Property prices

[Asian]

Hello All,

We have recently made offer on a house. We did offer the asking price £425000. The surveys are through, no major issues. We are in process of enquiries. We have 10% deposit. We are going for fixed mortgage of 5 years. Considering the current market, it stresses me to think if we would have issues remortgaging it after 5 years. Any suggestions would be appreciated.

It would be unethical of you to reduce the price at this late stage @Asian for no good reason. There was competition for the house which you only won by agreeing to pay the asking price.

Thanks @Twiglets1 , Won't be reducing the price. I understand that would not the right thing to do.

This thread has made me really irrationally annoyed. You "won" the property because you offered the highest price. You're now asking if you could reduce the price offered way down the line, for absolutely no legitimate reason, just because you can? Where are your morals

@Asian

forgive me, but you seem a little confused. You'll get your mortgage over a period of 20/25/30 years. The 'fix' 2/3/5/10 years is simply the interest you'll pay for the period you choose, at the end of that period, your lender will offer you another fix, but if you don't want to accept it, your mtge will go on to your lenders SVR (standard variable rate). You are not remortgaging (having to get a new mortgage)

Another thing to take into account is the ERC (Early Repayment Charge). Your lender will give the % it would cost you to pay it off early. Most decrease the further in you get, but it can be very costly ( it can be very restrictive if you want/need to sell)

I personally would not fix for 10 years at the current rate.

But Jesus wept, that a huge monthly mortgage. How much are you currently paying in rent?

I would imagine that the high Street lenders offer rate switching above 90% ltv - I know that some do for their existing borrowers so don't feel that the revert rate is standard

They haven’t stated the monthly repayment amount?

@ThankmelaterOkay

no they haven't, but it's not difficult to work out.

It’s impossible to work out because we don’t know how big their deposit is. Which is none of our business either.

Strange comment really as people buy far more expensive properties than the one OP is talking about.

10 %
Says so in op
We did offer the asking price £425000. The surveys are through, no major issues. We are in process of enquiries. We have 10% deposit.

5 year fix with halifax 2279 per month

You don’t know the overall term.

@Twiglets1

well, you might want to re read her Op.

It's not a strange comment given what the OP has posted.

yes, people do buy more expensive properties, but not usually as their first property & with such a small deposit. I'm just concerned they know what they're up for because it doesn't seem like they know their way around buying houses & & mortgages.

and anyway, I was responding to the OP, not looking for your approval.

Anyone can respond to anyone on Mumsnet as I'm sure you know.

Ok I did miss the 10% part but that isn't a very small deposit (especially if they are FTBs) and we have no idea about OPs financial situation. They haven't even stated that this is their first property - maybe it's just the first one they have bought in the UK for all we know.

They obviously can afford the repayments or wouldn't have been offered mortgages on the property. And 425 is a 1 bed flat in London or a 2 bed terrace in certain expensive parts of the SE, so it very much depends on where they live as to whether the payments will seem outrageously high or normal compared to equivalent rents in their area.

I think that anyone borrowing 80% plus of the house price is going to have a hard time paying down enough to avoid negative equity over 5 years. Then at the end of the fix you will likely have very limited options and will have to swallow the standard variable rate - whatever that may be.

If you are comfortable with that then go ahead so long as this is your "forever" home and you see no need to move for the foreseeable future.

@Twiglets1

yes, you can reply to any post, but you don't have to, you can MYOB re other peoples posts.

IMO a 10% deposit IS a very small deposit on a £450,000 house.

It may not be their first house, but it appears to be their first one in the U.K., she seems to be confused and not familiar with how mortgages work

How absolutely dreadful that I'm just trying to help her (not you).

I live in the SE, I'm well aware what that money buys you here. Not much! But she SAID.

The property is great condition, 4 bed townhouse, can't make it any better

Yes, the repayments might be fine if they've been renting something that cost them similar, but maybe not if they've been renting cheaper or living with family.

But again, my question was for her to think about. It didn't require you to half read her posts then put your snout in.

Exactly, anyone can read posts and respond to them.

Equally, you can take your own advice and not respond to other people's posts but I doubt you do. I also doubt OP needs you to question whether they can afford the house since it wan't something they asked for advice on. Their lender evidently thinks they can and the lender will have seen all the financial evidence, unlike you.

Also, @ThursdayFreedom 10% is 10% regardless of the value of the house - it's enough for a deposit as long as the buyer can afford the monthly repayments.

10% in this case is 45k - that is not a very small deposit that is a normal minimum deposit mainstream lenders will typically expect for a 450k property.

10% is most definitely a small deposit when expectations are that the property will loose at least that over the next couple of years..
Negative equity is no joke, I appreciate a lot of people won't have experienced it, but it does look like recent entrants and those on high loan to value ratios are likley to have to go through it.

I agree with this.

@Twiglets1 -10% is a small deposit when house prices are expected to fall by 10% by most 'experts' (personally I think it will be a lot more). The OP seems worried and not experienced with mortgages, etc so may not have considered these things fully.

10% is a normal deposit - small but not very small.

The amount lenders consider a normal minimum deposit ( 10%) is not based on what is likely to happen to house prices over the next year or so.

If it was you might argue that deposits should be minimum 20% or higher but that is not the actual reality of what they do require.

OP - you have passed the affordability for the mortgage, so it doesn’t matter if other posters think your monthly repayment is high. Your mortgage lender will have stress tested you. You know your financial situation and if that amount is unaffordable, which I don’t think it is as your question is about house prices falling and not the monthly repayment.

There are predictions that house prices will fall over the next few years. There is no certainty on that. You can see on this thread the variety in how much markets are expected to fall, obviously all from experts. Property prices might fall, they might not. I bought my house in 2017 and Brexit was going to cause a property crash. Then covid. Then cost of living. My house sold for £80k more than when I bought it. In 6 years. That’s ridiculous. Had we not bought 6 years ago, we wouldn’t be able to afford to buy a house now.

Negative equity is scary but so is escalating rent that you have no control over. Only you can say which is scariest to you. I think it’s really easy for people who already have a house and low LTVs to predict these numbers and tell people they absolutely shouldn’t go for it but you don’t actually know it was a success or a mistake until quite a few years after you’ve decided to continue renting or to buy. Whichever way is a risk, so which is the least risky for your family? If you don’t want to go ahead with the purchase, pull out. I would show good faith and share the survey with the sellers but you don’t have to. If buying is the least risky, do what you can to overpay in this 5 years.

Completely agree. Only in hindsight do we ever know whether property purchases were us being financial geniuses or idiots.

We’ve always just bought the best house we can afford at the time whether the market was rising or falling. It’s worked out well over a 35 year period but it’s always a gamble to a large extent as no one can accurately predict that far ahead.

My point was that it is a small deposit if prices fall. 10% falls seem to be generally predicted in 2023.
Lenders have tightened up their lending and will do so more. How many mortgages have been withdrawn already in the last 2weeks?!

I understand your point but my point is that lenders don’t decide what is an acceptable deposit based on whether prices will rise or fall.

No I think it would be crazy to be honest unless you can afford the SVR