Can someone please explain

Shakin_Steve

Just been watching location, location, location........again. On most episodes, the buyers have secured a mortgage, say it's £300,000. They find a suitable property, get it fo £280,000 and the Spencer says 'That leaves them £20,000 to do any necessary work'.
How? The bank will only lend them the purchase price, surely? So, unless you are a cash buyer, where does the £20,000 come from?
Am I missing something obvious?

PasturesNew

You are right, if the mortgage to them is the max available and they've just reached the minimum deposit, then there's no cash in the pot.

But - the programmes are for entertainment purposes, so it needs to go in one ear and out the other really.

seashore22

Because a percentage of that £300,000 purchase price is made up of a deposit or equity in their previous house.

When we sold our last house for instance we had a mortgage of £100,000, but a house that sold for £290,000. It gave us much more flexibility to not max out our mortgage potential yet still have some money left over to do up the next house.

Does that make sense?

seashore22

So:

Sell house for £300,000

Current mortgage of £100,000

Equity of £200,000

Buy new house for £350,000

New mortgage of £200,000

Potentially leaves £50,000 to do up the new house.

Not everyone of L L L is a first time buyer and some are downsizing.

Like I said, not everyone goes to the maximum mortgage they can obtain. Last time we moved we were offered a mortgage of £400,000 and said no thanks. We much preferred to sleep at night than have a super duper house.

G_M

This is a TV programme - it's not real!

you could equally watch homes under the hammer where people buy a property (£X), do it up (£YK) and sell (£ZK) and viewers are then told the profit was Z-(X+Y).

No mention of legal costs.

Or SDLT.

Or financing costs.

Or the value of the time spent doing it up (6 weeks solid work with no wages)

Shakin_Steve

Right. Thank you all, I'm not not that dim after all.:)

DaftyDuck

They do, of course spend "£360,000, including doing-up costs", and then a (spiv brainless and gormless) agent comes in, and suggests they could "market at £390,000...." ..... ..... so that's an instant and guaranteed profit of at least £30,000 (!???!). Aside from EA fees, the buyer knocking the price down, dear "Crashytime" popping up for a viewing (:rotfl:), and a bit of realism creeping in from scene left.

Mind you, it's even easier if you follow the gardening makeover programs. From concrete and dogmess back garden to Chelsea showstopper in only three months (and £14,000, discounted rates as the garden centre gets its labels on Telly).

Now, murder is actually much easier than CSI would lead you believe... so that's probably the best field to start off in!

Hoploz

For ease of figures ...

Property 100k
Cash deposit 30k
Mortgage required 70%

If I want to borrow a little extra to do some work I can borrow 80% and keep 10k of my cash back to do the work.

This assumes of course that my mortgage affordability allows me to borrow the whole 80k.

getmore4less

G_M wrote: »

This is a TV programme - it's not real!

you could equally watch homes under the hammer where people buy a property (£X), do it up (£YK) and sell (£ZK) and viewers are then told the profit was Z-(X+Y).

No mention of legal costs.

Or SDLT.

Or financing costs.

Or the value of the time spent doing it up (6 weeks solid work with no wages)

Try watching more recent episodes.

They often mention cost and taxes but not the detailed lists.