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Discussion in 'Personal' started by impulce, Oct 4, 2010.
Whats the difference between leasehold/freehold?
Freehold means you own the land the house is built on, leasehold means someone else owns that and you pay a proportion of 'rent'for it. It also means (in theory) a time limit on how long they let you have the rent. This can make re-sale problematic if the lease is running out.
sorry: 'how long they let you have the land to rent'
Impulce, buy my house!!
I am having to sell due to unforeseen circumstances and having spent only about a quarter or a half of the time in the place than I had anticipated. As a result, I'm going to warn you about a couple of things which I didn't consider (or saw no need to consider, oh how wonderful hindsight is!!):
1. if you take out a fixed rate mortgage and then want to redeem it early, expect to be clobbered by penalty fees. I am going to have to pay something over £3000 after two years on the morgage.
2. Even if you are on repayment rather than interest only, the interest is where the bank will put your monthly payments. So after said two years of paying really quite a lot, I still only own about £2000 more of the house than I did at the start.
3. Whoever said it's a buyers' market was right. Nothing is shifting at the moment, certainly not in my area, so much as I hate to say it, as a seller, you should be able to pick up a right bargain. Before you start shopping in earnest, I would arrange all your finances so that when you go in with a cheeky (or downright rude) offer, you will be in a strong, no-chain position and be able to complete within weeks- so you'd be gold for your vendor and they'd be silly to refuse you. If you do offer and it's rejected, wait a few more weeks and see what happens- because chances are the same offer would look much more attractive after another month of no viewings, no offers...
Good luck and enjoy it. I love my house- I'm still pleased I had/have it, even though I'm having to sell in less than ideal circumstances, because it meant the world to me.
Should mention that the circumstances aren't ideal for selling a house, but they're happy ones nonetheless
Glad they are happy circumstances chica!
I havent even considered paying interest only. I also didnt realise that you could buy a house and not technically own the land...do you assume it is freehold unless otherwise stated or should it always say?
I am SO excited - even if it ends up being a couple of years, at least we have the financial security of knowing that if our landlord decides to end our contract we have enough cash to buy.
Leasehold properties are usually (I think) flats; most houses are freehold and anyway it'll say in the particulars.
I bet you are, what a lovely position to be in! Take your time though and I bet you'll get a really fantastic place that you'll adore.
Actually, in some areas quite a lot of houses can be leasehold too. I've looked at new houses, on a prestigious estate, and they're all leasehold. I walked out of the office when I realised.
Leaseholds can be issued for time periods of 999 years but some are for shorter times. Once a leasehold has under 30 or so years to run, it's difficult to get finance to buy the lease. Prices drop as the lease time shorthens.
You don't actually own a property with a leasehold purchase. You simply own the lease to live there. The freehold to the land is owned by someone else. It's sometimes possible to buy out the freeholder and turn the property into a freehold one.
As a leaseholder, you pay a ground rent each year and the purchase money gives you the right to occupy the space where the house /flat was built (you don't actually own the property).
The freeholder usually arranges the buildings insurance (possibly getting commision) nad you have no say in getting a more competitive quote.
I don't know if it's the same with houses as it is with leasehold flats, but the freeholder can decide on certain repairs and improvements (outside cladding, pointing of brickwork, roof, gutters, windows, doors etc) and the individual leaseholders have to cough up to meet the costs.
When a leasehold period is coming to an end, it is possible to extend the lease by handing over another lump sum to the freeholder.
When a lease expires, the freeholder takes possession and can set up a new leasehold for another purchaser.
The LEASEHOLD arrangement is fraught with legal issues and complications. I won't go near it with a bargepole!
My advice is to go and see an IFA. You can see one who doesn't take payment until the mortgage itself is sorted out. Myself and OH went to see one in the summer as we want to buy (in London so looking at a much bigger deposit to save for!)
He said you really need to have a deposit of 15% to be able to get a decent mortgage. He looked up all the different ones whilst we there and the difference in choice btween a 10% and 15% deposit was huge.
So we have ended up deciding to save for a few more months!
My friend has given me details of an IFA that I will contact soon. I dont understand how they do it for free though - whats to stop him giving me advice, then me independantly applying for a mortgage and therefore bypassing his fee?
Emailed IFA to ask if he's available for a talk sometimes this week. Money should be coming through within 3 weeks....started having a browse and found some lovely places (and some horrible ones - how can they differ so much for the same price!!).
Found one fabulous place on rightmove..got very excited, went to the actual agency website and realised rightmove had priced it £100k under what the price actually was! Gutted but thought something was a miss - £115,000 for a 3 bed detached house in a wonderful area!
Will catch up with all the posts, but that declaration thing makes bloody good sense. I bought a house oitright this year and had a brief gulp moment, when I thought about putting into mine and the neanderthal's name. If we split (whicj would surprise me, but I went 2 ways, as his share would go to the kids, anyway.
If your mortgage payments are likely to be £200 more a month than you're currently paying I'd suggest trying to live on £200 less a month for a couple of months (put the £200 into savings or use it to pay off overdraft).
That way if it is a real struggle you won't have made a massive commitment that you are then stuck with.
You have to think long term. How would you save £200 a month? What could you spend less on without really missing it?
If you are living on less money each month then something major goes wrong with house or car will you have any spare cash to pay for it?
Sorry if I'm being a bit pessimistic but I have seen friends stretch themselves to get on the property ladder, then they have ended up skint and unable to have any kind of social life, holidays, etc as all their money goes on the property.
It depends on your priorities. Do you want to have a lovely home but spend a lot of time in it as you can't afford to go out much?
Or would you rather rent for a few more years, build up a bigger deposit and wait til you're in a better position financially (higher up the payscale, car paid off) then make the move?
I've stopped even thinking about getting a property as it will take us so long to save up a deposit - I'm just enjoying the lack of responsibility that comes from renting - no having to pay for repairs or buy new fridge/ freezer, etc when they break.
The mortgages we are looking at now would be about £100 a month more than we currently pay in rent. Add onto that the insurances that we would get for the mortgage (life/out of work) and buildings insurance and id say about £200 a month more. £100 a month would be easy, we'll need to make a few cutbacks for £200 a month but it shouldn't be too hard - I don't go out as much as I used to anyway and prefer to stay in with a bottle of wine nowdays. We would have to cut our takeaways though!
In 3 years the cars will be paid off too whick will free up more cash, plus ill be higher up the payscale.
We also save £100 a month which was going towards a mortgage deposit initially, but as we are getting this money we have spent £1000 we had saved on paying off one of our overdrafts, and will continue to save at least £100 a month (more once the credit card is fully paid off) and use this for an emergency fund for car/house issues/paying off the other overdraft.
Sounds like you're all sorted then! Just wanted to make sure you'd thought it all through.
I'm probably a bit more pessimistic as money has been ridicously tight in our household for a few years due to being a student, getting a car, not being able to find a permanent job, etc, so I know how miserable it is when you can't afford to spend any non- essential money.
I hope you find somewhere lovely and have fun making it your own.
We spoke to an IFA last night and he was great. Really informative, took all of our financial details and sounded very positive that we would be able to get a 10% mortgage on a £130,000 house which means what we were thinking was about right. Meeting him again next week to see what is available to us.
The only spanner in the works is that we are contracted to our rented house until the end of February...though if we manage to find somewhere before the end of the year, this might actually work out quite well.
Sounds fab Impulce! I'm sure you probably have but make sure you save up an extra pot of money for fees etc.
£130K wouldn't even buy a shed round here!
Thanks PFF! We have about £2k left for fees which sounds about enough, but my parents have offered a loan from them if we need more or if it falls through and we have to pay fees again etc.
£130k round here throws up plenty of 2/3 bed terraces/semi's...we have the option of a slightly smaller house in a nicer area, or a larger one in a slightly less nice area (Not a terrible area, just not as leafy and suburban as some others).
Hopefully we will have an agreement in principle for a loan in the next few weeks, and then can start looking.
A question for people who have been through the process - If we happened to find a house quickly, say the beginning of December, is the vendor likely to be okay that we couldn't complete and move in until the end of February? I know it can take a couple of months so figured that we would be an okay timescale. I know its a buyers market at the moment too so am hoping the fact that we are first time buyers and can definately move on a certain date would be enough.
Can't help with the vendor situation as we were new build with no chain. So stressful though with a process that was meant to take 6 weeks or less actually taking 6 months! Make sure you keep tabs on the mortgage lendor...they messed up our paperwork the first time they did it and then lost it the second time they did it but never mentioned it to anyone.
Our IFA assures us he will manage all paperwork for us! But ive also been told to keep ringing and checking (or nagging!) to keep it all moving.
Now have got to have a nitty-gritty discussion with OH about where to look - he prefers different areas to me!
I can remember the nagging well! Ended up with a huge phone bill during the whole thing.
Hope it all goes well. Buying a first house is really exciting!