahead based on what has been outlined in this thread.

 

[ntg]

So my understanding is this would be on the mortgage agreement, and she is liable for the entire mortgage in effect.

No,

From the first page of the thread

sorry - i've worded this wrong. she's his guarantor (read as: happy to bail him out shoul anything go wrong) should he hit any trouble paying his side of the mortgage, but the mortgage is being offered on the basis of his and my financial situations. does that make sense? not sure if it does! i'm confusing myself... i can't believe that someone as naive and gullable as me should be allowed to buy a property

She will not be entering a legally binding agreement (she is obviously not as naive as the OP or his friend).

Also to the OP: What happens when within the next 5 years you or your friend (or both of you) find a partner and want to move in with them???

 

[ntg]

i completely understand the point you're getting at. most of the people we've consulted are fully aware of:

a) my financial situation
b) the integrety of my mate's mum

I don't mean to sound rude or offend mate, but the integrity of a person goes out of the window when they are faced with a huge bill. Money destroys families and blood relatives, let along the relationship between you and your friend's mom.

Oh, and she wouldn't be abandoning him if **** hit the fan. She would just tell him to go rent a room somewhere else (which would cost him the same amount of money as the IR mortgage portion he will be paying now) and tell you to sod off and figure it out yourself. Money changes everything.

 

[toshj]

No,

From the first page of the thread



She will not be entering a legally binding agreement (she is obviously not as naive as the OP or his friend).

Also to the OP: What happens when within the next 5 years you or your friend (or both of you) find a partner and want to move in with them???

the place currently has two couples living in there at the moment, and we've both come to the decision that we'd be happy living under similar arrangements - also this would therefore split the payments four ways.

thanks for calling me naive i'd hasten to add itspretty naive to comment on someone's moral grounding without having met them. its the sort of thing that external commentators wouldn't really be able to grasp unfortunately, therefore making both of our stances irrelevant

 

[The Mad Rapper]

I am both confused and surprised at those comments from you two, IO mortgages certainly have their place in the market, and are the best repayment mechanism for the financially astute buyer.

And that's fine on the basis that the customer has a repayment vehicle with which to guarantee the capital. Years ago it was a requirement, but that requirement has been dropped.

I accept we may not agree, and for some buyers (BTL) Interest Only may be a good option, but I'd like to see them completely banned and have Repayment mortgages only, for the reasons I described earlier.

 

[ntg]

the place currently has two couples living in there at the moment, and we've both come to the decision that we'd be happy living under similar arrangements - also this would therefore split the payments four ways.

thanks for calling me naive i'd hasten to add itspretty naive to comment on someone's moral grounding without having met them. its the sort of thing that external commentators wouldn't really be able to grasp unfortunately, therefore making both of our stances irrelevant

Naive is not necessarily derogatory, it's just that you are obviously inexperienced in the whole buying houses thing, and your friend's mother seems to be much more experienced in it. Don't take it the wrong way. I didn't mean stupid, just inexperienced.

Btw, if she feels so strong on backing up her son it would be good to put her in the mortgage as a guarantor as well, it can only help your friend's credit.

 

[toshj]

Naive is not necessarily derogatory, it's just that you are obviously inexperienced in the whole buying houses thing, and your friend's mother seems to be much more experienced in it. Don't take it the wrong way. I didn't mean stupid, just inexperienced.

Btw, if she feels so strong on backing up her son it would be good to put her in the mortgage as a guarantor as well, it can only help your friend's credit.

ok cool. i'd be the first to admit that i have little experience within this space, however i know my budget and am not willing to compromise that. taking the entire debt on myself would be within my budget (including rates rises), so that's the point i was trying to get at.

i was under the premise that i would be able to renegotiate at the end of the two year fixed, and that given my credit rating and our combined income we should have been able to do that relatively successfully. obviously people don't agree and that's made me have a think

 

[Wicksta]

the place currently has two couples living in there at the moment, and we've both come to the decision that we'd be happy living under similar arrangements - also this would therefore split the payments four ways.

I take it you've cleared this with your future partners?

 

[Stretch]

Why don't you just make an offer at the banks valuation price? If you pay more than they value the property you’re always going to be fighting an uphill battle as far as remortgaging is concerned.

 

[toshj]

Why don't you just make an offer at the banks valuation price? If you pay more than they value the property you’re always going to be fighting an uphill battle as far as remortgaging is concerned.

yeah, having spoken with my mate and our mortgage advisor, that looks like th plan from now on.

i spoke to the estate agent just now and she indicated that the vendor was very disappointed its been valued at such an amount, as a number of different agents had valued it at a similar amount. she asked whether we had additional funds on top of our deposit to put into the offer so it doesn't fall short of his asking price, and i simply let her know that we wouldn't pay over the valuation. if we managed to get it through at this amount (£475,000) i'd be pretty content, but obviously wary as to issues other posters have highlighted

 

[ntg]

ok cool. i'd be the first to admit that i have little experience within this space, however i know my budget and am not willing to compromise that. taking the entire debt on myself would be within my budget (including rates rises), so that's the point i was trying to get at.

i was under the premise that i would be able to renegotiate at the end of the two year fixed, and that given my credit rating and our combined income we should have been able to do that relatively successfully. obviously people don't agree and that's made me have a think

You also need to take into account that if:

a) the bank is valuating it at less than the offer price, AND
b) the property market dives in the near future

Not only you will be in negative equity, trying to remortgage will be insane as the next bank will valuate it at less than the first one and you will have paid much more and be in neg.equity already. All this is of no consequence until you might want to sell, and considering you will be paying a IR mortgage you stand to lose a lot of money in that scenario.

I wish the best for you and your endeavours but I would strongly suggest to go for something less complicated. No matter how good this house might look like there are always bargains around.

 

[bloodline76]

Why don't you just make an offer at the banks valuation price? If you pay more than they value the property you’re always going to be fighting an uphill battle as far as remortgaging is concerned.

Yeah I would be worried about remortgaging. Say you are on a 4-5% fixed for three to five years now.

You then go and try to remortgage and find out that their value of that property is extremely lower. You would then switch to a variable mortgage which in three to five years could go up to about 8-14% if you were really unlucky and then you would lose it all.

Very risky for the biggest purchase of your life. Sounds like a nice dream but it could turn into a nightmare fast.

 

[Jez]

And that's fine on the basis that the customer has a repayment vehicle with which to guarantee the capital. Years ago it was a requirement, but that requirement has been dropped.

I accept we may not agree, and for some buyers (BTL) Interest Only may be a good option, but I'd like to see them completely banned and have Repayment mortgages only, for the reasons I described earlier.

My opinion is that an illustration of the repayment vehicle should be mandatory, but that the options should remain open. Otherwise this is a case of the uneducated spoiling the market for others.

 

[The Mad Rapper]

yeah, having spoken with my mate and our mortgage advisor, that looks like th plan from now on.

i spoke to the estate agent just now and she indicated that the vendor was very disappointed its been valued at such an amount, as a number of different agents had valued it at a similar amount. she asked whether we had additional funds on top of our deposit to put into the offer so it doesn't fall short of his asking price, and i simply let her know that we wouldn't pay over the valuation. if we managed to get it through at this amount (£475,000) i'd be pretty content, but obviously wary as to issues other posters have highlighted

If you are minded to press on with the purchase, I think this is a very sensible approach. Well done!

P.S. Don't let the EA bully you, remember, the higher the sale price, the more commission they get.

 

[Stretch]

yeah, having spoken with my mate and our mortgage advisor, that looks like th plan from now on.

i spoke to the estate agent just now and she indicated that the vendor was very disappointed its been valued at such an amount, as a number of different agents had valued it at a similar amount. she asked whether we had additional funds on top of our deposit to put into the offer so it doesn't fall short of his asking price, and i simply let her know that we wouldn't pay over the valuation. if we managed to get it through at this amount (£475,000) i'd be pretty content, but obviously wary as to issues other posters have highlighted

Sounds like the best policy to me. You're in the same position as most other buyers so I wouldn't write off your chances just yet. Unless a developer sees massive unrealised potential and makes a cash purcahse I can't see why you your offer won’t be accepted when the owner eventually realises they're valuation is way off the mark.

Just be firm and stick to your price, if it doesn't work out they'll be other properties.

 

[borich_planner]

This is just total Madness!

 

[Stretch]

This is just total Madness!

Why? He said he's not going to pay more than the banks valuation price. Sounds perfectly sensible to me.

I think if he tells the estate agent he's made an offer on another property and it's been accepted but he'd prefer this one at £475k they'd crumble straight away.

 

[Stretch]

Double post

 

[Tysonator]

Interest only mortages only work if do not intend to stay that long in a property. So when you sell you are hoping to cash in the increase in the equity.
Well that was true some 5 years ago.
These days the property prices are dropping slighty over all, though you always do have hot spots that buck the trend.
I would say in the next 12 months interest rates need to go up by at least 1/2 percent to help the value of the pound.
so you mortage payments will increase unless you have a fixed term. And even those are not that attractive and are not that much lower than 3-5 years ago when interest rates were higher !
With the country on the edge of a second recession buying a property at £500,000 odd quids is adventerous action, abd good luck to you.
Just remember you are looking at a mega monthly repayment figure, even though I suspect you have it over 30 years on interest only !

 

[Django x2]

I had exactly the same problem but with a developer. I risked it and said I was pulling out unless they accepted a revised offer inline with the valuation.

They did.

And please remember, it's a risk. The estate agent doesn't work for you, they work for the vendor. If the vendor pulls it, you're shafted.

Oh, and if you have your head screwed on, there is absolutely nothing wrong with an interest only mortgage. They can often work in peoples favour. Friend of mine is in IO flat and he will just rent it out when he moves to somewhere else. He can then choose to change to CR or keep it IO, the value of the flat will only go up at some point and he can then sell it, pay off his mortgage and pocket the rest (although the difference would be more if he was paying CR obviously).

I know a GP who is paying IO, married with 4 kids and who lives in Sandbanks, the most expensive property in the UK. Once al his kids have left home he will simply sell the house, pay off the mortgage and move to something smaller with his wife. Simples