Should I buy?

[Stressed]

I have just received my Section 125 notice from the Council informing me of my right to buy purchase price (I am a council tenant considering buying). I have qualified for 35% discount, thing is my friends are telling me to hold on cause of how unstable the property market is right now.  They seem to think if I wait the price could drop (the price of my house has gone up from 39000 to 59000 in the last 10 months).  Also I am worried that if I buy now while prices are high I'll end up in negative equity when I decide to sell.  Any advice would be welcomed, I am new to the property market, mortgages are confusing me and any brokers I have contacted just pressure me to buy, and want extreme amounts of money for their advice. Help!!!!

[Oneeyedvic]

A lot of brokers will not charge you anything - they get a commission from the mortgage lender.

When to buy and when not to buy - if only we had a crystal ball. Personally, I thik that we will go into a recession next year, but really, no one actually knows what the future holds - if anyone says they do, try and get the lottery numbers off them!

If the prices do crash though, you should not have negative equity as you will have at least 35% worth of equity. Most poeple's reckoning in case of a downturn is around a 20-25% drop. To make this easy - your house is worth �59,000; you can buy it for �38,350 (35% discount) - this means you have �20,650 worth of equity. If prices were to drop by 25%, you would still have some equity.

Also, bear in mind that you will have to stay put in your house for 3 years after purchasing the house or forfeit some of the equity as well.

Essentially, prices may drop, but they may also increase. Sorry, but there is no right or wrong time to buy unless you do own a crystal ball.

[Mrs_Pegasus]

Hi There

The question you need to ask yourself is, can you afford repayments on the mortgage.  Although people are predicting a crash, the houses that crashed in the 80's recovered eventaully and if people were able to hold on to them and weather the storm they got their profit just a few years later than anticipated.  People who talk of negative equity are people who were trying to sell either for profit or because they could no longer keep up with the repayments.

Ask yourself where you see yourself in 3-5 years time, if you see yourself in the same house then I would buy and start paying a mortgage rather than a rent.  If you are looking for a quick sale once you have cleared the 'lock in' then you may be better off staying put. 

Be sure you can afford the repayments and then concern yourself with negative equity. 

[vicars]

Prices are certainly uncertain so ask yourself why you want to buy - is it to make money, to have a place of your own - something to pass on, or maybe get some equity out to spend on something, which might be available in your circumstances. When you are on the property ladder you go up and down with everyone else but being a council property you will always be ebelow everyone else as these houses are not as sought after. So if your long term goals are to move up in the world, the sooner you start the better so take advantage of the discount and buy. Regarding brokers, if you want to pay for service then fine, if you dont then don't. If your mortgage is 3.75 times your income then get on down the high street and do it yourself. I'd be happy to do it for you as a broker but do some research - a right to buy is like any other mortgage.

[bekigee]

I agree with the above letters a lot of what they are saying is right.

The question you may want to ask yourself, Is the area where you live in a buying area? Do council houses sell in that area and how much for? Who do they sell to?

All council houses make money on sale, so long as crime and vandilism etc are not a huge problem in the area or your house is not in a state of disrepair (please dont take as a sweeping statement). You will not rent for much less, so what do you have to lose. The valuation officer will put a fair cost of what the house is worth. Before you even think about perhaps doing your property up or extending if the case may be, you have already made 35% proffit in effect, so really you cant lose.

I personally would go with a fixed rate, they have all these deals, but my best friend has just bought her house on a new scheme designed to pay of her mortagage direct and already in 2 months it has risen slightly. I just think that way you know where you stand and I do feel mortages are set to rise to control the spending and interest rates. It has to happen especially with all the lending too.

 

 

[bekigee]

part 2 hehe

My dads been in the buying houses business forever, and I bought a house once got completion date, managed to negotiate a perfectly good house, structurally sound from 40k to 36k and for personal reasons bottled it at last minute and did not go through with sale. Gutted, 2 years later they where on market for 80k. Still kick myself over that one.

Also when you take out a mortgage on a council house do you not have to keep them for 3 years then anyway? Which in turn, if on a fixed rate, will give market time to settle again, WE all hope, if it does decide to start rising!

But once you are on the ladder you can only make money and go up it, the general rule of thumb is. Especially with a well bought council house! My friend has just paid 50k approx and they are selling for 80k so there is the proffit already

I would say go for it unless your area is that bad or house is structurally unsound! Though even then the council would have to make repairs to house and yes they could even move you out, to do work. But unless they where gonna knock it down, you could still move back in and buy eventually anyway with all discounts in place.

My advice if you can afford it, go for it! At the end of the day people are scared of risks, but dad always said a house is the only that you borrow money on, all rest you should save up for!

[Stressed]

Thanks for everyones advice, I will take it all into consideration.  The reason I want to buy is because I don't want to stay in this house forever (it is only a 2 bedroom, not very big rooms either!), buying seems to be the only way to eventually be able to move on.  By buying my council house now and selling in about 5 years I was hoping to make a bit of money to use as a deposit on a bigger house in the future, where I could then settle for good.