After another month of forlornly scrolling through Rightmove, I’ve been wondering if I’m being too picky. My first-time buyer nerves mainly come from the fear of spending so much money, let alone the consequences of taking on such a debt, and ending up with a house beset with more issues than the Money Pit. These fears keep me on the ball when quizzing agents but might make me a bit eager when it comes to ruling out flats for things like dated kitchens.
Of course it would help if there were some flats out there that tickled my fancy, even just slightly. Agents are sending me the same old flats that are dropping in price, which hardly fills me with confidence. Several properties came on at auction but I didn’t view them, as I felt like I’d be a minnow in a sea of sharks and that the flats would not be up to scratch.
My chats with agents have been brief as they just don’t have what I am looking for – short leases being a recurring problem. The general gist is summed up in phrases that hardly add to my festive cheer: “Coming into a quieter period”, “With flats it’s all or nothing” and, my favourite, “Investors and first-time buyers paying asking price are snapping them up”.
One agent mentioned help to buy was good, as did a colleague. These endorsements, the lack of suitable flats in my £110,000 budget and my desire to escape generation rent led me to checking out initiatives that supposedly help first-time buyers. In addition to an agreement in principle I have with my independent financial adviser, who reiterated how he had access to more mortgages and offered excellent service, I spoke to a mortgage adviser in a Southampton estate agent about help to buy and shared ownership. Neither appealed to me in truth, but a touch of desperation might just have been setting in.
Before her sales pitch, the adviser hit me with a few depressing “facts”. Apparently there was one property for every 11 buyers, properties were selling very quickly, with buyers being swift off the mark as they knew what they wanted, offers came in on the day and places were selling at, or for more than, the asking price. One open day produced five or six offers from 10 to 15 viewers, she said.
We looked at the two help-to-buy schemes. The mortgage guarantee one offers 95% LTV mortgages to folk with a 5% deposit. As I have £20,000 to put down, I don’t really need to consider this one.
The help-to-buy equity loan scheme differs as it only applies to new-builds. I would put down a 5% deposit, while the government would stump up a loan of 20%, leaving me with a 75% LTV mortgage. Certain lenders, though, require a 20% deposit, which surely prices out a lot of first-time buyers. The government waives any interest on its loan for five years, then applies a rate of 1.75%, followed by annual increases in line with the retail prices index.
Under the scheme, I would have had 25 years to pay back the loan and the mortgage would supposedly have been cheaper, as the rate would have been lower with a 75% LTV. If I sold the flat, the government would take 20% of the sale, so we’d profit together, but it would take the hit if I sold my flat at a loss.
Scheme two had its merits, temptingly opening up a part of the market currently out of my reach, with those flats looking much better than others I’d seen. A two-year fixed-rate mortgage would have cost £330 a month, the same as the one for which I had already got an agreement.
However, I ruled the scheme out as I don’t like the idea of handing over part of my profit, along with being in debt to the government. There were also limitations I read about when searching the few new-builds in Southampton, including not being able to let the flat out and rules on making improvements.
Shared ownership, which involves buying a share of a property’s value up to 75%, would also open up better flats and only require a 5% deposit. But the idea of paying £373 a month for the mortgage and rent on a mere 25% share of a property valued at £120,000 didn’t appeal. I was put off this scheme because it involves paying rent on the housing association’s share plus my mortgage, which would make me feel like a tenant.
It was interesting talking to this in-house mortgage adviser as I learned what she could offer. Her access to 17 lenders rather than the “200 or so” available to my IFA, plus her mortgage application fee of £598 – twice my IFA’s – reaffirmed my faith in sticking with my existing adviser. This was despite her claim that one in six sales fell through if the mortgage was arranged in-house, compared with one in three via IFAs.
Glimpsing some of the issues that can affect mortgage eligibility has influenced my search. I give leases below 70 years an even wider berth, studios (due to square footage requirements) and flats above commercial property are shunned too. Also, it turns out some lenders don’t mortgage flats in blocks without a lift if the building has a certain number of floors.
With people supposedly less inclined to sell over Christmas, I am far from hopeful of finding my own home any time soon. I would love to widen my search to those around £125,000 as they look that much better but can’t afford to on my budget.
The one glimmer of hope recently has come from the new help-to-buy Isa, which I seem to be eligible for. I will be booking an appointment with my local bank to look into this, as the government boosting my savings by 25% while I earn up to 4% tax-free looks very appealing, especially as my deposit is currently earning next to nothing.
