M Brian

how much have people got to put down to get one???

as work this out... £750 a month x 2 years is £18k... so every 2 years it goes up £18k ok so houses no doubt go up... ok house prices have recently rocketed... but i dont expect them to sustain a 20% a year increase.

so now get saving... and in few years time you have a big chunk to put down.

6k to put down is like pi55in in the wind nowadays - id got 11k that I 'could' of put down in 2001 - i.e. 25% of the value. now for my house you're talking putting 22k down to be same kinda value.... still do-able as I woulda had an extra say £50k in savings if id stayed at home another 3 years.


london prices you have no hope - but when ever have you?? 2 years ago did you have hope? 3 years ago? 8 years ago? prices have always been considerably higher

how much a month are people putting away in savings for a house?

Stavros

I think its all time to buy posh caravans and mobile homes and live like Gyppos

RSrussell

Melv i put down 10%, almost 3 years ago which was around 3k deposit (37k as 50% ownership morgage)
Then at the 2nd year remorgage, i was allowed the 25% deposit rate, due to the equity in the property

M Brian

lol... oh also makes me laugh a bit.

people expect to live in the same kinda house and environment as their parents... get real. it aint going to happen. have your parents always lived in that house in that exact area? - i've actually moved back to the area where i was born and spent first 6 years of my life... as the equivalent house was £20-30k cheaper here than where my parents lived. (its only about 5 miles away and i dont live in a rough area - just not rurual type)

GARETH T

one thing i could never do is move away from my friends! this would be a bad mistake for me

great thread,,,

M Brian

i put down 10% aswell and kept the rest in the bank!! I could earn more in interest on my savings (6%) than my mortgage rate was (5%)!!

my current interest rate is 3.8% so ill be having a shock once it comes off fixed next year!! as i reckon ill only be able to negotiate in the 5s!!

Clare

Both now untrue (soz to piss on your parade Salv )

Housing Associations are no longer allowed to hog the market and insist that you advertise with them for a minimum period first. You are now entitled to sell your house by whichever means you choose.

The premium thing is also, as I said above, dependant on the Association, for example: in 2002 Midsummer Housing changed their Terms and Conditions to stop people putting premiums on their property when they sold them on (unless the property was on an old MKDC lease which they have no control over even tho they now own these properties).
Whereas MK Council Shared Ownership let you do whatever you want, so when mine goes up for sale next year it's getting the maximum £10k put on top

RSrussell

Melv i remember you saying that a while back and it got me thinking.
But i can't fathom how you worked it out to be better financially.

If you take a 100k home for example
and you pay a 10% deposit to make it 90k. 5% rate over 25years on repayment

Thats £157839 to be paid back

now if you pay a 20% deposit to make it 80k. 5% rate over 25years repayment

Thats £140301 to be paid back (£17538)

If you invested 10k into a 6% account thats only £11599.20 compared to the above, as the 5% interested is based over the whole original (80k) sum.

I used this site for the calcs as i always find it handy http://www.moneypointfinance.co.uk/calculator.htm

RichardPON

Clare,

I was just about to write all this drivel about Housing Associations and shared ownership, but I think you've covered it, and seem to know a lot more than I do about it

All I know is house prices are still, and will always be goverened by demographics. My parents place, which they bought 25 years ago, has recently been valued at close to £500,000, and it's a 3 bed semi! That sort of money will buy you a mansion back up in Norfolk where I used to live at Uni, but it's horses for courses.

In our current location, I can walk out my front door, and be in Oxford Street in 30 mins - that obviously adds significant value!

Andy-R

IMO and yes it is a very biased 1...based on years of experience.....repayment mortgages although the sensible option of repayment are not necesarly the smartest.

Typical example.

1st time buyer purchases house at £80k sells 4 years later at £158k

2nd purchase £270k there is now just under 30% equity in property. £78k deposit from sale of 1st property.

Assuming this was a interest only mortgage nothing has been paid towards repaying the loan. A lot less in monthly payments have been paid than a capital&interest mortgage, bearing in mind no capital is paid on an capital and interest mortgage until around year 8.

Purchase trends show that people move on average every 3.7years. Thus paying nothing towards purchasing there home, but pay a higher monthly amount that that of an Interest only mortgage.

As we tend to move to smaller propertys as and when childeren etc are out the way ultimatly we are going to downsize in any event.

Why atempt to pay capital as part of a capital&interest mortgage that you are possibly never going to repay due to moving house if your moving prior to year 8.

By moving house regulary and playing it smart you can be mortgage free with the property doing the buying for you!

Iain Mac

This thread started with a plea for the Government to help first time buyers. Honestly, young people today seem to think someone else should buy everything for them!!

I know things are very tough for kids nowadays, but I don't owe you anything, endured real shit to get where I am now, and I'm still having to find money to pay my own mortgage each month, so why should I pay more tax for younger folk to get a help onto the housing ladder?

Sorry guys, but I'm on a major downer about handouts of all descriptions just now after listening to a teenage couple with no jobs, education or prospects whining about how they are entitled to this that and the next thing because he managed to get her pregnant - what a hero! Yet when I got made redundant twice in 12 months I was entitled to contributions based job-seekers allowance (£42 per week for me, Mrs, and two teenage kids!) BECAUSE I had built up savings, yet if I'd pissed it against the wall or bought a fancy car I could have had a lot more.

When I bought my first flat (third floor, two rooms and bathroom, in the city centre so very restricted parking), I was on shit wages, and borrowed more than the three times salary so I had no money for carpets or furniture or anything like a social life - not even a decent sound-system.

I moved in on a Friday night after work with a Chinese take away and a 6-pack, and threw the party to end all parties - not the best start with the neighbours, but I met lots of interesting new people, including at least two police crews called out about the noise.

Bought a second-hand cooker and bits and pieces as they came along, but slept on a (borrowed) camp bed for 6 months.

Spent a year doing it up as cheaply as possible (including re-using the old floor tiles from my office when that got refurbished) and sold it on for a £5k profit. Did the same with house number 2, and three, each one a bit better than the last, until 13 years ago I built this house from scratch. About 1/3 of the finished value is pure profit when you build your own - not three times as stated above!

Others have talked about a looming price crash and I think it could well happen, so this could be an excellent time to rent or stay with the folks. Apart from anything else, why not put the difference in what you pay now against what you would pay if you had a mortgage away as savings and see what else you have to give up then ask if really you want the house that badly!!!!

RSrussell

ah you've ammended it now andy

been writing stuff for the last 20 minutes, but I keep rewritting it and changing it etcetc guess i'm just tired

So i'll just say

Although it horses for courses and "if" the rate shot up, they'd be in a worse financial situation (14% base rate in the 1989 crash!) than someone on a repayment.

Andy-R

Following on from earlier post.

**Sorry Rikki yup edited needed to make it a little more transparent!**



£80k mortgage. based on 5% 25years

Repayment = Monthly payment £473.01 Total payments £141,903

Interest only= £333.33 Total payments £99999.99

£140per month = £1680per year over 4 years thats £6720 to your lender for what? As Repayment mortgage hasnt started to eat into inital figure borrowed.

Iain Mac

In example one you own a house. In example two you still owe £80k.

If rates rise, the capital repayment stays the same (assuming you increase the payment) so option one gets proportionatly cheaper.

If house prices rise this year and next, then drop like a stone in year three, at least the guy in option one has made some small contribution to the capital so won't be as far into negative equity as the second guy.

RSrussell

But IF the rate went up to 8% the repayment would stay the same

but the interest only;
Interest = £533.33 Total payments £160000

It just a game at the end of the day

Andy-R

Rates rising would effect both Capital and Interest and Interest Only mortgages, assuming they are both the identical product.

The whole point is that no payments are made to an Repayment mortgage untill around year 8!

RSrussell

Not if you have a fixed rate

Andy-R

hence my

Fixed,capped,discounted,tracker etc etc are available for both methods

RSrussell

Fixed interest only? never knew that was available

Andy-R

Tis cool how much have I just saved you per month? lol

RSrussell

indeed!

Iain Mac

A small amount of capital is repayed from month one - otherwise the balance would NEVER come down. If you have to wait till year 8, what happens then that suddenly changes to allow repayment of capital?

I suspect you may be thinking of an endowment mortgage where all the commissions and charges to be paid to the salesmen would eat up years of contributions.

Using the example above of £80,000 over 25 years at 5% and assuming the repayment shown is accurate:
Borrow £80k, one month later you pay £473.01.

£80,000 x5% per annum interest = £4000 divided by 12 months = £333.33 interest for the month and £139.68 off the capital.
Month 2, balance is £79860.32 x 5% = £332.75 and £140.26 off capital.
Month 3, balance is £79720.06 x 5% = £332.17 and £140.84 off capital.
and so it goes on.

The real calculation is a bit more complex and depends on the lenders policy for compounding interest daily, weekly or monthly but this shows the principle.

In very broad terms, after a year of paying a capital and interest mortgage you will have paid off about £1700 of your loan and on an interest only you will have paid off nothing, but saved £1676.16 on the repayments. The gap widens with every additional year as the capital reduces, allowing more of your payment to go towards repayment instead of interest.

Worst case, and assuming you don't move house for the whole 25 years, you could end up still owing £80k on the house after having paid more in interest over the years than the interest element on a cap and interest loan would have been.

And finally. thanks to the miracle of compounding interest, pay just a little bit extra each month and watch the total you have to pay back fall hugely.

Then try to do that with an interest only....

Andy-R

Knife go phone your bank/building society check with your IFA you will find that what I have stated is fact!

Its the reason Banks Building societys steer potential customers towards Repayment mortgages and also why you pay so much more over the term of loan.

During the early years of a repayment mortgage, most of each month's payment is interest and it is only in later years that this is reversed year 8 is where significant payments are made to initial capital borrowd.

Check any point of sale info you have relating to your mortgage its quite clearly stated.

Its essensialy the same as a Car loan but on a grander scale.

You are however correct regarding potentialy still owing £80k.

However:

As an example (now granted the past 25years have seen high interest rates)

A client who's had remained in the same property for 25years, and who had selected at the time of purchase an Interest Only Mortgage (all be it with a Full Endowment)

Their mortgage based on a £7k properety(cost at time of purchase) Property value today cica £150k

Now the way I see it if the worst comes to the worst 25years down the line a personal loan would easily take care of the initial mortgage. Assuming there is no Repayment product in place(endowment, ISA, Unit Trust etc etc)

**edited to add a common missconception is that the Lender will come chapping on your door for amount borrowed at the end of the selected term(in the case of interest only). In my experience I have never seen a lender overly keen to see capital repayed. They are in the buisness of making money and the longer the better.

ZED

As some of you may know i sold my cossie to buy a house i went through a broker to get my mortgage in partnership with my fiancé for a house in hayes/hillingdon (london) its got a garage, big garden,needs no work and the area is very good its nearly 240k though! i should be getting the keys at the end of the month i still miss having a modified car a lot! but buying a house was something i had to do! I have gone through and going through the whole process of buying a house right now so if any of you guys want to ask me any questions please PM me i will help as much as i can.

RichardPON

Quite correct.

My best friend is an IFA, and just confirmed it too.

It's quite horrifying really!

Iain Mac

I have lent commercial finance for over 20 years so I don't need to phone anyone.

What you had said is that there was NO capital repayment until year 8.

What I said was that a SMALL amount of capital is repayed from month one. In the worked example a little under 30% of your first repayment is used as capital repayment, and the proportion grows with each month that passes.

I don't think IO is a good idea, but I can see why some people want to go down that route. At the end of the day I am not an IFA and am not qualified to give investment advice. If someone wants to go Interest Only, Offset, or Repayment or even Pension or Endowment that is a matter for them and their lender.

Clare

Im sure there are still some things I dont know, but my first house was on one of the most awkward SO leases you can imagine, so I had to get clued up very quickly to know what I was getting myself into.
The house was on an old MK District Council lease (the MKDC no longer exist). The house was then bought up by Midsummer Housing but they were not allowed to alter the terms of the lease, so I didnt have to pay any rent deposit, even tho Midsummer were trying to get me to. The rates on an MKDC lease were also much lower, which was great for me.
As far as Midsummer were concerned, they were useless, but I had to be accepted by them before I could buy it.
My new house is with MK Borough Council, and i'll give them their due, all I had to do when I bought the house, was fill in a Direct debit in my name to pay the rent and that was it, job done. The lease was pages and pages long, but that's what I paid my Solicitor for and she had any amendments made to it that she wasn't happy with.

Also, the big thing to remember with SO houses, is that not all Mortgage lenders will lend against them. For a very long time there were only 3 Building Societys who would consider them (altho I think now more have jumped on the band wagon but you would need to speak to them direct to find out for sure):

Both times I have bought SO, the terms were........ (but may now have changed)

Nationwide - Will lend on most SO but on condition of a particular clause in the lease (your Mortgage Broker or Solicitor should be able to help with this)

Halifax - Will lend on anything over 40% share, but NOT timber framed

Abbey - Will lend on anything, providing the property is surveyed at no less than the amount you want to lend.


Blimey......... I really do collect a lot of really useless information in my head

M Brian

if you invest 10,000k into a bank account in 25 years at 6% interest it will be worth £42,918.

so.....
put down 20% = you pay back only £140301 on 100k loan

put down 10% = you pay back £157839

so therefore putting down 10k less COSTS you an extra £17,538 (but remember you have the 10k left)

so you invest this 10k into a savings account = and it yields £42918. less original investment of 10k = £32918. Less what it has cost you in extra interest = 32918-17538 = £15,380 ultimately better off by putting down the minimum 10k deposit

this also means that you still have the money in the bank and could draw it when ever you need to get you out of financial trouble, stop you having loans etc... in 12 years it would of doubled in value to £20k....

not sure how you worked it out????

though minium deposit needs to be the minimum to get you the lowest rate. (e.g. 10% was minimum for my deal - if paid 5% it was higher rate and therefore wouldnt work)

clear as mud??

RSrussell

I was using the morgage calc for interest calculations thats what you get for doing sums at midnight

Also i guess it depends on how long you will leave the money in the bank for as anything under 9 years and its not doing you any favours. I know for a fact i would be spent on buying a car.......and subsequently breaking it

M Brian

yeah but if it stops you having a loan for say 5k at 7.9% apr then you win again!!

apart from breaking it!!

st3v3

build your own house,buy the land then get the builders in all in all about £80,000 depending on the location,

GARETH T

st3v3, 80k,, tidu plots by me go for 100k