Want to move in 12 to 18 months - how should we play it?

becominganobsessivesaver

I was basically after a bit of advice for achieving our next step up the property ladder. We currently own a home in an area which has a bit of a stigma attached from years and years ago, but it really is the nicest street in the world. Our house is near the end of the cul de sac, opposite a large grassed area (not overlooked). We bought at the beginning of 2006 for £130,000 and have a mortgage outstanding of around £107,000.

A house the same type as ours sold for £109k around 3 months ago (this is end terraced rather than a semi) The things our house has going for it is that it has a large well built conservatory (including radiators etc) which doesn't intrude on the garden and that we have also recently refitted the bathroom, so it has a brand new suite and expensiveish tiles (bought with clubcard points) - It's cream and brown so quite neutral!

There is a house the same type as ours which has been for sale for well over a year and is now on at offers over £100k (again no conservatory). The owners seem to have moved out, so could be that it is being sold as a part-ex?

I would like to think we would be able to sell for £115k, but may have to wait until the other house is sold before we market ours - any opinions??? Do you think this is realistic? How would be best to price to achieve this (offers over or guide price, or just straight valuation?)

Anyway the main reason we want to move is for schools for our toddler, the primary schools where we are are really good, but the secondary ones are not!!! We've seen a newbuild estate we really really like as it is right next to the beach, and there is a house style that both me and my husband love. We would like to move up to a large detached house, which I anticpate will be priced at around £240k - do you think we're more likely to be able to get a deal because the phase we'll be looking at will be mainly detached houses and therefore fewer people in a position to buy them? How do you think we should play it - we don't want to miss out on what could be our dream home? We'd have 15% deposit if we achieve the £115k for ours (saving a little for rainy day money), we're on a joint salary of £65k at the minute, and will be virtually debt free from April next year when our £20k 4 year loan is paid off:T I don't think the site is offering part ex or anything as the houses are selling quite quickly.

Any hints/tips for buying/selling in these circumstances (plus any critisisms) much appreciated!!

lincroft1710

Some disconnected thoughts:

Brown isn't a neutral colour (OH hates it). Doesn't matter what you spend on bathroom, what matters is whether prospective purchasers appreciate it and will pay for it. Selling in 12/18 mnths time means bathroom is 12/18 mnths older.

Moving costs and stamp duty (future unknown) could swallow at least £5K maybe even £10K, have you factored this into your equation.

If you don't get £115K, this will obviously affect potential deposit. If house is £240K and you do manage 15% deposit, you will be borrowing £204K which is 3.14 times your joint annual income. How secure is your £65K income?

Your "toddler" won't need a secondary school for about 8 yrs. Schools change, some which 5 yrs ago were terrible have now completely turned around.

becominganobsessivesaver

Thanks for the response - definitely some things to think about. I had factored in all the stamp duty/moving costs on top, and I see your point around secondary schools (it's something at the back of my mind too!) If I was to have another baby we would definitely need more space than we have now though (which is another reason to consider moving). Our incomes are as secure as they can be - OH is an employed tradesman and I am a chartered accountant, so worst case I think we would be able to keep similar salaries in alternative jobs. We visited the site today and they are offering 5% deposit paid, so hopefully with a bit of negotiation we can probably get the mortgage to beow the £200k mark.

Fire_Fox

Any lender will take your debts into consideration when calculating your net deposit/ equity. Many lenders will not accept gifted deposits either, they tend to undervalue the property to take that into account. The sold price of one house in the area is not indicative of the value of your house, you need to do a lot more research. My gut feeling is that you will not achieve £115 and you don't appear to have factored in legal costs and estate agents commission. How do you propose to pay a substantially larger mortgage when you are thinking of maternity leave? What about daycare afterwards?

becominganobsessivesaver

Thanks for the response. The achievability of the 115k is my key concern, if we don't get it we'll stay put! We'll
have paid off the loan before we move and will have enough savings for the 15%. The sale proceeds would cover the other costs (our mortgage would be less than 104k by then). The maternity leave shouldn't be a problem as I'm entitled to 6 months full pay and will have enough accrued leave to work part time for 6 months on full pay. I also get a generous sum towards childcare. Still it's all stuff to think about - thank you

getmore4less

The key to making this work is having more money than you need saved up.

I would have a good look at the current budget and see where you can trim.

£65k is around is £3.7k-£4k per month.

Since you are planning to near double the mortgage you should be saving at least the current mortgage amount each month.
£100k @ 5% is £660 so you want mortgage and savings over £1320.
say another £1500 to live on that leaves around £1k.

How much are you saving each month?
Have you done a SOA.

The big killer after the house is usualy cars.
Next are the regular smaller amounts, sky/cabe, phones utilites, gyms etc.
Discretionay spends going out holidays etc.

Cut back al of those for a 12 to 18months and see what the saving look like then.
review the situation closer tothe time who knows where prices go, commiting to a new build for 12months time is a bit risky.

Have you got a good deal on the mortgage, this may be worth porting ven though it limits lender.

becominganobsessivesaver

getmore4less wrote: »

The key to making this work is having more money than you need saved up.

I would have a good look at the current budget and see where you can trim.

£65k is around is £3.7k-£4k per month.

Since you are planning to near double the mortgage you should be saving at least the current mortgage amount each month.
£100k @ 5% is £660 so you want mortgage and savings over £1320.
say another £1500 to live on that leaves around £1k.

How much are you saving each month?
Have you done a SOA.
We've trimmed quite a lot! We don't go out too much. Our takehome is around 3.6k (student loan deductions are still quite huge - mind you less than 2 years to go!!!) We're currently saving between £1k and £1.5k per month (meaning we'll have the 15%), whilst still paying out just under £500 loan, £100 childcare and maintaining our essential luxuries!!!
The big killer after the house is usualy cars.
Next are the regular smaller amounts, sky/cabe, phones utilites, gyms etc. Again these are quite small - my phone bill is currently tiny after getting a good retention deal, DH's is slightly more as he wanted a better phone, we only have the basic sky package plus pay £20 for internet, line rental and calls on the land line.
Discretionay spends going out holidays etc.
Holidays is definitely our biggest area of spend!!! I work really hard, and therefore holidays are very important to us! i do make sure they are paid in advance though, and have a stash of airmiles/BA miles to ensure luxury for less!
Cut back al of those for a 12 to 18months and see what the saving look like then.
review the situation closer tothe time who knows where prices go, commiting to a new build for 12months time is a bit risky.
We definitely wouldn't commit to buying until closer to the time - but want to make sure we are in the best position possible to get the house we want
Have you got a good deal on the mortgage, this may be worth porting ven though it limits lender.

Current deal is base rate +0.98% - so currently very good. Think we will consider what the options are when we need to confirm the mortgage - if rates look like staying <4% may be worth porting and taking a 2 year fixed on the other portion.

getmore4less

That rate is going to be hard to better orting is a very likely option

No overpayments you should be able to get close to 1.45% after tax.

You need as much savings as possible to reduce the xtra borrowing.

What rate is the £20k loan, can you overpay or work towards redeaming that.

Holidays perhaps trim the budget for a year, cruises are cheap if you stick to the cheaper cabins and can be very good for relaxing, we get them for £50pppn but you have effectifly free flights so should be able to do better.

Jowo_2

Your property will sell, not according to what you desire to get a certain amount of equity to fund your onward property, but whatever you can get for it at that date depending on the state of the market (supply and demand).

What is more controllable is either saving up harder for the next property to make up for any potential shortfall in what you receive for your property and what you 'need' for the next. Or finding cheaper onward accommodation in the new area, such as a house that needs a bit of work to it.

You should put in on the market when it suits you instead of when you feel there is 'less' competition. You've cited a lower priced property in the area that's up for sale as a sticking point. Today, one property. Tomorrow, who knows, 5 properties on the market in your area. Yes, the properties up for sale in your neighbourhood will be an influence when you market yours but the litmus test, in your assumption that your conservatory and new bathroom will get you a superior price, is when you put it on the market.

becominganobsessivesaver

The problem with porting is we'll only be able to take around £100k at that rate - so will still need to borrow between £80 and £100k, at least Woolwich seems to lend on newbuilds (and I think they accept vendor gifted deposits up to 5% if you're putting in 15%), therefore if we were able to get the house for £230k, put down £36k of our money and get an extra £11k from the builder, we'd be looking at quite an achievable figure (a lot of ifs in there I know!!)

The loan is at 6.1% and will be fully repaid in April next year - I'd have to pay about 3 months interest if I redeemed anyway, so i think I'll just stick with it for the time being.

As for holidays - we're doing easyjet to France this year (all paid for except the food) and have a trip to Mauritius planned and half paid for for next year (I have factored in the remaining amount due in my calculations), after that I think we'll do some cheaper holidays for a few years (particularly if I do have another child - would not fancy long haul if I was pregnant, or with a child under 1!) Cruises are definitely worth thinking about, but in a couple of years we'll be restricted to school holidays which could drive up prices.

Thanks again for the advice!