Trading up

ClareFe73

I'm 43 and single and I bought my one bedroom flat in a good location in London 10 years ago for £200k. It's now valued at about £500k. There is about £95k left on the mortgage and the monthly mortgage repayment is only a fifth of my salary. I've overpaid the mortgage a bit at various times. However, I'd like to trade up to a bigger flat with 2 bedrooms. Once fees for buying and selling come out of the equity I'd probably be able to afford something that is between £550k and £570k - so I'd need a mortgage of £180k or £200k. This is affordable for me but ... is it worth buying a property that is only £50k more expensive than the one you've just sold? And spending £20k or £30k on stamp duty and other fees? I don't desperately 'need' a bigger flat now but I'm thinking that in the future having a second bedroom offers me some flexibility in case I go travelling and need to rent it out or in case I decided to take redundancy. If I had to leave my corporate job in the future I feel that there goes my last chance to get a mortgage while I'm earning a good salary. Any thoughts appreciated.

Cakeguts

Pay off the mortgage on the present flat, top up your pension and retire earlier to go travelling?

Annisele

I think that if my goal was flexibilty, I'd strongly prefer to have a smaller mortgage. I'd have an stronger preference for no mortgage at all, even if that meant a smaller flat. That would mean I could let out my flat without worrying about consent to let on the mortgage, and would give me huge breathing space if I was made redundant.

If my goal was having somewhere nice to live - or somewhere with space for a partner - I'd make difference deciions.

Hoploz

Out of interest, what would the rental income be on the 550k 2 bedder? You'd get good rent if you rented the whole 1 bed flat out I'd guess?

Personally I'd buy a bigger house, further out, rather than something only slightly bigger in the same city location. But my idea of where life will take me in 5-10 years sounds quite different to yours, so I appreciate that might not work for you.

ThePants999

I wouldn't pay five figure sums in fees and double my mortgage payment just to speculate on what my housing needs MIGHT be in a few years. Wait until you have an actual need to move IMO.

ClareFe73

Just to clarify - I'm also thinking about retraining and becoming self employed in the future. I'd like to keep some kind of property in London as an investment and somewhere to come back to and live. But if I took redundancy or left in the next five years, yes, great to have the one bed flat. But I'm wondering if it would be good to get the bigger mortgage on a bigger flat NOW while I'm in regular employment. I probably wouldn't be able to get a mortgage when I don't have a job.

AdrianC

ClareFe73 wrote: »

However, I'd like to trade up to a bigger flat with 2 bedrooms.
is it worth buying a property that is only £50k more expensive than the one you've just sold? And spending £20k or £30k on stamp duty and other fees? I don't desperately 'need' a bigger flat now but I'm thinking that in the future having a second bedroom offers me some flexibility in case I go travelling and need to rent it out or in case I decided to take redundancy.

Sounds like you're viewing the property primarily through the value, rather than through what you WANT to live in. The most important thing about the value has, surely, to be affordability.

If you think a second bedroom is a good thing, then it's affordable now, but might not be in the future. So it would seem to be a good idea to move now.

Hoploz

If you're retraining and becoming self employed, would that be in the same field you are now in? Just because as I indicated before, you get much more in a different location, and if it's something you don't need the city centre for, it's worth considering. Can you convert to a BTL mortgage and let-to-buy elsewhere? Or do it the other way around until you are ready to make the move?

Generally, it always makes sense to trade up as soon as you can afford to, as prices tend to go up, and esp if your income is likely to go down, you should do it sooner - but I wouldn't consider moving from 1 bed flat to 2 bed flat much of a trade-up, personally.

cashbackproblems

As you are in London it will always get rented out and mortgage covered, consent to let is hardly ever a problem and if it is you just go to a broker when re-mortgaging to find you a bank that will allow it

I personally would rather look for a small house so you have a proper home and no service charges/ground rent/lease issues etc, but a 2 bed regardless gives you more space and future rental income. Plus as you say you have the income and still have many years to work whereas in 10 years time it becomes less viable.