Affording my second home

wirralmatt

Hi!

My wife and I bought our first property together a little over 18 months ago. We have added some value to the property and I believe we have some equity in the property (by virtue of added value and the original deposit).

We are now ready to move to our second property, and I am confused!! We could afford to increase our monthly payments on our mortgage, but the fees, survey and costs associated with moving (from our experience last time) are way beyond us at the moment.

Could someone talk me through (in very simple terms) how the cashflow works - do I basically have to find the costs from somewhere else in advance of moving, or is there a way I can get the cash out of my current or new mortgage without incurring silly costs?

Sorry if this all seems a little simplistic!

Thanks

Matt

Cyclemonkey1

When you say second home do you mean selling your current one and buying a new one or buying an additional home?


If it is the first one then you will use the money you get from your buyer to pay off the mortgage on your current house - anything left over will be what you have to play with in terms of money for deposit, fees, stamp duty etc.. for your next house.


So for example if you have a mortgage of £100,000 and your house sells for £150,000 then you have £50,000 to put towards your next purchase. Some of the associated costs - solicitors fees, stamp duty etc.. can be settled once you have sold.


If you are struggling for any savings up front for searches, surveys and removals maybe it isn't the right time to trade up - 18 months isn't a very long time at all to own a house.

hazyjo

Unless the market has been booming, you'll nearly always lose money on moving after that short a period.

This is why it's wise to move as few times as possible in a short period of time.

In what way is the house now unsuitable, or did you buy it as an investment to add money to short term? If the latter, it doesn't sound like you did much homework re profit.

I'm with Cyclemonkey1 in that it's a bit confusing. Give us some figures and we might be able to help.

I've never 'saved' towards moving. I've had (or been overdrawn enough!) to pay for searches, removals, etc, but the rest comes out of my equity.

Cyclemonkey1

If you are in an area where prices are high enough to pay stamp duty that will be an additional cost.


I would get a valuation, work out how much a new house is and then do a budget. Firstly you need to see if you have enough equity in your current property to fund - estate agent fees, solicitors fees, removal fees, stamp duty, deposit on the new place etc... If you don't have enough to comfortably fund all of that then I would think about staying where you are. I seriously doubt prices have gone up that much in a year and a half that your place is worth that much more than when you bought it.

paddycharlie

Also check the terms of your mortgage as their may be an early redemption fee if you repay it so soon

Ozzuk

See if you can port your mortgage, that will help keep costs down. I tend to move every 2-3 years as I get bored, but I buy property I can hopefully make money on (not so easy now, no comment from Crashy needed).

you'll find it a lot more stressful process than FTB. I would suggest having a look around to see what you can afford but don't look too hard until you get an offer on your place - then go hunting. Nothing worse than seeing your dream home when you haven't sold yours.

You are then faced with managing a sale and purchase - if you can combine these then great, I usually try and minimise the chain by buying somewhere with no onward chain, but you can't always do that. Similarly consider the position of the people buying yours to limit the chain.

You can of course move out and rent, this gives you the most freedom and puts you in a great place to buy, but obviously has the pain of moving twice, and additional costs. You also risk losing the ability to port mortgage - my lender said no porting if there was a gap, but in the end I did it anyway, they then decided not to penalise me and froze the mortgage (yey Nationwide, saved me over 2k in fees). Was less than 2 months though.

As others have said, can be a costly business moving against so quickly - unless you've been lucky and bough at a good price. If you are lucky enough to generate extra value in a short space of time then you will find people might not like it - I had comments from the 'x'k plus uplift in value on a bungalow I flipped, people expected I would be open to low offers based on what I paid so I had to wait a bit longer for a buyer.

wirralmatt

Thanks for the advice and comments.

I am talking about selling my first home and moving to a second home. Not buying an additional home. Sorry for the lack of clarity.

Because the house we bought was being sold by a couple who were divorcing, and because it was in a horrible state (so bad that the estate agent had no photos of the inside and only two of the outside), we got it for a really great price (Asking price was £110,000, we paid £100,000). We haven't had it valued yet - that's next on the list if we can work out how to make the cashflow work for the fees and stuff.

In terms of adding value, from the prices of identical houses in my street I believe that we have added about 20% (£20,000) to the value of the house, against what we paid. We have completed a full rewire, redecorated throughout, replaced the bathroom, and redone the garden.

Before we look to sell we will also be making improvements to the front of the property including modernising the porch, relaying the driveway, repainting the front of the house, and some basic landscaping.

We have addressed everything that came up on the original survey, with the exception of some wear and tear on the kitchen cupboards and some sections of laminate flooring.

Thanks

Matt

Red-Squirrel_2

Why do you want to move?

csgohan4

wirralmatt wrote: »

Thanks for the advice and comments.

I am talking about selling my first home and moving to a second home. Not buying an additional home. Sorry for the lack of clarity.

Because the house we bought was being sold by a couple who were divorcing, and because it was in a horrible state (so bad that the estate agent had no photos of the inside and only two of the outside), we got it for a really great price (Asking price was £110,000, we paid £100,000). We haven't had it valued yet - that's next on the list if we can work out how to make the cashflow work for the fees and stuff.

In terms of adding value, from the prices of identical houses in my street I believe that we have added about 20% (£20,000) to the value of the house, against what we paid. We have completed a full rewire, redecorated throughout, replaced the bathroom, and redone the garden.

Before we look to sell we will also be making improvements to the front of the property including modernising the porch, relaying the driveway, repainting the front of the house, and some basic landscaping.

We have addressed everything that came up on the original survey, with the exception of some wear and tear on the kitchen cupboards and some sections of laminate flooring.

Thanks

Matt

Bare in mind that what you paid to renovate will not always add the same amount to the house price.

Cyclemonkey1

That is what I was thinking - you only managed to knock £10K off the asking price for a house you said was in a complete state. However a lot of these improvements, rewiring apart, seem to have been cosmetic. Not sure you will make much more than £10k back in eighteen months.

DaftyDuck

.... and, before you get excited by the Estate agents' valuations, remember these are likely inflated guesstimates to get your business, and your achieved selling price will be lower, especially when said agent gets his slice.

Unless you are doing much of the work yourself, on a house at that price point there is very little room for price improvement above what you spend. Indeed, you'll often come out at a loss after sale.

Why, after such a short period, are you looking to move? Costs of moving really eat into any potential profit, particularly if you have lived there so briefly.