How to sell my first house, and buy my second?

sailerboy

TangoFiver wrote: »

She gave me 4 options for borrowing the additional 40k:

2yr fixed @ 2.99%
3yr fixed @ 4.19%
5yr fixed @ 4.49%

and a standard variable I think, but she was too quick for me to write these things down

I asked why do the rates go up for the longer term mortgages, and she said "thats how mortgages work". I thought that if you signed up to stay with someone for longer you would be rewarded with better rates?

Interest rates are currently very low. At some point they will rise. If you 'fix' for 2 years, it is likely interest rates will be much as now for that 2 year period - hence the low rate of 2.99%

But if you fix for 5 years, it is very likely that at some point during those 5 years interest rates generally will rise. You, of course, having 'fixed', will not be affected by that rise. But the lender takes this into account and charges you a higher rate (4.49%) from the start. It costs you more in the early years but you are protected from rising interest rates for longer.

Fire_Fox

If you cannot afford to save up a decent whack towards the costs of moving, can you afford a larger mortgage, higher council tax and bills, higher interest rate in two years? Do you still have three months mortgage payments set aside in case you get made redundant, fall ill or injured and cannot work?

If at all possible it's far cheaper to remain in each house for as long as possible, leaping up the from, say, a two to a four bedroom. This may need a massive clear out and to buy some multi purpose furniture (wall bed, sofa bed, cabin bed, gateleg table, stacking or folding chairs). This is particularly important in a recession - if you waste thousands on estate agents and stamp duty every few years it's probably cheaper to rent. If you add all these costs to the mortgage you will be paying thousands more over 25 years, have you done the maths of how much it will cost you when you take the interest into account?

JimmyTheWig

TangoFiver wrote: »

So I've just spoken to the Yorkshire Bank, and it's all about as clear as mud

I tried to ask for an example for if we wanted to buy a house for 150k.
...
So, IF we sell current house for 110k, (around 75k of which is the Yorkshire Banks')

Ok, so we've got...
Sell current house for £110k
Buy new house for £150k
Moving costs / fees: £10k
Current savings to be used: £0

So increase in mortgage will be £150k + £10k - £110k = £50k.

Current mortgage: £75k
New lending: £50k
Total new mortgage balance: £125k
(which is nicely within the £150k they said you could borrow, subject to credit check, etc.)

LTV on new house: £125k / £150k = 83.3%
(which is significantly more than the 76.7% discussed with the advisor on the phone. In which case (a) they might not let you borrow it and (b) the rates offered might be higher. The reason this is higher is you need to borrow £10k to cover fees.)

So probably the last thing you need them to confirm is what LTV are they happy for you to go up to.


From what you've said it would probably make sense to get the additional funding on a two year deal so that when that finishes you should be in a position to remortgage the whole amount without redemption fees.

Racky_Roo

I would make an appointment with the bank and talk it through with them as its always clearer in front of someone.

I would consider borrowing the extra amount on a tracker rate as these are usually "fee free" and have no time scale so in 2 years when your fixed rate comes to an end you can combine the 2 amounts into one mortgage - meaning you only pay one arrangement fee for the new rate otherwise you could end up always on 2 different rates paying arrangement fees twice!

TangoFiver

Thank you all once again for the replies - makes it easier to understand when it's on a screen rather than over the phone!

I rang them to ask what LTV we can go up to, and after giving him our salary details, he said that "90% was not beyond the realms of possibility".

So he gave me the options for borrowing a further £60k;

2yr fixed @ 5.79%
3yr fixed @ 5.89%
5yr fixed @ 5.99%

and went on to give me the monthly repayments for the 2yr option. I said that we probably would only want to borrow up to an extra £50k, and he said then the rate for a 2yr fixed would be 4.89%.

He told me there would be a 'port fee' of £499 to port our current mortgage, plus a valuation fee of our next house of around £310.

After speaking to my dad, I rang back to ask if another lender could lend us the additional £50k.
They said that they could, but Yorkshire Bank would have 'Frist Charge'. Which if I understand it correctly, if we were to default, then the Yorkshire Bank would get all there money back first, and only then would the new lender (the 'second charge') be able to source their money?

They said that I would need to find a lender who would be willing to be a 'second charge', is this likely to be difficult?

Thanks once again!

JimmyTheWig

TangoFiver wrote: »

They said that I would need to find a lender who would be willing to be a 'second charge', is this likely to be difficult?

Yes!

Will certainly be difficult to find one with rates as low as those you've been quoted.

ScotlandM

First charge and second charge. If you can't pay the mortgage and your house is repossesed the first charge is paid first and the second charge second. Simples.
But, with such a high LTV other companies may not offer to accept a second charge. If the value of the house falls there may not be enough money to pay the 2nd charge. In this case first charge would get all their money back but the second charge would take a bit loss

With a lower LTV there would be less chance of the second charge not being repaid, so more chance of having a second mortgage provider.

I agree with the above, try and have your 2nd extra bit of mortgage 2 year to then put both mortgages together. Also, frequently moving house is expensive and makes having a mortgage more expensive than renting. How long do you plan to spend in your new house? You "really want to move" I don't mind not knowing the reason but will the reason happen again this time? Expensive one off house buying fees add up if paid every few years. It might be better as OP said to perhaps wait until the end of this mortgage deal(2more years) and then go for a house for 180,000

JimmyTheWig

ScotlandM wrote: »

Expensive one off house buying fees add up if paid every few years. It might be better as OP said to perhaps wait until the end of this mortgage deal(2more years) and then go for a house for 180,000

The only (financial) reason not to do this would be if house prices were rising quickly. They aren't currently and many predict they won't over the coming few years.
So I agree with this suggestion if you can make it work, OP.

kingstreet

You are unlikely to find a second charge at anything like the rate your current lender will charge you for the extra you want to borrow over and above the balance of your current mortgage.

You may wish to look at changing to a new lender and taking a whole new mortgage for the total you wish to borrow and factoring-in the penalty your current lender will charge you to leave them early.

It's a question of checking if £75k at one rate, plus £50k at another is better than, say, £130k at a whole new rate.

TangoFiver

ScotlandM wrote: »

. How long do you plan to spend in your new house? You "really want to move" I don't mind not knowing the reason but will the reason happen again this time? Expensive one off house buying fees add up if paid every few years. It might be better as OP said to perhaps wait until the end of this mortgage deal(2more years) and then go for a house for 180,000

Our next house, we would hope to settle their for a good 10 years+ (but we know situations change etc).

I can see why it would make financial sense to stay put for the remaining 2 yrs on our original mortgage, but it's just not something we can look at at the moment

I'm not too fussed about the second charge thing, just thought it might be a cheaper way to borrow the additional money - seems not!

Many thanks once again