how much can I afford.... ?

tallmandat

Hi Guys
I'm trying to get my head around the maths, if someone can help shed some light I would appreciate. Currently we live in a 2bed house, bought back in 2014 for £235k, had a little inheritance so just needed £90k mortgage to top up on inheritance to buy my home for £235k. 
The kids share a room, boy is 9 and girl is 7, and we're thinking of moving to a larger 3bed home, as oppose to splitting their existing room. 
So at the moment, there's £80k left to pay on the existing mortgage and I just checked and I'm a whopping 2.89% fixed until februray 2021! 
I've seen houses on rightmove in my area, range from 2bed terraced with drive, for £325k go upto £375k for a 2bed end of terrace with drive. My home is semi detached, with driveway, extension for dining room and extension for a large family bathroom, about size of large single room. The state of the kitchen is what I've seen on Rightmove say "in need of modernisation" everything works, it's just a bit 90's decoration. The bathrrom I recently had done 2 years ago so that's modern. What I'd like to know, is how much can I afford? based on below, can anyone let me know if I am near or way off the mark:
1. Sell house for £350k
deduct £80k to pay off my mortgage then I have £270k "in my pocket". I don't have much savings so let's say kiss goodbye to £25k in stamp duty, solitictors, estate agency fees, moving, etc. (I don't think we'll be moving until next summer) So then that leaves me with £245k in my pocket. 
2. we then see a house we like for £400k. So that means we need to borrow  £155k from a bank. 
3. Based on the many mortgage calculators out there, a £155k mortgage on 2% interest rate over 25 years, would cost me around £660 a month which I can most certainly afford. 
So based on above, if points 1-3 are correct - I guess the real crux of moving forward, is to find out a realistic selling price for my home?  

foxy-stoat

I would agree with everything you have said.  I would look at similar properties to your for sale and pitch it around that, get your 3 estate agents round a month or 2 before you want to go on the market.

With a LTV of just over 60% you shouldn't have an issue in securing a mortgage assuming your credit file is nice and clean.

tallmandat

Hi Foxy, thank you kindly for your reassurance, yes my credit history is good i think - based on my bank giving me a £7k credit card (I only intend to use in emergency e.g. flights to where Parents live in case of who knows what) and I recently applied for a 0% interest MBNA credit card for 12 months for which I was pre-approved - I've never been pre-approved for anything before, so this was a confidence boost. 

onthemend88

Don't forget, there has been a reduction in stamp duty up to the 31st March 2021 so I would say that's something to consider when crunching your numbers if you are considering doing this soon. 

getmore4less

I would work back from what you think you can afford per month, and a reasonable term.
if £660pm is comfortable, could you go to £700pm or £750pm+,  whats the income?

Your current mortgage is £80k @ 2.89% what is that costing a month(~£400pm) and how much a month do you save?
That gives you an idea of what you could afford, remember a bigger house will be more expensive to tun and probably higher council tax.

Having a bit more in the pot might open up options that avoids another move later.

ON rightmove you can look at for sale and SSTC and then look at actual sold prices for similar properties.

You can get a fairly good idea of how much competition there is from the numbers and what sort of prices people are getting.

You can do the same for your target next property 

getmore4less

pretty much a duplicate/follow on of the thread 2.5 weeks ago
https://forums.moneysavingexpert.com/discussion/6161258/shall-i-borrow-more-to-upgrade-home-or-rent-out-home-and-have-2-properties/p1

tallmandat

onthemend88 said:

Don't forget, there has been a reduction in stamp duty up to the 31st March 2021 so I would say that's something to consider when crunching your numbers if you are considering doing this soon. 

Yeh considered that but we're not rushing and intend to do it next summer thx

tallmandat

getmore4less said:

I would work back from what you think you can afford per month, and a reasonable term.
if £660pm is comfortable, could you go to £700pm or £750pm+,  whats the income?

Your current mortgage is £80k @ 2.89% what is that costing a month(~£400pm) and how much a month do you save?
That gives you an idea of what you could afford, remember a bigger house will be more expensive to tun and probably higher council tax.

Having a bit more in the pot might open up options that avoids another move later.

ON rightmove you can look at for sale and SSTC and then look at actual sold prices for similar properties.

You can get a fairly good idea of how much competition there is from the numbers and what sort of prices people are getting.

You can do the same for your target next property 

Hi there, thanks for response yes currently paying £385 per month, I have loans and credit cards which I'm coming to the end of very soon, so then in theory I could spend up to £800 a month but would prefer £700, as taking into account running costs and council tax will be higher. 
I also checked on actual sale prices of both houses on my road and target areas of future homes, nice one. Definitely don't want to move again this will be our final move home.

clairebeth

Have a look and see what the early repayment charge is on your mortgage (will be on your statement). Take that into account when thinking about when you move, because although you'll save on that by holding off, if you move before next March you'll save ?£12k on stamp duty. 

Get your place valued, ask and then you'll know where you stand a bit more.