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First-time Buyers 'don't Understand Legal Terms'

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Any difference between a leasehold & freehold property?

Article Published On 7 June 2007

Many young home buyers - even after securing a mortgage - are in the dark about the terms surrounding property negotiations.

A new report from AA Legal Services found that 40 per cent of first-time buyers could not correctly explain the difference between a leasehold and freehold property.

With the Bank of England's Monetary Policy Committee due to meet today (June 7th), the AA has warned that people may not understand what type of property they are set to purchase with their mortgage.

Young home buyers will typically have to spend £159,653 on their first home - often taking on a large mortgage to afford it - but just 59 per cent knew what a freehold was and 43 per cent were ignorant of what buying a leasehold property would mean for them.

A worrying two per cent of people aged between 18 and 24 believed you could only buy a freehold property if you were a member of the Freemasons. :lol:

"Our research suggests that many homebuyers are so desperate to get onto the property ladder that they may be over-looking vitally important basic legal principals," warned James Molloy, the head of AA Legal Services.

"For years, the legal community has not helped much in terms of engaging the public on legal aspects of home buying."

Recent figures from the Council of Mortgage Lenders suggest that first-time buyers spend 18.3 per cent of their income servicing the interest on their mortgage.

No wonder they are paying delusional prices today not to miss the boat as they are clueless. Mortgage lenders also live on "Cloud cuckoo land" if they really think mortgage on £159K is only 18.3% income of first time buyers.

Let's do the math.

£159K mortgage - 10% deposit = £143K

£143K @ 6% = £932pm (Repayment)

= £715pm (IO)

so, for £932 to represent 18.3% income we are talking about home take pay of £5,089pm = £61K (net salary)

or on IO mortgage the net income must be £3,904pm = £46K (net salary)

They are lucky I didn't read that article on Monday morning as it is Friday afternoon I guess I can put up with VI rubbish :lol:

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Any difference between a leasehold & freehold property?

No wonder they are paying delusional prices today not to miss the boat as they are clueless.

Hilarious and tragic at the same time. Maybe we need a house-buying license, along the lines of the driving license, to protect these children from themselves (not to mention everybody else).

Well, it would be one way of reducing demand :P

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I think the flaw in the logic is to think that 1st time young buyers typically buy a home at 159k. Average houses may well be around that mark, but we are talking about people who buy in at the bottom of the market, without getting into a discussin on the distribution of a mean average, I think its fair to say the majority will be paying less. Certainly FTB flats in my town in London start at about 140k (and go up to 280k for a new build 2 bed - but that wont be bought by an FTB one hopes!), with houses starting at 180k or so. But isnt London supposed to be at the top end. :)

Edited by Orbital

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