advice on upgrading to a more expensive house

s100000

Hi, I currently live in a house which is worth 300k in north bedfordshire but want to move closer to london, within the m25 preferably i.e watford, uxbridge etc some time next year.

Our current house is mortgage free and the houses we are looking at are worth around the 420k mark. Therefore, we will need a mortgage of 120k, would we need to have a 12k deposit for this mortgage amount?

Our situation, It is only me and my dad that live in our current property so we would be looking to get a joint mortgage for the newer property. His salary is 6k per year working part time and hes due to retire next year. Im on 25k a year so we should be able to get the sum we need.

Would we be better to get a joint mortgage?Even if his pension would be around £500 per month including an additional private pension along with my 25k? The repayments will be around £500 a month which isnt too bad? Do mortgage companies take pension payments into consideration? He can work a couple of years longer if it helps but what happens when he retires and then tells the mortgage company? What if I am solely on the mortgage? I think he would prefer to keep some, if not most, of the property under his name.

Lastly, when we apply for a mortgage, will be applying for the additional 120k we need or 420k with a 300k deposit?

Sorry about all the questions but they've been playing on my mind and I feel this is quite a complex scenario.

pathtofreedom

Right you need to do a lot more homework but I think this is the high level answer, as always the devil is in the detail with houses but this should help.

You sell your current house for £300k which means you have 300k to use as a deposit for your new London house (assuming you have other savings for the solicitor, estate agent, moving costs, new house buying costs and stamp duty on new house more on that later).

To get a new mortgage for the £120k to make it up to £420 depends on a few things. Different banks, mortgage companies look at the criteria slightly differently but you're probably best having a chat to a whole market broker. The rough answer is you'd need 3-4 times your salary to afford that alone, which 25k would not be. To include your dad on the mortgage, this might end up restricting the term you can have as well, even if it means you meet affordability to be able to get 120k loan, they might only lend you it for 10-15 years or something instead of 20-30 depending how long a term you're after, which in turn makes your repayments more each month. Also depending how old he is if he dies this could cause you problems as you wouldn't be able to remortgage yourself, unless you get some big pay rises or manage to pay off a lot of the mortgage before then. Also are you looking for a place big enough so if you got married or had kids or something you could all live together? If he needed to go into a care home also this could cause you problems, but then if you're using his house money for the deposit this might need specialist advice either way.

Again a whole market broker can help go through some of the sums to see how much you might be able to get a mortgage for alone and with his income.

Then you wouldn't need an extra 12k for a deposit as you mention as the 300k is your deposit and used to work out your loan to value (ltv) so the whole house is 420k, your deposit is 300k, which makes your ltv 28% which is very low which could open you up to some good deals, normally the higher the ltv the higher the interest rate, although some places want ltv's of over 30%. Again talk to a whole market broker, not just one from the estate agents.

You will need some savings to do all this mind you, moving house is bloody expensive, I did it myself last year, and there is always one more thing that needs paying for, some of which will be needed up front of you selling your place too. Things like survey costs, some solicitor costs, moving costs, then you also need to think about stamp duty, estate agent costs, you have to pay the solicitor twice in a way to do the paperwork to sell your place and buy the new place so that adds up pretty quickly too. So all that could take a pretty big chunk out of your 300k from the current house. Just the stamp duty for a 420k house is 11k for example and that's just one of the costs.

I hope this sort of makes sense and points you in the right direction. I think a whole market broker is your first step to go through everything with you, both what you can afford or if including your dad helps or not. Do not just use the broker from an estate agent, you'll need a bit more specialist advice really to make sure you don't end up regretting things later especially as no one knows how interest rates could change, you don't want to get stuck with a mortgage you can't remortgage without your dad's help in 5-10 years and not being able to pay, or he needs to go into a care home and how those fee's are recovered from his share of the house.

Hoploz

Great answer above!

Def see a good broker - it's complicated.

Easiest financially is to get the mortgage by yourself. Lenders will go to 5x salary so it is do-able.

However the complication is your dad's money. If you get a joint mortgage then he will be able to retain joint ownership. You'd need to get it all drawn up by solicitor who owns what. If it is just your mortgage he still could, but mortgage co would need to know exact terms, ie. if he owns say 70% of the property legally then they would only have a right to 30% in case of default ... Or whatever. it doesn't actually work quite like that but you get the drift.

He will complicate your mortgage as described above, due to his age. Even it he wants to work longer, lenders will lend only up to a certain age which may be 65 or 70 or perhaps longer but it's no good them taking his salary into account on a 25 year term if he's only earning the agreed amount for 2 years, or even 5 or whatever, see what I mean?

So it's a but of a minefield this joint ownership thing. Much simpler if he gifted you the deposit and you got a sole name mortgage, which could work if you have no siblings or other claimants on his will. But what man in his right mind would just hand it all over with crossed fingers you don't fall out?!

s100000

Thanks for the above info, i love this site!

Yes i dont think he would want to gift me the full amount so joint would be the best way..

I have the neccesary savings to move, ive got 15k as a budget but as your saying the stamp duty is 11k i will need to up this. Also i thought i pay stamp duty selling my own home? I will have the mortgage deposit of 11k also but will they accept a mortgage with no deposit?

Regarding the term, your saying 10 to 15 years which doesnt sound great.. arent there specialist mortgage products for retired people? What if i was to act as a guarantor?

I hope this isnt too risky, might not be worth it or wel have to settle for a cheaper 2 bedroom property etc

~Beanie~

s100000 wrote: »

I will have the mortgage deposit of 11k also but will they accept a mortgage with no deposit?

You do have a deposit... the £300,000 from selling the house you currently own.

AnotherJoe

OP will need a deposit at exchange of contracts. If its 10% that will be £40k. They might be able to negotiate down to 5% but that's still £20k.
If they get 10% from the person below them in the chain (eg their buyer) from their deposit, £30k, that leaves up to £10k potentially.