Financial planning to upsize house. HELP

Jambo_bri

Hi there. I am after some advice.

My wife and I are looking/needing to upsize our house within the next 2 years due to my wife expecting our first child, hopefully 2nd would follow on straight after.

We are in somewhat of a pickle and my head is minced trying to find the best solution.
We currently have 120K left on the mortgage (I paid 170K), currently paying a pretty high intrest rate 5.5%, not locked in.
We would struggle to sell the house as the house builders have not finished off the development (5 years and counting) however we have been told that renting wouldn't be a problem. If the site was completed, the house value would be roughly 145k.
We have 30K in the bank, possible savings over the next 2 years would be an additional 70K.
I am unsure whether to put these savings into the existing mortgage, then remortgage for a better rate...but also we need a deposit for a new house. New house value would be 300-350K.
It's looking like part exchange or renting is our only option currently, renting isn't to desirable as I am a higher rate tax payer and it doesn't seem to make much sense.

Also if anyone has information on how to challenge a house builder that'd be magic!!

Any help and advice is greatly appreciated.
Cheers guys.
Brian

princeofpounds

Well you definitely need to get on with refinancing that mortgage.

Do you have any idea what sort of valuation you might get for the property currently from a mortgage valuer?

Let's assume 145k for now. With a mortgage of 120k you have LTV of 82.7%. Your 30k could chip up to 20.7% off that LTV (I assume it is all genuinely available and this will not leave you without liquid funds).

It's almost certainly worth putting some of those savings into the mortgage. Getting from the 90% LTV band down to sub-80% produces a notable improvement. Getting below the 70% band produces a further improvement, but not quite as large. The 5% bands in between can help also, although they tend to be smaller improvements.

Given your value is not likely to be 145k in reality, then it's going to take a somewhat higher proportion of those savings to get below 80%.

Also, you might find that your ability to get a BTL mortgage on your current place is hard unless you are below 75% LTV with a certain interest cover provided by rent.

Given your second house is going to be bigger in terms of property exposure, with a bigger mortgage, then having a lower LTV on that property will likely be more valuable. So you probably want to retain as much of the deposit for this as possible, given the constraints noted on the original property plus the small cmount of capital needed to cross the next LTV boundary.

Based on the 145 valuation, that would take another 12k injection roughly to get you to 75%. With the 18k left over, + 70k future savings, you might be able to get something like 75% LTV on the new property as well.

So, overall, I think it's likely you will have to pump some money into the current place. Get below 20% LTV and, probably, 25% LTV to allow it to convert to BTL in a little while.

Then put the rest into the new place.

Precise figures are impossible without proper valuations of the properties and an understanding of what the likely rates on mortgages you will actually get are. All the above is back of envelope.

dimbo61

You are wasting money with savings in the bank earning what 1/2% and paying 5.5% on the mortgage.
Remortgage asap to get the mortgage down to 75% LTV by using savings to increase the equity. Consider offset mortgage and pour all your savings into the offset account.
You should get 3.50/3.75% two year fix or good tracker deal.
If you want to move in two years you have a good deposit and can change your existing property to a BTL or ask for Consent to Let as 75% LTV