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First time buyer looking at new build...

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  • First time buyer looking at new build...

    Hi everyone,

    I am 26, single and looking to purchase a new build 2 bedroom apartment on a large local Persimmon development.

    Before the last week I knew absolutely nothing about buying...

    The apartment is up at £116,995 but the woman at the site office said they would probably accept £111,000 if that is all I could manage...

    I earn just about £20k a year with the overtime I do, I know this isn't guaranteed income but it is what I earn generally without fail week in week out so he's taken my year to date figure and put together a figure for me...

    He believes I can purchase a property on the Homebuy Direct scheme for up to 130k...

    I'm sure some of you are familiar with the Homebuy Direct scheme, whereby you put down a 5% deposit, get a mortgage for 70% of the property and you get a loan of 15% from Persimmon in my case and a 15% loan from the government... I think thats how it works...

    I have a few questions....

    If she has said they'll probably take 111k, does that mean I should still try and haggle a bit? What is a realistic offer?

    After the initial 5 years I have to start paying back this (in total) 30% loan.. It starts at an interest rate of 1.75% and rises 1% each year... How high can that possibly go? Is there a capped limit? I don't want to be paying 25% on it in 25 years time for example...

    I have to pay a 'Property Management' fee also of £990 a year... This apparently covers maintenance of all the communal area's, window cleaning etc.. She has a list of everything it covers... Apparently it also includes the buildings insurance (how much is this for a year on average?).. £990 seems pretty steep to me, but then I'm new to all of this so I'm not really sure...

    This is what I've budgeted so far... I'm not sure how accurate I am with a lot of it... Council Tax I'm really not sure on, its a band B...

    Costs: (per month) – Estimate...
    £410 - Mortgage Repayment
    £82.50 – Property Management & Building Insurance
    £50 – Council Tax
    £30 – Gas
    £30 – Electricity
    £20 – Water
    £15 – TV License
    £18 – Broadband

    Total - £655.50
    A friend wants to rent the 2nd room from me, would this be allowed? Obviously it'd help me out with all the costs... Also if I do struggle at some point in the future, my parents said I could move back in with them and rent the place out... Do I need a special type of mortgage in order to do this?
    Any advice I would be so grateful for as this process has become very daunting...
    Thanks in advance,

    Arran

  • #2
    Re: First time buyer looking at new build...

    I'm pretty sure the interest rate on the equity loan is 0 for the first 5 years, and then 1.75% which will increase annually with inflation. I don't think there is a cap on it bubt I am not sure. But do bare in mind how it is calculated. If after year 6 (so after 1 year of paying the equity loan at 1.75%) inflation is 3%, the interest rate increase is not calculated by adding 3% to the 1.75%, but by increasing the 1.75% by 3% ie 1.75 x 1.03 = 1.8025%, so its only a very small increase.

    As for haggling, can't hurt to give it a go.

    The £990 per year isn't particularly high, and there is usually some for of charge if you have a flat, take a look at flats in other developments to see what they charge.

    As for your budget, it's not to far off, and you can't be too accuratte as you won't know exact coss until you move in, but I imagie you can at probably double the council tax estimate and one thing you missed out is contents insurance which you may want to get.

    I don't imagine that letting out a room to a friend will cause you too much trouble and I can't see any reason why you would inform anyone of this anyway. However I very much doubt that you would be allowed to let out the flat while you have a government funded loan in place, I imagine that would break the terms and conditions of the equity loan, and your mortgage lender would not allow you too either, although they can grant "consent to let" if you ask them, thereby allowing you to rent the place, but may charge you for the privilege.

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    • #3
      Re: First time buyer looking at new build...

      Mortgage Adviser,

      Thank you for taking the time to read and respond to my post.

      You have eased my mind somewhat with your explanation of the interest rate increases on the equity loan...

      Thanks for the tip on the Council Tax also, I'll budget for that... I'd rather budget over the odds than under and get a shock...

      Thank you very much

      If anybody else has some advice I'd love to hear it, thanks..

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