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tigermike

Really Need Advise (Apologies To Ask People)

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Hi,

Firstly apologies if this question has been asked time and time again!

So that out of the way ill begin ;-)

Myself and my partner were priced out of the property market some years ago and decided to save save save. We live in Taunton in Somerset and have a combined income of £54,000.

We have increasingly been looking for our own property and recently visited a property that was up for sale on a popular estate called Blackbrook (currently where we rent).

The house was up for £219,000 then £210,000 then £199,000 (priced dropped over a 3 months) We looked at the property and really liked it 4 bed detached.. we put in an offer for £185,000 which was accepted by the owner last week.

We have been approved for the mortgage borrowing 90% and putting in 10% ourselves.

Our interest rate is 5.69 fixed over 2 years.

Currently we live in a 3 bed semi (very small) and with our only child growing rapidly we feel the 4 bed forfill our needs more, however this is the costings

Rent £595

Mortgage £920 (plus £20 month insurance plus £46 month life insurance) plus increased council tax etc etc.

Both myslelf and my partner have thought long and hard about this, we are only just paying over 3x our annual income so we are borrowing over what we should (believe it or not we were offered a borrowing amount of £240,000 which is riduculas as the mortgage would of been far too much)

I have 2 concerns and i hope im not sounding like a "wimp" (but this is the first time we have done this)

Concern 1 are we on the verge of another BIG down turn - if so should we hang on another 6-12 months

Concern 2 should we really feel comfortable when buying your own property (for ie combined take home £3380 - the mortgage etc leaves us a damm site less per month than renting)..... Are we being greedy by thinking this is a shed load of money more each month PS.. we have no other debt so this would be our only debt.

I woud really appreciate any coments and again apologies if this has been asked before.

Thanks

Tiger Mike

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Hi,

Firstly apologies if this question has been asked time and time again!

So that out of the way ill begin ;-)

Myself and my partner were priced out of the property market some years ago and decided to save save save. We live in Taunton in Somerset and have a combined income of £54,000.

We have increasingly been looking for our own property and recently visited a property that was up for sale on a popular estate called Blackbrook (currently where we rent).

The house was up for £219,000 then £210,000 then £199,000 (priced dropped over a 3 months) We looked at the property and really liked it 4 bed detached.. we put in an offer for £185,000 which was accepted by the owner last week.

We have been approved for the mortgage borrowing 90% and putting in 10% ourselves.

Our interest rate is 5.69 fixed over 2 years.

Currently we live in a 3 bed semi (very small) and with our only child growing rapidly we feel the 4 bed forfill our needs more, however this is the costings

Rent £595

Mortgage £920 (plus £20 month insurance plus £46 month life insurance) plus increased council tax etc etc.

Both myslelf and my partner have thought long and hard about this, we are only just paying over 3x our annual income so we are borrowing over what we should (believe it or not we were offered a borrowing amount of £240,000 which is riduculas as the mortgage would of been far too much)

I have 2 concerns and i hope im not sounding like a "wimp" (but this is the first time we have done this)

Concern 1 are we on the verge of another BIG down turn - if so should we hang on another 6-12 months

Concern 2 should we really feel comfortable when buying your own property (for ie combined take home £3380 - the mortgage etc leaves us a damm site less per month than renting)..... Are we being greedy by thinking this is a shed load of money more each month PS.. we have no other debt so this would be our only debt.

I woud really appreciate any coments and again apologies if this has been asked before.

Thanks

Tiger Mike

Hi Mike,

My suggestion would be that you don't seem comfortable with what you would be paying, therefore you should seriously consider whether you are paying too much.

With a 2-year fix deal you have to contemplate an interest rate rise as a possibility at some point in the future. On the size of mortgage you are looking at, this may represent a significant increase on what you would be paying for the next 2 years.

Think it through carefully and listen to your gut feeling. If something is telling you not to proceed - DON'T.

Good luck!

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My comments, for what they are worth.

1. Ask yourself if you would be able to continue paying the mortgage if either one of you should have to stop working, for whatever reason. Would you still be able to cope?

2. NOBODY knows if house prices will fall. Every bit of logic says that they should and, in another time, they would. However, it would seem that banks, building societies and government seem to be doing everything they can to keep prices up because the consequences of a significant fall would be, in their opinions, disastrous. Others, including many on this forum, believe that prices must inevitably fall off their unsustainable tight rope. On the other hand many people, on both sides of the argument have stated openly that prices are highly unlikely to rise in the near future, which would seem to give you time to reflect. With so many properties now up for sale, it would seem, coupled with the previous sentence that there is no need to rush into a purchase at this time - but that MUST be your decision.

3. You have no need to apologise for asking for advice. You cannot know everything and there is a wealth of experience on this forum.

Good luck, whatever your decision.

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Chances of interest rates rocketing and driving up repayments in two years time when the fixed rate ends? Pretty high.

Chances of unemployment growing in the coming years? Pretty high.

Chances of housing going up in the next few years? Virtually zero.

Could you afford the mortgage at the current rate on one income? Can you afford the rent on one income? What if one of you becomes unemployed or you want another child so your wife needs to give up work?

It seems the only benefits you get wrong this is a bigger/nicer house that you can call your own, which is a misnomer, as it will be 90% the banks. You may have more room to live in, but will your quality of life be improved in other respects (nights out, presents for the kids, holidays) if you are paying out all the extra money on a mortgage? And if there is a job loss and/or interest rates rocket? Then you probably lose it all, the house and your hard won savings you used to buy it.

If you really need the extra space, pay out an extra couple of hundred a month to rent a bigger place for 12 months and reassess the situation then.

It may seem like you've negotiated a fair amount off, but don't let that think you are getting a good deal. An anecdotal for you. I was dragged into Laura Ashley last weekend, '70% Off' signs up everywhere. It was still a load of overpriced tat at that price. ;)

Bear in mind that since 1995 house prices have gone up by as much as 220%. I don't know how much wages went up since then, but I know they are only up 13.6% since 2000, lending got way out of kilter with wage growth, it was unsustainable. The banks were lending £116Bn a year for mortgages in 2007, last year it was just £3Bn! Prices literally cannot be bid up in future if the banks aren't lending. We are in the eye of the storm in my opinion, something will give eventually, I expect it will be pressures on peoples incomes via inflation, forcing sales, although that may not happen for another year or two.

If I were you I would step back and take a deep breath, focus and think about all the advice given here and the balance the potential risks versus the benefits objectively. It's just a house, don't let emotion about it being the perfect home get in the way, there's tonnes of great houses out there and they will be a lot cheaper and a lot less risky to buy in the future in my opinion.

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There's nothing to lose in waiting buddy, but a lot at stake in buying right now. Be patient until next spring. Things will be clearer then. Keep saving until that time though.

At the end of the day it is down to individual situations. If you need to move do so, if you can aford to wait, then do so.

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my twopenneth....if the place you are in is getting too small then rent something bigger and keep saving.

You could even rent something at around the £1k mark to see just how manageable that outgoing is although it would make more sense to rent something cheaper and keep adding to your savings.

I wouldnt bother with a fixed rate, if you do get a mortgage then get the cheapest one that you can find because interest rates arent going anywhere anytime soon.

As others have said, right now there is nothing to lose by waiting and everything to gain especially if you keep growing your savings at the same time as prices keep falling.

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Thank you all soo much for you comments.

I definately have doubts about this purely due to the mortgage amount per month and the interest rate rise that will follow at some point. We had thought after speaking with friends that it could just be us being greedy with our money because we do have alot of disposable income (which goes into savings) and friends had told us to "just get in and buy", Upon reflection though if you dont feel comfortable with it you should walk away....

You have really given me food for thought so thank you.

Alot to think apon :-(

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For your first question, no one really knows. However I would say it is odds on that prices will not increase. That vague enough for you?

In terms of your mortgage, the interest part would be £789.49 which is far more than your current rent. The big reason is the house is much much bigger/nicer I assume?

I would say saving to 15%, 20% deposit would put you in a far better position. How long would this take you?

However, only you know if your currently rental fits your needs. How old is your child? Do they need a bigger garden, more play space?

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Myself and my partner were priced out of the property market some years ago and decided to save save save. We live in Taunton in Somerset and have a combined income of £54,000.

...

We have been approved for the mortgage borrowing 90% and putting in 10% ourselves.

You've been saving hard from a decent income yet only have 10%?

That suggests you lead a very high-cost lifestyle. Is that compatible with your prospective new costs (don't forget to budget for maintenance too)? If not, think through what you'll cut back on.

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You've been saving hard from a decent income yet only have 10%?

That suggests you lead a very high-cost lifestyle. Is that compatible with your prospective new costs (don't forget to budget for maintenance too)? If not, think through what you'll cut back on.

Porca

We have only been on this level of income for just over 15 months, prior to that we were saving but no where near the rate we can now, but yes we do have a comfortable lifestyle now not exuberant but comfortable..

We have done the sums together on numerous occasions and insuppose that's my point really, I know buying should be more expensive, but my concern as I FTB is are we setting ourself up for a fall? The economics of the planet are cracking at the seems and whilst I would love to sleep in my very own property I will not put my family in any danger just to say "I have"..

We are still thinking very hard about this at the moment because the price is still very attractive to give you some idea 3 bed semi's go for £175,000 on blackbrook so it makes this property at present seem like a good deal, however as discussed it's pushing me to the very top of my comfort zone.

Anyway once again thank you all for your comments

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Our interest rate is 5.69 fixed over 2 years.

I just can't see the value in taking a two-year fixed deal (and esp one at that high a rate). Interest rates WILL go up and while no one can predict exactly when, the chances are you'd be finishing your two-year fix just when IRs are heading north, leaving you to find another deal at just the wrong time. Plus another set of mortgage application fees. And if your current lender wasn't offering any good deals, you'd have to go to a new lender which means the hassle and stress of a new mortgage application - and what if your income situation had changed for the worse at that point? You could get stuck on your lender's SVR.

Only having a 10% deposit means you don't have the pick of the deals so a decent five-year fix may be out of reach by now (although I see that Chelsea BS are offering 5.39% fixed for five years at 90% LTV). I'd say continue to save, build up a bigger deposit and then you'll hopefully reach the point where you'll have the pick of the mortgage deals. Get a 25% deposit and YBS are offering 3.69% fixed for five years.

Good luck.

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I can't really add much, but somebody who lived in the South West posted a topic on here about how house prices vs rents were totally out of kilter with each other in the South East.

E.g. The local economy can't really support a rent of £920 a month, but that's how much a mortgage would cost you. I suspect that prices in the South West are skewed heavily by retirees buying down there to spend their golden days, and by holiday home ownership.

What are your options like for renting elsewhere?

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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