Pay of current house, buy new house w/o selling?

jasonagnew

Hi Everyone

I'm looking for some advice.

Ten years I bought my first house at 20 for £150,000. I now only have £28,000 left on mortgage but me and the wife are very keen to move. I'm pretty sure if I really focused I could pay off the rest of mortgage over 12 months. Once paid off we would like to buy a new house.

I was thinking it would be a lot easier if I didn't need to be in a chain, and also be able to do up whatever house before moving in. So I was thinking I wouldn't have much money spare for a deposit but then I would have around £150,000 in equity in the current house.

Would it be possible and make sense to try to get a very low deposit mortgage (probably with higher interest rates) that allow no early repayment fees. So I think the new house would cost about £450,000. Therefore after we moved in, say it takes about a year to sell the house, I could pay £150,000 of the mortgage then look to remortgage with a better deal.

I have no real experience buying houses as I've only bought one to date. So it may be I'm being silly and its better to get stuck in the usual chain system. It's shame I don't live near family as I would of considered selling and moving in with them while I buy a new place.

We're on about 80K combined salary now but we both have confirmed pay rises so its likely 100K by the time we look to buy. We have no debt (apart from student loans), we have no pcp/car loans etc.

I would really appreciate any help or advice.

Thanks.

buggy_boy

Go to a mortgage broker and find out how much you can borrow, make sure you do not over stretch yourselves, are kids on the horizon? what would this do to your income? If you keep your old house while doing up another dont forget you will need to pay the additional 3% SDLT, on £450,000 that will be £26k, you can claim the 3% back when you sell your own house.

Could you wait a few years and save as much as possible, the housing market is unlikely to rocket away and you would be in a much better financial position.. Also remember rates are likely to raise over the coming years.

AdrianC

Yes, you can pay the remainder of your existing mortgage off, and save for a new deposit. 5% deposit will be £22,500. 10% deposit will give you much better interest rates, £45,000.

Don't forget the +3% SDLT that you'll need to pay - £13,500 on top of the £12,500 that you'll be paying on a £450k house purchase - but you will get that extra back if you sell the first property within three years of the additional purchase.

jasonagnew

Thank you, both for the replies.

I agree I need to speak to a mortgage broker and find out what we can afford as it may be a lot lower. We'd love to live in the countryside but it seems to be at a premium in the North East of England. Our plan was to do this as our final house, try to skip getting in between house. We do want kids, our plan was to get move out of the way so about 2 years before trying.

I never thought about SDLT, probably a question for a mortgage broker but no harm in asking. I bought the current house before I met my wife, and have been the only one paying the mortgage. Would she receive relief on SDLT? or would this be invalid due to us buying a second home?

From both your response it sounds like this approach would only make sense if we also had a reasonable deposit saved up as there would be no real disadvantage. I'm just curious if there's a way to use my current situation to our advantage as I've been very fortunate to get this stage.

Maybe buying a rundown house that requires a lot of work, so from an auction where the overall price of the property would be lower allowing us to provide a reasonable deposit.

Hopefully, I'm making sense

eddddy

jasonagnew wrote: »

Maybe buying a rundown house that requires a lot of work, so from an auction where the overall price of the property would be lower allowing us to provide a reasonable deposit.

Many houses sold at auction won't be mortgagable (that's often the main reason they're in an auction).

And even if they are mortgageable, it's very difficult to arrange a mortgage on an conventionally auctioned property.

If you want to go down that route, it would be far better to take out a mortgage on your current house - and then buy at auction for cash.

AdrianC

jasonagnew wrote: »

I never thought about SDLT, probably a question for a mortgage broker but no harm in asking. I bought the current house before I met my wife, and have been the only one paying the mortgage. Would she receive relief on SDLT? or would this be invalid due to us buying a second home?

As a married couple, you are treated as one unit for SDLT. You both jointly own the current place, and you will both jointly own the additional one.

Maybe buying a rundown house that requires a lot of work, so from an auction where the overall price of the property would be lower allowing us to provide a reasonable deposit.

It's a good way to end up with the place you really want - and it's one that's eminently achievable for you - but it's unlikely to be a money-maker, simply because the auction mist (with a large chunk of daytime TV) blinds people to the realities of the cost and time implications of a big project.

jasonagnew

Really appreciate all the replies. Been super helpful.

I guess the three routes we could take are:

1) Stay & Save
So stick with our current place for a good couple more years and save a big deposit before buying our next place. This makes sense although I would say we're both a bit fed up not having a garden and living on a main road so close to the town center which is always so busy and noisy - used to love how close everything was but priorities change.

2) Move & Buy somewhere not so expensive
Buy somewhere in the local area but not in the countryside that's around £200,000 which is in a quiet place with a decent garden. That way when we do sell the current place we would be left with very little to pay off. Then we could stay there for 5 years saving up for a bigger move.

3) Try an auction
Get a place at auction, possibly buying it in cash by taking equity from the current house along with some savings. Then taking our time to do it up, but with the understanding, it may not be worth what you put into it but could give us the flexibility we need.

hazyjo

Sounds like these choices are to avoid chains. Why? I had 6, 7 or 8 or 7 (I forget) links to my last chain and it was quicker than ones with just 2.


Can't you just find a house to buy, sell yours at the same time, and move in?


Jx

jasonagnew

Thanks for your reply.

My answer to that would be inexperience on my part. From what I've heard from people, being part of a chain can be a stressful experience. In fact, I don't even know how the process really works. I guess that lack of knowledge makes it seem daunting.

If you don't mind explaining the process. I'm assuming I put mine on the market. Find out from a mortgage broker what I can afford based on estimate sale price. Then start looking for a property. If I find one I want before getting an offer on my house than they may choose to accept it and wait for me to sell mine or reject if they want a quick sale. If on the other hand, someone puts an offer on my house before I've found a new property I can accept but explain it may be a while as I haven't found anywhere?