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Original poster

Would you buy this house or carry on renting?

30 replies

chaffinch · 31/05/2007 16:15

Bellway homes are doing a deal near us on a new development where if you buy a 3 bed new build they will pay a 5% deposit, give you £500 towards legal fees and pay stamp duty too. However we had planned not to buy for a while as I am learning to drive and am working part time. The plan always was that when I pass I would look for a decent full time job then we were going to buy a home in a rural area with a nice view which these new houses definitely won't have

My dilemma is this. Do we buy one of these houses, put our hard saved £15k deposit towards it too and go interest only just for a year. After all we are paying dead money in rent anyway and I have heard new builds tend to increase in price by about 20% after they are sold. This would mean we could then buy an even nicer dream home eventually. Or do we stay renting for a while in the anticipation that house prices may come down? We are in Doncaster, South yorkshire if this helps

Thanks for all those who have bothered to read this until the end. I hope someone will be able to advise me as my head is now spinning!

OP posts:
Cappuccino · 31/05/2007 16:17

I'd probably buy

but that's not based on any legal or financial experience it's just what I'd do

it could be completely wrong

Mumpbump · 31/05/2007 16:18

Difficult dilemman. I'd be inclined to buy on the basis that the biggest disincentive in having to move twice within a relatively short period of time is the stamp duty, but if they're paying that, it doesn't matter so much. Plus, if they will pay the 5% deposit - do you have to repay them? - then you have some insulation from the house prices falling.

But there is a lot of hype at the moment about the market falling. I am pretty confident it won't in the South East where we're based, but don't know about your area.

Mumpbump · 31/05/2007 16:20

The other thing which might influence your decision is what mortgage deals are available at the moment. If you wind up paying a big redemption penalty if you pay the mortgage off early, that would be a reason not to buy now...

Twiglett · 31/05/2007 16:20

will you end up living on a building site? newbuilds tend to sell and keep building

do you love the house?

is it in the area you want to be in for 3-5 years

are the prices in line with other similar properties in the area (or have they set their own price then discounted)

personally I'd buy .

Original poster
chaffinch · 31/05/2007 16:22

I am not sure about having to repay them, would probably need to look into that in more detail. Never thought about that - that is how much my head is spinning!

Does anyone know if new builds do increase a lot after purchase?

OP posts:
nannyogg · 31/05/2007 16:22

I think that sounds like a really good deal for getting on the ladder. Have you checked online what your mortgage payments will probably be? If they'd be the same more or less as your rent then I'd probably go for it. I'd get good independent advice as well though. I'm sure a property whizz will be along with some better advice, but if it was me I'd be tempted to go for it.

LIZS · 31/05/2007 16:23

That sounds a pretty good deal so would be tempted however if it is a ploy to shift a first phase you may find yourselves waiting for several years, while the rest of the development is built and becomes established, before you are able to see an appreciable rise in your investment. I really doubt prices will come down much , let alone enough that a reduction would outweigh the financial incentives the developer is offering.

Carmenere · 31/05/2007 16:23

What to 3 bed houses go for in your area, how does the price compare? How is the local market performing atm? Why are they giving those incentives. Are you sure they are not asking over the odds for this property? Not too sure about new builds appreciating by 20 per cent tbh.

The market is levelling off atm, not crashing by any means but just properties are not increasing in value in the same way as they have done in recent years.

That said I would probably buy rather than pay rent but that is just me(and cap)

Mumpbump · 31/05/2007 16:25

And I would try to go for a repayment mortgage if you can possibly afford it. Interest only has historically proven to be a bad deal...

Cappuccino · 31/05/2007 16:25

also maybe look at what other houses are being built in the area

if there are loads and loads of new developments planned then in 3 years time you may find that buyers would rather buy new, with similar deals to yours, than look at yours

Cappuccino · 31/05/2007 16:26

yes no to interest only

pay as much as you can go repayment

Original poster
chaffinch · 31/05/2007 16:27

The price is actually quite low compared to some in the area. The house is nice but doesn't tick all the boxes in our wanted list as it doesn't have an ensuite or the view I so badly yearn for but it would certainly be ok for a year, and the building site aspect would be ok as long as it wasn't literally next door! We do have a good IFA too who would find us a mortgage with no ERP's

Don't you just hate dilemmas which could be life changing?

OP posts:
Mumpbump · 31/05/2007 16:28

That is a very good point, Cappucino! They're building loads of stuff in our town at the moment and that must keep the prices static at least...

Mumpbump · 31/05/2007 16:29

Would you mind staying for longer than a year if you couldn't readily re-sell it?

Original poster
chaffinch · 31/05/2007 16:36

There are some really good points on here. There are lots of new builds springing up from nowhere at present which means Cappuccino has given me food for thought. However none of the other developers are offering anyhwre near such a good deal. The house is nice enough though to mean it wouldn't me a massive issue if we had to stay for a bit longer but I want the house with a view badly so I don't want to be in a situation where we can't sell it at all.

Can I ask why interest only is a bad option if this is a short term solution? The interest only payments will be about £100 a month more than we are paying now wheras the repayment would be £300 a month more which we probably couldn't stretch to for at the moment.

OP posts:
tigerschick · 31/05/2007 16:38

Personally I'd buy. But, like others have said, that may not be the best thing in this situation. I just think that renting does mean that you are spending money on something that can't give you a return where as a bought house might.

Mumpbump · 31/05/2007 16:39

To my mind, interest only is like paying rent. You don't increase your equity in the property so end up in no better position. Plus in the long term, there is no guarantee that the policies they sell to pay off the capital at the end of the term will cover the full amount which is what happened a few years ago. It might not be relevant if you move after a year, but you might get stuck there for longer and (as a very risk averse person) I personally try to at least think of how things would work in worst case scenario.

LIZS · 31/05/2007 16:41

Interest only emnas the debt remaisn the same and is only repaid on sale or with a life assurance type policy maturing at term whereas with repayment the debt gradually reduces and gradually the amount of interest is periodically recalculated based upon the revised debt , with the ultimate goal to pay it off completely at the end of the term. There will be penalities attached to early repayment , especially with a fixed rate deal, so make sure you are aware of the implications

Mumpbump · 31/05/2007 16:41

Sorry - I mean you are more reliant on the house market going up or at least holding. Whereas paying off a mortgage is a form of saving which also would help protect you from winding up in negative equity if the market did fall.

Original poster
chaffinch · 31/05/2007 16:42

Tigerschick - what a fab way of putting it. I think we would definitely go for it providing house prices don't crash. The last thing we want is to lose our deposit we saved so hard for. I know it is a tricky issue but does anyone have a crystal ball/ little wizard/ ability to go forward in time, to be give me a definitive answer please? !

OP posts:
noddyholder · 31/05/2007 16:44

If you are looking for a long term home it is a good deal but not as an investment.They don't increase in value as much as older houses and the market is faltering atm and even falling in some areas

Original poster
chaffinch · 31/05/2007 16:45

Aww shucks Mumpbump and Liz. You are both right too! I have a driving lesson now so going to try to switch off for now both physically and mentally for the sake of my driving instructor, but will come back later for more info if there is any. Thanks to all posters so far, you have all been great.

OP posts:
noddyholder · 31/05/2007 16:47

Also if you can afford the extra 100 but no more if interest rates rise further and you have to find the extra it will be tight.Interest only is like renting from the bank imo.

RanToTheHills · 31/05/2007 17:03

on balance , i;d buy. Just faced similar dilemma so feel for you. disagree actually about the lack of equity build-up if you go interest only. If house prices do rise (i know, many are predicting a slow-down) then you will gian some equity. Renting is always a dead-end however, thouigh it buys you the flexibility to jump when/if the right house comes up. I think at any price you have to compromise, tbh.

RanToTheHills · 31/05/2007 17:06

np it isn't like renting from the bank (but do understand where you're coming from)!
If she fixes, which is sensible with interest only, then no worries in short-term (which is what she's looking at) as regards rate rises. It's a foot on the ladder - she may well be priced out of the market if house prices increase, however slightly.

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