Living with parents - The pros and cons

Living with parents – The pros and cons

Due to high rents, lack of jobs and being priced out of the property market there is an increasing number of young adults moving back in with parents. Whether it’s to save for a deposit, due to unemployment or unable to afford high rent in comparison with wages, the number of 20s-30s moving back home is on the up.  

However there can be some advantages to this, usually low rent, sometimes includes meals and bills and the opportunity to save. If you get on well with your family then this is always a bonus. Although there are some people who consider this to be a horror story, not having their independence, family arguments and tensions and feeling guilty for coming home at early hours of the morning. This is a situation probably the majority of young adults today want to avoid but in a large amount of cases it is un-avoidable for a number of reasons.

With house prices increasing it seems first time buyers are becoming priced out of the market. Due to low wages in correlation with property prices it is difficult for first time buyers to initially stump up the money for a deposit and then qualify for the affordability of a mortgage.

The bank of mum and dad is increasingly known as donating deposits for their children’s first step on the property ladder. And in many situations with house prices increasing largely since the family home was purchased parents can often be sitting on a nice amount of equity in their own home.  

There are signs of things improving such as the Help to Buy scheme to assist people being able to get onto and move up the property ladder without the need for a large deposit.

Have you been in a similar situation? What was your experience? We look forward to hearing your opinions.

Rising house prices are increasing concern of affordability

Rising house prices are increasing concern of affordability.

Currently the biggest issue for first time buyers getting on the property ladder is affordability as house prices continue to rise and the amount required as a reasonable deposit increases. Nationwide found a property price increase of 8.8% over the course of 2013. Usually an increase in house price is welcomed as a positive thing, but not to the generation of young adults trying to get onto the property ladder. And because of this there is a whole new ‘Generation Boomerang’ of young adults having to live with their parents because they cannot afford a deposit or to rent.

House building is up on previous years but still not to the level required. Hand in hand the need for more housing, an increase in property prices and wages failing to keep up to pace with the housing market is showing increasing people priced out of the property market.

For example housing charity Shelter, measured house prices and wages as an average from 1997 – 2012 and found that the price of a home had increased from £75,762 to £253,816 and the average wage has increased from £16,500 to £25,932. If earnings had been raised at the same amount as house prices then the average salary would be £55,296.

Will we see a more affordable stable property market over the course of 2014? We will watch this space…

Be wary when buying a home Off-Plan

Be wary when buying a home Off-Plan

Buying a new home before a brick has even been laid is becoming increasingly popular here in the south. This is due to new development popping up in sought after location and then rise in need for housing. To many buying a new build home is very appealing but remember to be wary as you are buying a property you haven’t even seen yet.

There are many advantages to buying off-plan, you are able to choose your plot and extra options such as garages and fixtures and fittings. This rise in popularity may have come hand in hand with the first stage of the Help to Buy scheme where you are able to put down as little as a 5% deposit and obtain a 75% mortgage with the government lending the other 20%, enabling many people to get on the property ladder or move home.

Another benefit to buying off-plan is you agree a price at the start, in the current housing market with property prices increasing you may have already made thousands on your house before you even move in. There are also all the usual benefits of buying a new build home, the good economy and new systems throughout the house, no need for any work or maintenance and ready to move straight into. 

 

However it is possible it could be a very different story, for example if property prices were falling the buyer could lose out before the house is even built. This could lead to issues obtaining a mortgage or having to pay a larger sum to make up the difference as the lender will look at the current value and the developer will want the price agreed at the outset. There is also the aspect of the property not being built in time, and therefore the mortgage offer expiring and having to go through the process again.

Also the property may be different from what you imagined when looking at the initial plans. You don’t know who your neighbours will be and views and noises may not be what you expected. There is also the chance that the developer could go bust before completing the development.

Have any of you bought off-plan? What are your experiences?

 

 

Unsure whether to use Help to Buy or save for a larger deposit?

Unsure whether to use Help to Buy or save for a larger deposit?

Are you a first time buyer eager to get that first step onto the property ladder? Or even an existing homeowner needing to move to a larger home? If you are I am sure you have heard all about the Help to Buy Scheme.

There are 2 parts to the Help to Buy Scheme, the first part is available to existing homeowners and first time buyers but only applies to new build property. The buyer is required to raise a 5% deposit then government will supply up to a 20% interest free (for the first 5 years) loan enabling the buyer to obtain a 75% loan to value mortgage, which will allow them to achieve a lower interest rate and more affordable monthly mortgage payments.

The second phase of the Help to Buy scheme was launched in early October. This is available again to both first time buyers and existing homeowners but applied to both existing properties and new build properties. The buyer is required to raise a 5% deposit and then obtain a 95% mortgage but the government will guarantee up to 20% of the mortgage. This means that should the buyer become bankrupt or the house is repossessed the government would cover 20% of the mortgage. This was aimed to make 95% loan to value mortgages more available and lenders more willing to offer them.

 

The Help to Buy scheme is a great idea and opportunity for those who are unable to save large sums of money for a big deposit. However sometimes it can be a risk putting down such a small deposit because should the property drop in value then the buyer would be in negative equity. If you are able to save even a 10% deposit the window opens for better interest rates and you are putting more equity into your home which gives you more security.

Property prices have been rising and should you wait to save for a larger deposit there is a risk that prices may increase even more. It is also difficult to predict what will happen regarding interest rates because they are currently the lowest they have been. For example if you aim to save for a 10% deposit for another year, interest rates and property prices may rise. So Help to Buy with a 5% deposit may be perfect for you now.

Since the scheme has been launched we have provided conveyancing services for many Help to Buy transactions and are familiar with the process. Don’t hesitate to get in touch for more information or a quote regarding Help to Buy conveyancing or visit our dedicate website.  Help To Buy

The Second Part of the Help to Buy Scheme… The Mortgage Guarantee.

The Second Part of the Help to Buy Scheme… The Mortgage Guarantee.

The terms of the second part of the Help to Buy Scheme have been reviled at the end of July. George Osborne launched the second part of the scheme in a meeting with lenders and house builders. The scheme will guarantee a percentage of the mortgage on a property new or existing up to the value of £600,000. There have been warnings that it may push up house prices and encourage buyers to take out larger mortgages than they would usually afford.

George Osborne has responded to these negativities saying that there will be strict checks required to qualify for the scheme. Buyers will not be allowed to purchase property as a second home on the scheme and will be required to sign a declaration to agree to this, strict income checks will also be applicable to ensure the buyer can afford the mortgage. Individuals who have any issues on their credit records will not qualify.

The aim of the scheme is to help people buy a property with a much smaller deposit. The government scheme will offer to guarantee a percentage of the mortgage with the lender which will add security and cover a portion of costs if the buyer became bankrupt or the home was repossessed.

The first part of the Help to Buy Scheme has already proved to be a hit with buyers. It allows buyers to purchase a new build property with an equity loan of up to 25% regarding they have at least a 5% deposit, permitting the buyer to secure a lower mortgage with a lower Loan to Value and therefore in most cases a lower interest rate.

In comparison the mortgage guarantee part of the scheme will provide a guarantee to the lender on a portion of the mortgage meaning if the property was repossessed the government would cover a portion of the lenders losses.  The scheme will run for 3 years and lenders will be required to pay a fee for the guarantee scheme, the amount is yet to be revealed but it has been stated that it will depending on the loan to value. The aim is to encourage as many lenders as possible to use the scheme.  

Uncertanties about the Help to Buy Scheme

An end is put to uncertainties about the Help to Buy scheme fuelling second homes and foreign buyers

David Cameron has spoken up to clarify that the Help to Buy scheme is not available to people wanting to purchase a second home or to foreign buyers. He stated the Help to Buy Scheme is aimed at helping people onto the property ladder. The scheme is only to be used for people who are purchasing their own home to live in.

According to Cameron there will be a mechanism in place to ensure that foreign buyers and second home owners do not qualify for the scheme. Another point he made was that to qualify for the scheme you have to have a credit record in this country.

There are to be clear rules published relating to the scheme. It has been criticised that the scheme is artificially inflating house prices into a housing bubble. But time will tell…

What’s your opinion on the scheme?

We have a dedicated Help to Buy website for more information…

 

Click here to visit our dedicated Help to Buy website

UK housing market finally on the up!

UK housing market finally on the up!

Rate them or slate them, the new government schemes aimed at getting the property market moving again are proving to be working. The demand for housing is the highest since 2009, and the new government Help to Buy scheme is proving to be one of the reasons for this. After the Stamp Duty Holiday there was a lull in the property market for first time buyers, however now that mortgages with a higher loan to value and new government initiatives are more readily available the number of first time buyers is increasing.

Help to Buy Scheme

It is encouraging to see government schemes are having a positive effect on the property market. Help to Buy is aimed to enable people to purchase property with a small deposit (5%) and the government lending the further deposit (20%)  interest free for the first 5 years enabling the buyer to get a lower LTV mortgage (75%) with a lower interest rate and smaller monthly payments compared to if they took out a 95% LTV mortgage. Help to Buy is open to everyone, not just first time buyers; this may be why it is a factor in the rise of property demand. However developers need to be true to their word in delivering more housing so that house prices do not rise too drastically. According to a monthly report carried out by the RICS (Royal Institution of Charter Surveyors) property prices are starting to rise and inquiries from new buyers were at their highest since November 2009.

Funding for Lending Scheme

Another factor which may be responsible for the increase in the housing market is the Funding for Lending Scheme, introduced last August. It was aimed at making borrowing easier for prospective buyers, with mortgage lenders loosening strict mortgage requirements this has helped to reduce mortgage rates. The Funding for Lending scheme was designed to enable was designed to enable greater availability of funds to lenders at a lower cost and proves to be paying off. With lenders more confident in their credit supplies they are more openly providing borrowers with mortgages and supporting first time buyers. In conjunction with each other these schemes have had a positive effect on housing market activity and it is showing signs of further growth.

The Concerns

All this being said there are also some issues which may arise. House prices are gradually being pushed up, however this makes property which has been unaffordable even more unaffordable to buyers. Within our economy earnings are still showing very low signs of growth. With a demand for property and developers under pressure to deliver it is inevitable that property prices will rise.

The property market is still a favourable place to those looking to buy their first home. According to the Council for Mortgage Lenders more borrowers are taking out higher loan-to-value mortgages than any other time over the last four years. At first people were dubious about the success of these government schemes but from all the evidence they are only proving to be of help.