Hi All,

I am thinking of buying a house in London, and the funding system I want to use will work in this way:

Buy a house which has a potential value of between 220,000 – 230,000 for 200,000 based on comparables and similar properties that are currently on the market or ones that have sold using a percentage increase in value to work out the estimated figure.

Assuming that I buy for 200,000 this week (180,000 mortgage), I can get a workman to start minor renovation work (plaster, new lick of paint, new bathroom/toilet and possibly a little bit of flooring). Renovation costs with a budget of 5000.

Mortgage: 180,000

Deposit: 20,000

Renovation costs: 5,000

Conveyancing & Other costs: 2,500

Total outlay: £27,500

After the first month, I can apply for a further advance after valuing the property at £225,000. Further advance at 10% of the new value of the property, (225,000 – 22500) – 180,000 leaving me with a new loan of about £22,500. So literally, I have only spent £5000 on buying the property, although I will have a new loan security on the property of around £202,500.

The reason why I am going this complicated route is that, I am going to be borrowing the bulk of my deposit from family members and I need to return their money. The other alternative is to get a 95% LTV mortgage, a visit to the broker last week, I was listening to rates of about 7.39 which made me walk away.

I would like to get some advise from the helpful members on this forum.

Cheers.

I get emails from a bloke in Nigeria who makes more sense than this.

Who is going to do the valuation for you and guarantee that you'll get the extra loan?

How do you plan to repay the mortgage?

Mortgage fees?

A 95% mortgage in this market?

Expecting value to grow in a falling market?

This is just so, so wrong...

first off we are in a house price crash, so buying a house for £200k that will be cheaper this time next year is madness! what most ppl fail to realise is that a lick of paint and some plaster doesn't really add value to a home. spending £5k on home improvements does not add £5k in value. a home is only ever worth what someone is willing to pay. even if things did work out, a mortgage of 95% LTV and you will be in negative equity by xmas. therefore you'll end up unable to remortgage until the market bottoms out and starts to increase again which will probably be 2011 and a standard variable rate will prob be higher than 7.39%.

Is this a test?.........I mean this is not a serious question right?..........do people really think like this?...........did somebody stop reading the financial news, falling house prices, crashing markets etc?............Is it that late?..........time to go to the pub!

Ladies and Gents

I might be a novice, but the point of having a forum is for people to have discussions, it was only an idea that I thought about after reading the BMV deals that you hear about when you go to too much property exibitions etc, so please excuse me for that.

I am a first time buyer, although a lot of people are saying that prices will fall further etc, but when is the best time to buy ??

And how do you also rate if you are geting a good deal ?

If one keeps waiting for prices to fall further, when do you finally decide to make a move ?

In london, I believe the demand for accomodation is quite high, so even though we might be hearing of the doom & gloom news, I think if one can afford the loan payments, sit tight and ride out the storm, one should be fine. One punter has said that prices will stabilise back in 2011, what makes you think so, what if by that time they start rising again ??

This will mean that I can no longr afford again..

There's never a right time to buy if you're trying to make guesses about the state of the market. There's a right time to buy if you can afford the cost and you need a house, but not if you're making guesses about the state of the market.

The central flaw in your plan is the belief that you'll be able to get a better than 10% rise in value, against market trends, with just a few modifications. It's madness.

The second flaw in your argument though is the one you identify in you last but one para. Demand for accommodation is quite high, but the supply of mortgages has all but dried up, especially in difficult or unusual cases (like re-mortgaging just a month after purchase). You could get halfway through your plan then find that no-one ants to lend you the extra money at anything other than penal rates.

the economy operates to various cycles, to cut a long story short, what tends to happen is 10-15yrs growth followed by contraction for approx 4-5yrs. what we are seeing with the credit crunch is nothing that new, there was a recession back in 92 that was preceed by a houseprice crash from 89. it bottomed out approx94-95 and prices started to take off again in 97 onwards. there has been property booms and crashes throughout history. what we are experiencing is nothing new.

demand may be high, but if you ask 100k ppl if they want a brand new sports car pretty much of 100k ppl would say yes, but it doesn't mean they can afford the price. therefore price comes down to meet demand. as it stands, property is unaffordable with ppl needing up to 8 times their income to afford the purchase. historically banks lent on 3 to 4.5 times a salary. i wouldn't fear you will not get on the ladder. think of it this way, renting may mean ur paying someone's mortgage for a yr but it is not dead money that ppl suggest. if you pay £6k rent a yr, then buy a house for 100k it's cheaper than buying the same house for 106k and not renting for that yr. the reason is compound interest. if you borrow 100k over 25yrs you'll find you'll pay back 2.5 times what you borrowed. therefore best bet is to rent, build up a big deposit and when the market bottoms out you'll find that the deposit you saved goes far further and you'll have a greater amount of equity meaning you'd get a better rate. the only problem is calling the market. and let's face it, no one is an expert! most ppl who claim to be so are lucking! like all forms of gambling.

Ok guys

I have heard all the arguments, but my bone of contention is that what if you know you are geting a true bargain. I.e, a property sold on same street for £250,000 last year (fair enough, that was at the peak of things) and may be in a better condition. But if you find thesame property with a asking price of say £210,000. Is it worth having a go ?

In other words, how would you access a bargain, what are the pointers which would signal that one is about to buy a good bargain, what level of discounts will be go up to before we can say, yes I will go for that, considering the current climate.

Looking forward to good replies.

DBA:In london, I believe the demand for accomodation is quite high, so even though we might be hearing of the doom & gloom news,

I don't really understand where this idea comes from but I hear it so often (then again there may be truth to it) but as far as I know, the bigger the bubble, the bigger the fall. Where in the UK has speculation on house prices been at its highest? In London. It's not so much that there's demand for accommodation but there's been a lot of people and property developers betting on the market trends. A lot of high-end property has been kept up at ridiculously high prices because hotshot traders with their massive bonuses can afford these prices. When there's virtually no bonus for them next year, no money's going to go into inflating the property prices. This will only impact prices at the lower end as well.

London is especially dependent on the health of the financial industry. Sure, the statement that demand for property will always be high in London because London is a major financial centre seems to make sense to some extent but it assumes two things: 1) that financial services will continue developing as quickly as they currently are/were 2) that London will keep its place as one of the major financial centres. We can't be sure that London won't lose market share to certain Far-eastern cities, to New York or pretty much anywhere. London is certainly well place to keep its position but as time comes by, banks are becomign less and less geographically-dependent.