Buying a house
Mar. 9th, 2004 01:15 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
ciphergothI've decided to buy a house. Somewhere on the southern end of the Northern line, with two double bedrooms and gas central heating.
Flood me with advice!
For "house", read "living accommodation of some sort", by the way; in Edinburgh I'd write "flat" without thinking.
I was going to rent, so that![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
spikeylady could get out of her Wimbledon place and to make sure we can live together happily before buying. But she is now moving in with ergotia and lilithmagna, so we're in no rush; and the mortgage payments would be something I could afford by myself if need be, so in the unlikely event that we can't live together happily it won't be a disaster. And it seems wisest to get out of paying rent to someone else and start paying it to myself as soon as possible. Plus it means we can choose our own fridge and suchlike - I really enjoyed that flexibility when we lived in Mir.
To forestall some advice:
Flood me with advice!
For "house", read "living accommodation of some sort", by the way; in Edinburgh I'd write "flat" without thinking.
I was going to rent, so that
spikeylady could get out of her Wimbledon place and to make sure we can live together happily before buying. But she is now moving in with ergotia and lilithmagna, so we're in no rush; and the mortgage payments would be something I could afford by myself if need be, so in the unlikely event that we can't live together happily it won't be a disaster. And it seems wisest to get out of paying rent to someone else and start paying it to myself as soon as possible. Plus it means we can choose our own fridge and suchlike - I really enjoyed that flexibility when we lived in Mir.To forestall some advice:
- Yes, I'll go to a FIMBRA-regulated financial adviser
- Yes, I'll get a capital-and-interest repayment mortgage, not an endowment or interest-only
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
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Date: 2004-03-09 05:33 am (UTC)Li'l Sis and I did a quick look around the Tooting estate agents a couple of weeks ago as I'm wanting to buy as soon as I have something permanent (I don't like renting at all) and there does seem to be an absolute load of really quite nice places out there.
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Date: 2004-03-09 05:41 am (UTC)2. Sit down now and learn all the differences between the English and Scottish systems
3. Resign yourself now to many many comments about London house prices.
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Date: 2004-03-09 05:42 am (UTC)It'll be great for
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Date: 2004-03-09 05:46 am (UTC)no subject
Date: 2004-03-09 06:02 am (UTC)no subject
Date: 2004-03-09 06:17 am (UTC)no subject
Date: 2004-03-09 06:18 am (UTC)no subject
Date: 2004-03-09 06:20 am (UTC)During the early nineties that flat would have sold for around 30-40k. She couldn't have moved anywhere. And small flats are a bugger to sell at all when first time buyers can afford small houses.
Buying at the top of the market can hurt you financially for a *very* long time. And I believe we're at the top of the market now. I have a long rant on the subject, which I won't burden LJ with, but will happily tell you all about at the BU.
Rent for a year. Even if prices stay static it won't hurt you that much; if prices drop it could be the best decision you ever make.
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Date: 2004-03-09 06:21 am (UTC)no subject
Date: 2004-03-09 06:25 am (UTC)It does seem to make a great deal of sense to me
(and as someone who's likely to rent for a year or so and then want to buy I would like it to be true)
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Date: 2004-03-09 07:17 am (UTC)Apparently around a quarter of mortgages being taken out are for 'buy to let' properties.
So, yes, it's quite possible it will pay to rent until the landlords go 'eeek' at supply being greater than demand and trying to sell.
But we could be wrong and you'll end up having to pay £50k more, as well as having paid rent for a year. I do suspect the current insane London property values won't crash unless interest rates rise dramatically. If they do, the crash will be very severe.
And when you do... sod the adviser, do the research yourself online, decide what level of risk you want to take (long-term fixed rate or short-term cheap deal, switching every couple of years) and save a small fortune in commission.
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Date: 2004-03-09 07:38 am (UTC)I would agree with
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Date: 2004-03-09 07:52 am (UTC)Aah, for the day i can afford to buy in london....
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Date: 2004-03-09 07:57 am (UTC)Thirded. when I bought my flat my IFA was useless - I ended up picking the mortgage myself anyway, and he sent some of the details to a random unconnected conveyancer, meaning I had to sort out a courier at the last minute.
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Date: 2004-03-09 08:28 am (UTC)J
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Date: 2004-03-09 08:42 am (UTC)no subject
Date: 2004-03-09 09:09 am (UTC)no subject
Date: 2004-03-09 09:17 am (UTC)I did that - printed off some sample mortgage figures, took them to the IFA, and essentially said "Can you beat these, and what catches are there, and what are the differences between them?"
As it happened, he could beat them, having access to more choices. We didn't have to pay him anything either - 3/4 of the mortgages he could offer offered him commission, and we went for one of those. If we'd gone for one which didn't offer him commission we'd have had to pay his fee ourselves.
It comes down to a gamble on whether you think interest rates are going to go up or down, and by how much.
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Date: 2004-03-09 09:29 am (UTC)*sigh*...
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Date: 2004-03-09 10:03 am (UTC)no subject
Date: 2004-03-09 10:41 am (UTC)It's highly plausible that London (if not some other parts of the UK) are at the top of the market. The IMF has requested that the Bank of England increase the interests rates enough that they would cause a housing recession if not a housing crash. But buying property is always a calculated risk; someone who didn't buy four years ago because 'the market is going to crash soon' and who has been paying rent ever since -- say, £1000 a month, so £48,000 -- is probably kicking themselves now. As far as I understand it, one possible way to lower the risk of negative equity is to buy a property that needs a reasonable amount of refurbishment. The other benefit of that is if the housing prices don't go into recession or crash that when one sells up, the house value will incrase.
... But as I said, grain of salt. I could easily be talking out of my arse here.
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Date: 2004-03-09 10:45 am (UTC)Ask the advisor about em, anyway, since you're going.
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Date: 2004-03-09 11:07 am (UTC)The rumour is that there are so many property development programmes on the TV right now that unrefurbished property sold at auction is actually going at a premium now. I blame Sarah Beeny.
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Date: 2004-03-09 02:51 pm (UTC)no subject
Date: 2004-03-09 04:20 pm (UTC)2. Getting a reference from an old landlord of a rented accommodation to say you managed rent of X amount if it is more than they claim your mortgage potential is can be of great help and can make them re-think what they will give you.
3. Bristol & West seem to give mortgages based on your earnings not what the books claim your mortgage potential can be which generally ends up more. They ask for 6 months wage slips as proof of potential.
4. Most mortgages come with a clause in the small-print saying you can not rent out the property or part of the property without their written consent or even at all. Some say you can have 1 lodger but no more. Check that carefully if you are ever possibly even slightly likely to rent a room or the entire property.
5. Bank accounts which off-set your mortgage are BIG problem causers if you sell the house before teh mortgage is paid off or if you redeem your mortgage before the final payment is contracted to be due.
6. Mortgages which you can take a break from are great, but check if they will charge you for taking a break, charge more per month to make up for it after or just extend the time you have to pay it by the amount of time taken as holiday.
7. Check what happens if they discontinue the produce, ie would you have to take out another mortgage or just run the course of your own. If you have to change it then you can be liable for a charge of up to £5,000 I have seen plus solicitors fees for the new mortgage arranged.
8. Fixed Rate is good provided you can live with your decision should the rate drop and you have missed out on that, you will tend to find all mortgage interest rates drop in election year and the year after but go up after by somewhat. Ask for 5 year fixed interest rate.
9. Shop around. They are at the moment fighting to give people mortgages and will tend to beat any quote given by another company.
10. Conveyancers (solicitors) tend to cost less outside London but have to deal with London all the time. Horsham has many. A conveyancer costs less than a solicitor as a rule but are specialised on conveyancing so wont leave your work because a more exciting divorce case comes in. I can recommend a conveyancer in Horsham (who I never worked for but always thought I should!) and a solicitor just outside Horsham who very much has her eye on the ball so to speak and knows how to charm her way into any solicitor's good books to get them to deal with her case first.
11. Conveyancers do not spend their time in meetings. If you call twice and are told theya re in meetings they are avoiding your call. Conveyancers spend their time in the office and on the golf course, *very* rarely anywhere else.
12. Make sure your solicitor/copnveyancer asks for the mortgage monies to be transferred to them by the mortgage company the day BEFORE you are due to complete. This makes things run smoother and a hell of a lot quicker on completion day. It solves a LOT of problems and worry and gives the solicitor time to chase up the mortgage monies, mortgage companies are well known for messing up completion monies which can end up in YOU having to pay your seller compensation.
I spent a few years working in conveyancing. If you want any advice on that respect give me a shout.
Good luck!
C.
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Date: 2004-03-10 02:27 am (UTC)I'd also add my voice to the growing chorus of "what people will lend you and what it is sensible to borrow are different figures". If you're buying from scratch on a single income in London you'll probably have to exceed the traditional three-times-salary multiple, but do do the sums on your mortgage for what happens if interest rates hit 7 or 8% - quite likely IMO - and then 10% to give yourself a real fright. Then calm yourself down again by looking at 5 or 6% which is more likely over the next year or two! Might be worth looking at very long-term fixes (25 years!) - though the ones I've seen aren't bargains and have nasty redemption penalties.
Don't forget mortgage brokers as an option. Don't let yourself get talked in to insurance you don't need. Read the small print in the insurance about what's covered and what's not. Read the small print in the mortgage offer, particularly about paying off part or all of the mortgage early. (A flexible mortgage of some sort is a great idea IMO - effectively you earn the mortgage rate as interest on your savings, which approaches the long-term expected return from equities, only completely tax free and with extremely low risk.) If they won't let you read and consider before you sign, go elsewhere. Shop around for the various components you want - you may be able to get a better deal by getting a mortgage from one place, buildings insurance from another and any life/income replacement/etc cover from a third place. Companies have been known to advertise knock-down mortgage rates tied to extortionate compulsory buildings insurance.
When you have a property in mind ... Check the Environment Agency website for flood risk and run a mile if in the remotest doubt. Check UpMyStreet.co.uk and the like for a quick overview. Visit the property and the area at different times - chucking out time can be an eye-opener. Don't be embarrassed to look round the property, again, with checklists and clipboards and the rest of it, and take hours about it - if you're spending tens or hundreds of thousands of pounds you probably want to spend more than 20 minutes deciding if it's the right one. Remember that Estate Agents are formally acting in the best interests of the seller, which can mean they tell you things that are not in your best interests to believe.
Don't be afraid to put in a low initial offer. You can always raise it if they say no. If they accept your first offer you've no way of knowing that they wouldn't have taken a lower one. This is easier to do if you're fairly relaxed about losing a property you've set your heart on, and being in no rush helps a lot as well. My rough impression is that the market in the SE is tipping towards buyers rather than sellers, but things vary widely by locale so see if you can get an idea for the area you're looking at (and remember the point about Estate Agents above!).
When it comes to a survey, get at least a homebuyer's report (more detail than the cursory simple valuation survey the mortgage company will need). Don't be freaked out if the survey identifies minor problems - most houses more than about 5 or 10 years old have something wrong with them. But do check out anything serious - off the top of my head, things like damp, subsidence, roof trouble, dry rot.
If you're buying a flat, make sure the lease has plenty of time left (well, duh!) - not just for you but for whoever you end up selling on to. Also see if you can find out from other leaseholders what the freeholder and/or management company is like. Run a mile from a flying freehold. Make sure you trust your solicitor/conveyancer (get recommendations from friends if possible), and make sure their office is somewhere you can get to fairly quickly and easily if it becomes necessary.
Don't worry too much. Most properties are fine, and with an affordable fix and a repayment mortgage, you can ride out any negative equity should a crash turn up.
And best of luck!
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Date: 2004-03-12 11:25 am (UTC)I hear that you've given Paul some advice which made him decide not to buy at this time. Would you be willing to share that with me as well (if I was to buy property I'd be a first-time buyer looking for livable accomodation that doubles as an investment) regarding London and letting me know if the same would be true in Scotland or the north of England? I totally understand if you don't have the time for that, but I thought I'd ask. Thanks.
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Date: 2004-03-15 03:32 am (UTC)As far as I'm concerned, this applies to the whole country, particularly now that investors from the SE have bid prices up so much in the north.
This is my reasoning, for what it's worth:
Reasons people say the housing market won't crash:
- There's a housing shortage. No there isn't - there's a
shortage of affordable housing to buy. This is just another way of
saying that house prices are very high. There's plenty to rent, and
it's cheaper now than it was five years ago.
- Interest rates are low now, making monthly payments affordable. Yes, kinda, but rates are already rising slowly. Interest rates are currently low as an emergency measure to stave off a global recession. This
will not be the case for the next 25 years. Or indeed the next two
years, once Dubya has succeeded / failed at getting re-elected
priorities will change.
OK, I've typed too much. Stopping now.no subject
Date: 2004-03-16 12:22 pm (UTC)One more question -- in your estimation, when you do believe will be the right time to buy again? Obviously you wouldn't be able to give me an exact timespan; what I mean is whether you think the conditions will be good again in one year, two years, five years, etc.
Thanks again! :>
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Date: 2004-03-17 03:06 am (UTC)Pick one of:
* When you can afford the property you want to live in, or
* When the accepted wisdom is that you'd be crazy to do so - don't you know how many people are in negative equity?
The first point is probably still on the downward slope but hopefully you won't care.
The second point is probably the bottom of the market.
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Date: 2004-03-27 04:50 am (UTC)I'm sorry that I'm jumping in to the thread very late, but I just had to point out that the IMF has said nothing of the sort. The IMF has broadly praised the UK economic performance, whilst expressing worries about the housing market amongst other things, but those worries are hardly going to prompt them to call for a rise in interest rates that would create the very housing market crash they caution about. The report in question (The Annual Article IV Consultation) is available here or there is a brief summary from the Beeb here.
One thing that the IMF and other international bodies have been saying very publicly is that the global housing market looks like it is in a bubble - this announcement was made in the last 3-4 weeks, I'd link to the Economist story but you need to be subbed. The UK is looking a lot better than countries such as Australia taken in a wider context. A global housing market retrenchment could be a shock to the system, tho' not on the dot-com scale.
Fwiw I'm split between looking now and waiting a year. I'd probably wait, as altho' I don't expect house prices to crash in London I don't expect them to soar either. I do expect some harsh readjustments outside of London, one of the big ones likely being Edinurgh.