Saving to buy a house - is this the answer???

[Jackweaver]

Hi all, looking for some advice on buying our first house

Me and the wife are renting our house in Norwich at the moment – it’s a bit small and we’re trying to save enough for a deposit but really struggling to put enough away each month! Need more space though and pretty soon we’re going to want to paint little one’s bedroom.

We’ve looked at shared ownership but it looks to me like we’d still need a big deposit to buy the first chunk of the sort of house we want – then there’s the question of getting a mortgage. Help to buy is the same – it’s more achievable than a 10% deposit but we’d still need something like £12k!

Caught up with a friend of ours who works in property and he’s mentioned a scheme his company are launching. He explained it to me like this…

• You buy 1% of the house up front then rent the rest from the company (you can buy more upfront if you have the cash) – for us this would be about £2,500
• You then save up just like we are now but use the money to buy chunks of the house over time
• Because you’re renting the outstanding %, you don’t need to have a mortgage – you just kind of buy bits as you go along.
• Legally it’s similar to shared ownership (we'd have a 125 year lease apparently)…so we can basically do everything a normal owner could (like decorate, have pets etc) anyway.

The monthly cost is pretty much the same as our rent is now so I don’t think we’ll be out of pocket – it’s just knowing whether this is a good option or not!

I’m not all that clued up on mortgages and the whole house purchase world – any honest thoughts on this would be great. Don’t want to only get the sales pitch by going back to him just yet.

Thanks

What happens when / if you want to move? Who actually owns your house? What if (for example) you need a new boiler? Who pays?

How much is the ground rent etc?
How much would extending the lease be?
Do you pay a penalty or % of sale price to the company if you sell?

I personally would always prefer to buy a house freehold, no nasty surprises then.
Ask for a copy of the leasehold/contract they use and ask for legal advice as to what the catches are.

www.which.co.uk/money/mortgages-and-property/first-time-buyers/help-to-buy/shared-ownership-awjs50y9dbf6

www.google.co.uk/amp/s/amp.theguardian.com/housing-network/2016/sep/15/shared-ownership-risks-affordable-housing-rent

Would you ever be able to buy the house though?? If your monthly rent is just that, rent with no payment towards principle then how would you be able save enough to repay everything?

Say your house is £250,000, you pay £2,500 so still need to pay £247,500. You’d want to pay over 25 years so would need to find an additional £825 per month on top of rent to pay off that house! That’s near enough my mortgage and I don’t have rent as well to pay.

It just seems proper shady of your ‘mate’ to get you into this.

Yes and others said, what about maintenance costs? Windows need doing or these a roof leak who pays? Who needs to take out building insurance? If you do all those things that normal homeowners do, do you invalidate their insurance and your suddenly liable for damage to a house you don’t own? Is there a lifetime tenancy? What if the company goes bankrupt, that house is their asset to be sold. It sounds dodgy as to me.

Wait til after brexit, it's likely prices will plummet. I don't fancy that scheme at all.

Sounds very dodgy. Dont let your desperation cloud your judgement.

Would you be willing to commute? If you look at train lines you can get quite comfortable commute and more house for your money. With 5% deposit, you could get a 2 or even 3 bed further out of Norwich in sorrounding towns and villages.

His think sounds odd to me tbh

You'd be better off renting and saving IMO—at least that way you'd get the benefits of renting (i.e., no maintenance costs, being able to move).

If you can't save anything, then you won't be able to pay anything toward this house either, plus they'd have your £2.5k!

Sounds very expensive. Annual rent is generally 4-10% of a property's value annually and interest on mortgages only 1.5-3%. So it makes a lot more sense to buy if you can afford it. I'd just buy a property you can afford rather than aspire to sth you can't afford.