Things are suddenly dawning

Sonofa

I came to this site, as I'm sure many others have done, with a reason.

We are considering selling our house and buying up the ladder.

First point: All my figures have been estimates on paper, approximate repayments looking at mortgage lenders' web sites and vague recollections of what we did last time.

On paper it all seems do-able, however, have I been missing something vital?

Everything I've based my figures on has been on the assumption that we will used the equity held in our house. We have NO savings.

People are talking about deposits 5% minimum, ideally 10%. Is this always the case? Do you pay this on exchange of contracts? It's 15 years since we sold/bought a house and I really cannot remember any of this!

Do I need to have 5-10% in readily accessible funds to pay out on exchange of contracts or are there alternatives? Is this a negotiable point?

Plenty equity in the house even with the nose dive in property prices, but we don't have any readies.

Mortgage-wise this will be more than 40% of the value of the property (in the price range we would look for) but I assume this is only relevant to the mortgage provider.

What have others in a similar position done?

Second point: we use our overdraft, every month. We have an overdraft facility of about 5k and always go into it by 1-1.5k. Is this going to be a big problem when applying for a mortgage?

We are lazy/undisciplined with the way we use our money and I'm sure this is the only reason we do this. By this please don't think that we p**s it up the wall what I mean is that we aren't careful, but we aren't careless either.

A new mortgage would mean that we fundamentally changed the way we spend.

If our current way of doing things is likely to be unsuitable to any lender, how long would we need to stay in the black for, for this financial history to be disregarded? This only happens with my wage/account, not my wife's. I earn approx. 2.5 times her.

Okay, sorry for the megga post all info/advice/opinions gratefully accepted.

elona

If you have no savings then how are you going to pay stamp duty, solicitor's fees,HIP, estate agent and removals?

elona

Forgot to mention new carpets and curtains if not included, increased gas, electric and water bills - not to mention council tax.

hethmar

Sounds like you need to go to a good broker.

globalds

So you will sell your present home and then with that cash and a new mortgage buy a new home .
surely the deposit will be the amount you bring to the table ..I can't work out if the 40% mentioned in your post is that or the increased mortgage you need for the new property.
So if it is 40% deposit, most banks would be happy to offer you a mortgage, all other requirements being met .

SandC

One thing that strikes me is that you currently use your overdraft to the tune of at least £1k. How are you going to manage when you move up the ladder and your mortgage payments increase accordingly?

Sonofa

Hi,

Thanks to everyone for your comments so far.

I'll try to answer the questions raised and give further clarity (to my understanding) in order.

Elona, everything would come from the equity released from the present house. I would anticipate coming away with 80-90k.

Stamp duty would be paid from this, if needed, and if I recall rightly from last time, would be paid out of the monies whilst being held by the solicitor. Same goes for the estate agent's fees and the solicitor. HIPs is what, £300? Moving would be family and van hire only.

We are aware of the approximate increased council tax cost, about an extra £50 per month. Gas, electricity and water are kind of unknown at the moment. We are thinking about a specific house which is empty so no one to ask. But this doesn't necessarily mean this is where we would end up.

Carpets, curtains would be an as and when. Been there, done that before, are prepared to do again for the right place.

Hethmar,why necessarily would a broker help? because of our limited free cash or other?

globalds, over 40% would be what we would be putting down on the new place. This doesn't constitute the entire equity from the old place, we would be holding back 10-15k for works on the new place (not in a habitable condition at the moment) What I was getting at with the deposit is the impression that I have been getting from other posters saying that 5-10% has to be paid out at exchange of contracts? Is this correct or am I missing something, I don't recall having to do this last time, in fact I'm pretty sure we didn't have any free cash then either.

SandC, I know it sounds strange, but we would be committed to using our money in a different manner. Our current mortgagepayment is only about £230 per month so is only a small proportion of our take home (about £2200). New mortgage would be about £650 per month. My concern is would any lender look at our bank statements and immediately say forget it?


Do I sound rational or do I need a wake up call?

Lotus-eater

The only thing I would say, is that you can't afford to live within your means as you are, why do you think you can afford it when you move house and it costs more?

How about changing your spending habits and actually see how much you can live on for a few months. There is no rush that I can see to move,

dander

It is perfectly possible to move house using only the equity in the current house as your funding, most of the costs - stamp duty, ea fees etc are paid for at the time of sale/purchase or just after. The deposit would come out of the equity as well, ultimately, but usually on exchange of contracts the deposit pretty much gets passed up the chain, your solicitor will pass on the deposit money your buyer gives you to the vendor you are buying off.

There are a few things you'd have to pay for upfront - HIP, removals, survey - but these can be paid for on credit cards, or using more of your overdraft and then pay yourself back out of the equity when the house sells.

The thing to be sure of is that you've factored all these costs in fully, so you REALLY can afford to do everything out of the equity.

It's all perfectly doable in your situation, and if you are otherwise debt free, using your overdraft is unlikely to ring alarm bells with mortgage companies.

However, the one thing you don't seem to have factored in is the fact that it's actually incredibly hard to sell a house in the first place at the moment. You just need to consider that you could be still sitting in the same house in a year's time, still waiting for an offer - and that could mean your sale price, if you get a sale, is a lot less than you perhaps hope for.

Sonofa

Lotus-eater wrote: »

The only thing I would say, is that you can't afford to live within your means as you are, why do you think you can afford it when you move house and it costs more?

How about changing your spending habits and actually see how much you can live on for a few months. There is no rush that I can see to move,

Valid, thanks.

Sonofa

dander wrote: »

However, the one thing you don't seem to have factored in is the fact that it's actually incredibly hard to sell a house in the first place at the moment. You just need to consider that you could be still sitting in the same house in a year's time, still waiting for an offer - and that could mean your sale price, if you get a sale, is a lot less than you perhaps hope for.

Believe me, that IS at the forefront of my mind in all of this. But in reality it doesn't have a bearing on the above. Other than obviously getting the price needed. In that case this proposed house just wouldn't happen anyway. I'm not that foolish.