Mortgage and house buying advice?

Enchantica

Hello all.

I am normally on the comp or wedding board so this is my first time here! Be gentle please... I am looking for some advice. Me and OH bought our flat for £95,000, 2 bedrooms, ground floor, garden etc. We are looking to move to a different area in 2 or 3 years when we plan to have kids. The kind of place we are looking at is a semi detached 3 bedroom place in a nicer and quieter area and it will be around £140,000. We are hoping current flat will sell for £120,000 but that is being quite optimistic. Realistic probably around £105,000 or a bit more.

So, when we buy the next home, what happens to our mortgage? It is £80,000 because we had put down a £15,000 deposit on current flat when we bought it in 2009. Does it just carry over with an extra lump added on for the difference? Do we need a deposit to buy the next home? Can we borrow more or less than what we originally borrowed for the current place?

Is £140,000 place just an unachievable dream, going from somewhere that we paid £95,000 for? I can't work out how much our mortgage would be if we went for this next place. I am hoping we have £20,000 saved between us and then have the extra money from the sale of current flat if it sells above what we paid.

I hope this all makes sense. I'm just not sure what happens when we go from one home, sell it and buy another. People seem to work their way up from a small flat to a house somehow and I wondered how they did it. Is it just profit from their previous place?

Sorry I feel like this is all rambling nonsense now lol.

sophievenusdoom

You're alright lol!

Basically, the gist of your situation (from what I gather) is that you have £20k saved, and should hopefully make £10k from the sale of your flat. This gives you a deposit of £30k. If the place you want is £140k, this means you will need to be accepted for a mortgage of £110k. Providing that is affordable to you (and you make as much as you hope on your current propert) there shouldn't be a problem!

Thrugelmir

We're a friendly bunch on this board. So have no fear.

You'll need a 10% cash deposit when you exchange contracts on the new property. Also you'll need to cover the costs of selling, buying and moving. It all adds up.

Do your savings earn you a higher rate of interest than that you pay on the mortgage?

If your flat rises in price so will the property you are hoping to buy. Perversely the best time to move up the ladder is in a falling market. As the differential narrows not widens.

How much is your joint income currently? That'll help us have an idea of affordability.

Enchantica

Hi, thanks for the replies so far, they make sense to me

We don't have the £20k saved yet as wedding is coming first but that's what we hope to have. I make £17,500 and OH makes £17,000 both before tax is taken off. We are currently paying £489 a month for our mortgage which is affordable to us and hoping to pay roughly the same but since we are on an £80,000 mortgage it will more than likely be more in the new place.

We are on a saving spree right now to get as much as possible saved so we have a smaller mortgage. We just have normal bank savings accounts so may look into getting a higher paying savings account when we save for the house. Wedding savings are up and down right now!

I am managing to save £500 a month right now and OH is trying to do the same so we should end up with a good amount in a couple of years time. Of course I want to go to New York in between but that's another story lol. Hoping any money we get from the wedding will also go towards the house when we upgrade to the more expensive one. Just want a nice family home for when we settle down. This place is ok but didn't want to raise kids right in the city.

I am hoping to ask for a pay rise but a bit nervous right now. I want to be on £20k but we shall see. Would help a bit!!

Thrugelmir

I'd be surprised if a property you paid £95k for in 2009 would realise a £105k. In your wildest dreams a £120k!

When buying property its worth taking a long term view. So maybe you should split your savings into different pots.

Wedding, holiday, house.

Just overpaying the mortgage by say £50 a month initially, will slowly accumalate. Paying an amount like this regularly won't be noticed and once paid you won't be able to spend it again.

The quicker you reduce you mortgage balance the less interest you'll pay. Rather like making a large snowball.

Enchantica

Thrugelmir wrote: »

I'd be surprised if a property you paid £95k for in 2009 would realise a £105k. In your wildest dreams a £120k!

When buying property its worth taking a long term view. So maybe you should split your savings into different pots.

Wedding, holiday, house.

Just overpaying the mortgage by say £50 a month initially, will slowly accumalate. Paying an amount like this regularly won't be noticed and once paid you won't be able to spend it again.

The quicker you reduce you mortgage balance the less interest you'll pay. Rather like making a large snowball.

It was valued at £100k, we spent £5k doing it up with carpets, new bathroom suite etc and just got the side garden paved so was hoping it would increase the value a bit in a few years time But I am a complete newbie to all this so it's really just me having a guess. I thought maybe we could get £120k because there were other properties in the area going for that, ours is in a block of 6 and it was the second cheapest. The others all went for over £100k. Could have been the different times they were bought etc though.

As I say, newbie

InMyDreams

Enchantica wrote: »

It was valued at £100k

By whom?

Enchantica wrote: »

we spent £5k doing it up

Whatever you did, it won't have added as much value to the property as what it cost you, if anything. You did it to your tastes, not to the next owners' tastes. Also in a few years, those carpets and bathroom won't be new any more.

Enchantica wrote: »

was hoping it would increase the value a bit in a few years time

As Thrugelmir said, you should be hoping for the opposite... if you want to 'step up the ladder' then it is better for you if prices are lower than when you first bought as the difference in price will also be smaller because the place you want to buy will likely have dropped by more than yours. It's when you 'downsize' that you want prices to be high.

Enchantica wrote: »

People seem to work their way up from a small flat to a house somehow and I wondered how they did it. Is it just profit from their previous place?

Those people that manage it, it's likely to be a combination of all or some of 1) paying off as much of their mortgage as they can to increase the equity they have when moving up 2) having a higher income so they can borrow more and 3) banks becoming increasingly 'irresponsible' and lending more and more leniently (eg less deposit needed, even more than the value of the house on some cases). Number 3 did dry up, leaving lots of people in a lot of **** who had relied on this in the past. I would recommend numbers 1) and 2)

Enchantica wrote: »

But I am a complete newbie to all this so it's really just me having a guess.

Hang around a while, read a few threads, and you won't feel like such a newbie. They tell it how it is on this board ;-) Welcome

Raggs_2

You say the mortgage is currently around 80k? You hope to have 20k in savings, and are hoping for around 105k for the flat (who knows what prices will do in the next few years though). What will your mortgage be if you keep heading with the repayments as they are, in 2/3 years?

How much is the interest on your mortgage, and how much are you earning on your savings? It could be worth throwing a large portion of those savings straight onto your mortgage. Effectively investing into your house. Check out the mortgage free wannabes.

To my knowledge (no expert), you will need to get a new mortgage. The old one will be paid off with the sale of the flat, and then you will need to arrange a new one for the new property.

You could be hoping for around 40-50k equity in your flat (assuming 105k is a reasonable price in a few years), meaning (again, assuming prices stay stable), you may be aiming for a 100k mortgage. Are you jointly earning over 30k? If so, you'll probably be ok.

Lots of guesses on property prices there, but overpaying your mortgage is almost certainly a good idea (you need to check how much you can overpay by).

Enchantica

Thanks for the advice everyone, I will have a look at Mortgage Free Wannabes and see what they are saying. I'm going to dig out my mortgage info and get the details for you as that will probably make things easier.

The property was valued on a home survey at £100k. It was in quite bad (ok disgusting) condition. The general walls and floors were fine but there was just A LOT of dirt and muck and unspeakable things. Pretty sure it hadn't been changed in the 60 years the guy had been there. It now looks like a proper (modern) home so I thought this might give it a bit more value since, well, it doesn't look like a hole anymore lol. But I do understand what you are saying, that our decoration may not be to everyone's taste.

My boss has just today put me in for a pay rise so really hoping I get it as it would definitely help in the long run. Jointly we make £34,500 before tax is taken off.

Basically I want the dream family home before I start shooting out bambinos. At 26 the clock has started ticking... Our aim is to get married in 2011 (already booked), have our NY holiday and then buy our new house in 2012/2013. We can each manage to save around £500 a month if we try hard so hopefully that should help get us our savings or overpaying the mortgage.

Enchantica

Ok here's the info:
Property survey valued flat at £100k
We bought for £95,000 and put down £15,000 deposit
Interest rate: 5.99% 3 year fixed
Mortgage Amount: £81,745
Monthly repayment: £489.57
Term: 30 years from 3/1/2009
We have made 9 standard payments so far (I think)
Our combined wages are: £34,500 right now
Early repayment charges: £2,452.35

I may call up Santander and ask about over paying and what the max we can over pay is. So you think this would be better than saving into a normal account then?

Plan is to sell in 2013 and buy a house for around £140,000 or a bit more if we can manage.

MB1919

Enchantica wrote: »

Ok here's the info:
Property survey valued flat at £100k
We bought for £95,000 and put down £15,000 deposit
Interest rate: 5.99% 3 year fixed
Mortgage Amount: £81,745
Monthly repayment: £489.57
Term: 30 years from 3/1/2009
We have made 9 standard payments so far (I think)
Our combined wages are: £34,500 right now
Early repayment charges: £2,452.35

I may call up Santander and ask about over paying and what the max we can over pay is. So you think this would be better than saving into a normal account then?

Plan is to sell in 2013 and buy a house for around £140,000 or a bit more if we can manage.

It's definitely worth phoning Santander about making overpayments. With your fixed rate standing at 5.99%, this will be considerably higher than the interest on your savings. Therefore, making overpayments makes financial sense. However, once you make an overpayment you can't get the money back! Just make sure you have sufficient savings in the event of an emergency and of course keep some funds for the wedding. Many banks allow overpayments of up to 10% per annum, but Santander may be more/less generous. Even a relatively small monthly overpayment of £100 will make a difference in the longer term. Give them a call.