Buying for the second time

Mortgage_Moog

I wanted to buy in the area I already lived in (living with family) but couldn't quite afford it so the plan was to buy elsewhere, save up and then buy back in the area I grew up in.

I recently bought a place just 5 miles down the road. It's lovely and I'm very happy here but the thing is I got it for a bargain price because the man I bought it off had been messed about by the previous buyer who pulled out last minute. Due to that I bought this place for 5k less than he paid 10 years ago!

I'm now in a position where I have effectively made 3- 5k overnight meaning I only need another 5k saved up to be able to move to the other area. I'm saving 1k+ per month so I may even be ready to move back there next summer, years sooner than I planned.

I just want to know how it all works when you buy your second home. Is it as simple as selling mine, paying the difference in cash to upgrade and my mortgage just carries on?Do you have to go through the entire application process again? I only did it 3 months ago.

I know there's a fee of £3000 if I was to pay off the mortgage early but is there any such fee for moving? Does it get classed as remortgaging? I don't even know if I have to tell the mortgage lender whether I want to sell before putting it up for sale?

If there are any such threads on this already please point me in the right direction but I thought it'd be good to get some specific answers for my situation.

amnblog

Costs and options depend on the Lender and the product you have.

Yes, the whole thing has to be underwritten as it is a new mortgage.

Different property = new mortgage

Mortgage_Moog

Here are some figures if it will help. I paid 70k which sounds cheap I know but it's lovely, just that it's on the very edge of the city. I paid a 10k deposit so I already own around 14% of the place.

If I wanted to buy somewhere for 80k and I sold mine for let's say 72k it would be quite easy to just pay the difference of 8k in cash to upgrade? My income has gone up since applying before and I have a great credit score.

Malmo

When you sell your current property, you redeem your existing mortgage i.e. pay the loan (plus fees/charges and any other costs) back to the lender, out of the sale proceeds.

Whatever is left over can then be used as equity towards your next purchase. However, you will need to reapply for a new mortgage, once you have had an offer accepted on a property.

You appoint your solicitor / conveyancer to deal with the money, ideally for both the sale & purchase. You do not need to see any of the cash, especially if all your equity from the sale of your existing home is going into the next purchase. Remember that you will not actually have £8K (using your example figures) to put towards the next purchase - some of that will need to pay for sale & purchase legal costs, your current lender's early redemption charge, estate agent commission (if using one to sell) and so on.

Mortgage_Moog

Thanks for the help. I'm not planning on moving anytime soon but I'm just planning well ahead. I thought there would be fees to pay but I don't mind those because they're so small on my property and I can save them all up in two months.

I'm enjoying just having my own place for now but it's always good to keep an eye on your next move.

Mortgage_Moog

I suppose It would be better for me to pay chunks off my mortgage with over payments rather than saving cash in a bank account with interest rates being so low.

I can sell this place for at least 3k more than I paid and I'm sure I read the maximum amount I pay for ending the mortgage early is 3k so that fee is "free" so to speak.

Thanks for the advice :-D

dimbo61

Why not start off by checking if you can overpay the existing mortgage.
Even if you are in a " Fixed rate deal" most lenders allow 10% overpayment each year.
Use " Moneysavingexpert" website to save money on everything you buy and earn/pay for to make the most of your money

ViolaLass

Mortgage_Moog wrote: »

I suppose It would be better for me to pay chunks off my mortgage with over payments rather than saving cash in a bank account with interest rates being so low.

Depends how your personal mortgage and savings rates compare.

Mortgage_Moog

I can overpay by 10% per year without being charged anything and it's fixed for 5 years. My mortgage is so small at around 56k that I can pay the whole thing off in about 6 to 10 years so I think when my fixed term ends my monthly payments will actually go down quite a bit.

I'm just looking ahead and planning but for now I'm glad to be out of renting and paying into something rather than throwing money away every month.

Mortgage_Moog

Great news, I just checked my documents and the fee I pay If i end the mortgage or move is only £1700 and not the £3000 I thought. It says that £1700 is the maximum amount so am I right in thinking that the final amount goes down the longer you've had the mortgage? It works out that £1700 is 3% of my mortgage so I suppose it's always going to be 3% of the amount I owe?

I can even keep my 5 year fixed fee when I move so it all looks quite simple.

Spangled

"so I suppose it's always going to be 3% of the amount I owe?"

Check your Key Facts document that your lender would have issued you with - it will detail exactly what the ERCs (early repayment charges) are. Often with a fixed mortgage it's on a sliding scale, eg 5% of outstanding balance if redeemed in first year of the fix, 4% in second year, 3% in third year etc.

You may also have the option of porting your mortgage rate if you move property within the duration of the fix and stay with the same lender. You still have to apply for a new mortgage (because it is secured on a new property) but you keep the mortgage rate/deal you are currently on and avoid any ERCs. But you'd need to work out whether it was better to stay on your current fix or to move to another lender completely to get a better rate but pay the ERCs.