Page 1 of Advice for first time buyer please!

Ok so I`m currently looking at taking the plunge and buying my first house (been living at home until now saving up for deposit etc) Apologies for length just need to say everything.

I`d be living by myself, getting a 2 bedroom so that I can use one as an office as I work from home. I`m after an apartment as I don`t want anywhere with lots of rooms and cba with the garden at the moment. My girlfriend would probably move in about a year down the line but until then it`ll just be me.

Prices around the area are all around £110k for somewhere decent and there`s no way I`d get approved for one of those. But I have seen something a place that`s ideal but I`d like people`s input/advice please as obviously want to be as clued up as possible on things. The home is a new build from Wilson Bowden and is being sold by Barratt homes on their dreamstart scheme. What that means is they put 25% of the price down as a deposit for you and you get a mortgage for the remaining 75%. The 25% is interest free and has to be paid back either when you sell the house OR after 10 years, whichever comes sooner. Now here`s the catch, it`s 25% at that time, not the price I`ll be paying now, so whilst at the moment it would be around £28k, it could obviously rise or fall quite dramatically.

The area is right in the centre of town and there are only 30 apartments so I can`t see them putting housing association tenants in which is a plus. It also comes with fitted kitchen and appliances, bathrooms, all your flooring and all solicitors fees etc paid. Which obviously would normally cost a few grand.

Now the other problem is the mortgage, I`ve got to check all the details but I think you hav to get a mortgage with who they tell you (the one over the phone told to me was 35 year one, 2 years fixed rate @ 4.69%) - but what bothers me is what happends when this 2 years is up, presumably I`d go onto a standard variable rate but god knows what that would be - that`s for me to sort out though.

So the main problem is this 25% as in 10 years time it could be a huge amount. A friend mentioned to me getting an interest only mortgage for the first 10 years and then remortgaging after that time for the price plus the 25%, or another idea I had would be to see if I can pay off 10% now and owe 15% in 10 years time which would be more manageable. Alternatively I could pay off say £10k of the mortgage instead - can anyone give me any tips please with regard to all this as it seems like a minefield.

Any help would be much appreciated and virtual beers all round! Thanks guys.

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Go and see an independent financial advisor (IFA) that`s what we did 5 years ago when we bought our first house, after we got confused reading all the ins and outs and trying to work out the best deal. we got a 5 yr fixed rate, and as that was about to run out, he got in contact to ask if we wanted him to sort out a new mortgage, so we said yes, saves a lot of time and effort!

We don`t pay him, but when you pay the fee to the mortgage company, he gets a cut from them (which he told us about in advance). I even asked him if that mean if I went straight to the building society he recommend if if would be cheaper for me, he said no, that they just charge the same whether direct or through an IFA.

My advice would be 1st time buyer (especially at the mo) get fixed rate for as long as possible, so you know what your bills are going to be for as long as possible.

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Hi JohnnyTV,just something for you to ask about before you buy, as you are going to be using the property as a business address,(work from home) this could affect your mortgage,insurance etc,and a lot of propertys have no business use in the covenants in the deeds.
hgv

There were similar offers around when we bought our first house 3 years ago and we faced the same dilemma that you are. There is no right or wrong answer really as it needs to be a decision you, and you alone, come to based on all the information you can garner.
House prices have declined in the last few years so if this happens further between now and when you come to repay the 25% you are quids in. However, looking at history tells you that house prices very rarely decline to such a degree. They drop but usually recover and then exceed their original value. If your not looking to move in the next few years again to a bigger place then over the course of the 10 years I would say (in my amateur opinion) that the price would be in excess of the 110k that it is currently worth. Therefore the 28k (or however much it is) they effectively knock off/ postpone on the apartment now will be even more in the future as you already know.
Should you do it? Its not for us to say as its your gamble. What I would say is that if this is the most realistic way for you to get on the ladder and are comfortable with the gamble of having to repay more than the original 25% they knocked off then its a good solution. Just make sure that if your staying there for the 10 year period then you have a solution in hand (savings, another mortgage at the time, a loan etc) in order to cover the 25% when they ask for it back.

Thanks a lot guys the help is much appreciated as always. I`ve double checked on the running the business side of things and that seems fine but thanks for the heads up!

I saw the property again on Sat and took a list of questions with me and got them all answered. Turns out we can be granted an additional 5 years to pay off the 25% and we can pay in installments, so the plan is to pay off 5% straight away then keep saving in a high interest account. We will have sold within 15 years so we`ll see how property prices are, taking advantage of paying off the remaining balance if they`re low, otherwise we`ll pay it off when selling the property and use our savings as a deposit on the next property - does that sound like a good idea?

I`ve now put a £500 reservation on the property informally that is apparently fully refundable if I`m not happy with anything. Speaking to the solicitor and mortgage advisor this week so will then move forward if everything`s alright. Major headache making this decision. Been offered a 2 year fixed rate mortgage for now but may try and see if I can get a better deal out of them if possible.

Thanks again guys, if there`s anything else you think I should know please feel free to mention it or pm me :)

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