Upsizing from a one bed flat to a house

savvygirl1986

I would appreciate some advice please.
 
2 years ago my fiancee and I purchased a 1 bed flat for £125,000. Our mortgage was £118,000. We have since made some improvements and the estate agent has valued it at around £130,000.

We have just remortgaged @ 2.26% for two years and we can port our mortgage. We will save £81 per month when our new deal kicks in and we will pay our £499.24 mortgage payment + £81 per month that we would save as a minimum but we are looking to pay extra on top (up to the 10% maximum per year) once our credit cards are all paid off in December. So we anticipate paying an additional £500 on top every month. Our outstanding mortgage is  now £113,000 so we have a small amount of equity. 

We have savings of £9,000 at the moment. I've got £5,000 of this in a savings account called 'maternity' to support us when we have a baby while I am on maternity but I am topping up this pot monthly. 

Within the next 12 months all being well we will start a family. Our flat is jus about livable with a baby for a short time as it is a good size but within the next 18 months we would like to up size to a 2-3 bed house. 

I've had a look today and depending on location in our area we would be paying anywhere from £220,000- £250,000 for a house. We are happy to purchase properties that need some work but not a complete overhaul. 

My partner's salary has increased from £16k per year to £18k per year and my salary has increased from £24k to £35k since we took out our first mortgage. 

I'm struggling to get my head around how upsizing works in terms of mortgage. 

1. Do we need a 10% deposit as if we were starting from scratch? 
2. What fees are there as a seller to consider?  Any ideas of the costs based on properties at the value we are selling at
3. What fees are there as a buyer to consider? Any ideas of costs based on properties at the value we are looking at? 
4. Do we need additional savings or is it worth trying to increase the equity as well? 
5. Anything else that we need to consider? 
I'm a realist so would appreciate any advice you can give. I want to know what our gap is between where we are now and where we want to be. So than we can focus our money into the right place for the next 18 months. 

Thank you in advance. 

getmore4less

Need to be looking at 85% LTV these days  there might be more 90% deals in a year

For a £250k purchase that's £37.5k deposit and mortgage of £212.500  a 4x joint salary so in range but maternity may impact that.

current mortgage  
£113k  2.26% £499pm is around 24y 7m full term
End of 2021 with + £81(15m) + £500(12m) mortgage will be around £101,500, in 18 months time around £99k

if you can still get £130k for your place you are going to have around £30k equity 

New mortgage will be £800-£1k region depending on amount rate and term

Looking pretty tight for a upsize in 18months if you need 85% LTV 
If you can find £1,500pm the mortgage will be down to £92,500,  which will be much closer what you need.


Is all the debt on 0%? 
if not why have you borrowed to have savings?

NameUnavailable

savvygirl1986 said:

1. Do we need a 10% deposit as if we were starting from scratch? 
2. What fees are there as a seller to consider?  Any ideas of the costs based on properties at the value we are selling at
3. What fees are there as a buyer to consider? Any ideas of costs based on properties at the value we are looking at? 
4. Do we need additional savings or is it worth trying to increase the equity as well? 
5. Anything else that we need to consider? 
I'm a realist so would appreciate any advice you can give. I want to know what our gap is between where we are now and where we want to be. So than we can focus our money into the right place for the next 18 months. 

Thank you in advance. 

1. Yes you will still need a deposit of at least 10% depending on your lenders criteria - ideally more

2. You will have to pay fees to sell the property (fixed fee type agent or % of your sale price) and the legal fees. 

3. Legal fees and stamp duty unless you buy during the stamp duty holiday.

4. You'll need money to cover other costs i.e. removal firm, new furniture potentially, other incidental costs moving to a new home.

5. You will need to have an offer on your flat before most agents will allow you to view properties to buy. Flats are very difficult to sell at present due to market conditions and issues with EWS1 requirements and looming fire regulations (depending what kind of flat you have). You may find that you can't sell it or can't get the price you expect.

Aranyani

Your timescale is off.  If you plan to start trying for a baby in 12 months, you might not even be pregnant for another 6-12 months after that, then the pregnancy is 9 months, then the baby will be with you in your bedroom for at least the first year. 

You have longer than you think before you need that second bedroom.

savvygirl1986

getmore4less said:

Need to be looking at 85% LTV these days  there might be more 90% deals in a year

For a £250k purchase that's £37.5k deposit and mortgage of £212.500  a 4x joint salary so in range but maternity may impact that.

current mortgage  
£113k  2.26% £499pm is around 24y 7m full term
End of 2021 with + £81(15m) + £500(12m) mortgage will be around £101,500, in 18 months time around £99k

if you can still get £130k for your place you are going to have around £30k equity 

New mortgage will be £800-£1k region depending on amount rate and term

Looking pretty tight for a upsize in 18months if you need 85% LTV 
If you can find £1,500pm the mortgage will be down to £92,500,  which will be much closer what you need.


Is all the debt on 0%? 
if not why have you borrowed to have savings?

Really appreciate the breakdown as need to understand whether it is feasible and how much we need to be saving.

Yes all debt is on 0% and has been for the last 2 years since we moved in. We made the decision to build our savings as everything we had went into reducing our credit card debt significantly to be able to get a mortgage. I wanted to make sure were financially secure when I'm off for maternity to pay all of our bills without struggling. I can earn anything between £500 and £1,000 in overtime every month (not capped but dependent on what overtime I am prepared to work) and this has been consistent for the last to years. I use the zero accounting method I think it's called. Once all of my bills are paid I split what's left between my paying extra off my credit cards and building up our savings. 

Definitely some numbers so think about and whether 18 months is feasible or we need to sit tight for a bit longer. Thank you 

savvygirl1986

NameUnavailable said:

savvygirl1986 said:

1. Do we need a 10% deposit as if we were starting from scratch? 
2. What fees are there as a seller to consider?  Any ideas of the costs based on properties at the value we are selling at
3. What fees are there as a buyer to consider? Any ideas of costs based on properties at the value we are looking at? 
4. Do we need additional savings or is it worth trying to increase the equity as well? 
5. Anything else that we need to consider? 
I'm a realist so would appreciate any advice you can give. I want to know what our gap is between where we are now and where we want to be. So than we can focus our money into the right place for the next 18 months. 

Thank you in advance. 

1. Yes you will still need a deposit of at least 10% depending on your lenders criteria - ideally more

2. You will have to pay fees to sell the property (fixed fee type agent or % of your sale price) and the legal fees. 

3. Legal fees and stamp duty unless you buy during the stamp duty holiday.

4. You'll need money to cover other costs i.e. removal firm, new furniture potentially, other incidental costs moving to a new home.

5. You will need to have an offer on your flat before most agents will allow you to view properties to buy. Flats are very difficult to sell at present due to market conditions and issues with EWS1 requirements and looming fire regulations (depending what kind of flat you have). You may find that you can't sell it or can't get the price you expect.

1. That was along the lines I was thinking but like you say depends on criteria and what deals are around at the time and as getmore4less said 85% LTV is what it is at the moment not sure what the market will look like in 18 months time. 
2. That makes sense
3. Ok
4. We will do what we did last time and move everything ourselves to save on that cost. It took a few car trips but saved us some money
5. Okay that's good to know. Our flat is in a prime location right in town centre and a 5 minute walk from the beach. It is very well built 1930s so no issue with cladding that you would get with a tower block

This has been really useful and gives us some figures to work with 

carefullycautious

I would try to get the house before pregnancy occurs why the rush?

AdrianC

savvygirl1986 said:

2 years ago my fiancee and I purchased a 1 bed flat ... the estate agent has valued it at around £130,000.
...
Our outstanding mortgage is  now £113,000 so we have a small amount of equity. 

We have savings of £9,000 at the moment.

So you have about £17k equity plus £9k savings = £26k total equity.

I've got £5,000 of this in a savings account called 'maternity'

Are you including this in your £9k? So if you exclude is, that's only £21k equity.

to support us when we have a baby while I am on maternity but I am topping up this pot monthly. 

Within the next 12 months all being well we will start a family.

I think you're going to need to prioritise and choose which of these two is more important to you.

I've had a look today and depending on location in our area we would be paying anywhere from £220,000- £250,000 for a house. ... My partner's salary has increased from £16k per year to £18k per year and my salary has increased from £24k to £35k since we took out our first mortgage.

So your OH is on minimum wage, and you're considering maternity leave...? Can they take parental leave, and you go back to work?

Between you, £53k income. 4.5x joint income is £238,500.

I'm struggling to get my head around how upsizing works in terms of mortgage. 

1. Do we need a 10% deposit as if we were starting from scratch?

You can borrow at most 85% (currently).

For a £250k property, that's £212,500, so you will need £37,500 equity.
For a £220k property, that's £187,500, so you will need £32,500 equity.
You currently have £26k, £21k if you want to keep your £5k maternity pot separate. You need more equity.

The security deposit on exchange simply gets passed up the chain.

2. What fees are there as a seller to consider?  Any ideas of the costs based on properties at the value we are selling at

Yes, there's legal fees - they're not as much for sale as for purchase. Work on a grand for the moment.
EA fees - call it 1.25%, so another grand and a half or a little more.
Then, of course, removals.

3. What fees are there as a buyer to consider? Any ideas of costs based on properties at the value we are looking at?

Let's wet-finger a grand and a half.
SDLT is currently £0 until the end of March, but may not be after that - it would normally be £2,500 on a £250k purchase.

4. Do we need additional savings or is it worth trying to increase the equity as well?

The more equity you have, the better.

Whether that's in cash or because you pay your mortgage down further makes no difference. It simply means you need to borrow less. Obviously, paying your existing mortgage down reduces the interest you pay.

Reduce your outgoings as much as possible - no frippery spending... No credit obligations, such as car finance or big mobile contracts.

I assume you don't have any other debts after the cards are paid...?

The faster you can save (whether cash or pay down your mortgage), the better - and it'll help you get into good habits when your mortgage payments are higher and you're thinking of bringing an expensive mouth into the world...

5. Anything else that we need to consider?

Increase income! That doesn't appear to be your cap on purchase price - but given your plans for a family, it can only help you. Especially if your partner moves up from minimum wage.

I'm a realist so would appreciate any advice you can give. I want to know what our gap is between where we are now and where we want to be. So than we can focus our money into the right place for the next 18 months.

Basically, you're on the right road, but just need to a bit further down it.

You also need to consider how saleable your flat is. You're absolutely sure there's no EWS1 post-Grenfell cladding issues in your block? Where are you? Are people trying to move out of urban flats in your area, due to a Covid dislike of commuting and desire for space?

dimbo61

Well done so far 
You have bought your first home and now have most of the furniture needed when you do move to a bigger property.
Look at eBay Gumtree and local Facebook market place for any other bits you might want in the next home.
Your clearing your debts while also saving like mad Excellent 
You can hire a van or a van and a man for the move but hopefully you have a brother or 2, uncle/dad to help you move.
You need to live the MSE way of life with everything.
Cheap smartphone ( I have a Moto G7) and cheap contract for less than £10 a month.
No Sky but maybe Netflix 
Cheap joint life assurance before any baby comes along !
Cooking at home, shopping at B&M, Aldi, Lidl, Poundland etc.
Looking at every bill you have.
Cancel the gym and go walking in the park.
Visit friends for meals and drinks and forget the pub/wine bar.
Camping/Caravan holiday in UK or France/Holland rather than flying to USA/Dubai.
Pay down the mortgage as much as possible but clear the credit cards as well.
Build up savings so you have the 3/6/9 months of income as emergency savings.
Lastly please consider an Offset mortgage so you can build up the baby fund while also saving interest.

savvygirl1986

carefullycautious said:

I would try to get the house before pregnancy occurs why the rush?

I'm 35 next year and not getting any younger and we are not in a position to upsize to a house now as per the posts above we have nowhere near enough deposit to upsize. It could take a year or even longer to get pregnant due to my age. 

savvygirl1986

AdrianC said:

savvygirl1986 said:

2 years ago my fiancee and I purchased a 1 bed flat ... the estate agent has valued it at around £130,000.
...
Our outstanding mortgage is  now £113,000 so we have a small amount of equity. 

We have savings of £9,000 at the moment.

So you have about £17k equity plus £9k savings = £26k total equity.

I've got £5,000 of this in a savings account called 'maternity'

Are you including this in your £9k? So if you exclude is, that's only £21k equity.

to support us when we have a baby while I am on maternity but I am topping up this pot monthly. 

Within the next 12 months all being well we will start a family.

I think you're going to need to prioritise and choose which of these two is more important to you.

I've had a look today and depending on location in our area we would be paying anywhere from £220,000- £250,000 for a house. ... My partner's salary has increased from £16k per year to £18k per year and my salary has increased from £24k to £35k since we took out our first mortgage.

So your OH is on minimum wage, and you're considering maternity leave...? Can they take parental leave, and you go back to work?

Between you, £53k income. 4.5x joint income is £238,500.

I'm struggling to get my head around how upsizing works in terms of mortgage. 

1. Do we need a 10% deposit as if we were starting from scratch?

You can borrow at most 85% (currently).

For a £250k property, that's £212,500, so you will need £37,500 equity.
For a £220k property, that's £187,500, so you will need £32,500 equity.
You currently have £26k, £21k if you want to keep your £5k maternity pot separate. You need more equity.

The security deposit on exchange simply gets passed up the chain.

2. What fees are there as a seller to consider?  Any ideas of the costs based on properties at the value we are selling at

Yes, there's legal fees - they're not as much for sale as for purchase. Work on a grand for the moment.
EA fees - call it 1.25%, so another grand and a half or a little more.
Then, of course, removals.

3. What fees are there as a buyer to consider? Any ideas of costs based on properties at the value we are looking at?

Let's wet-finger a grand and a half.
SDLT is currently £0 until the end of March, but may not be after that - it would normally be £2,500 on a £250k purchase.

4. Do we need additional savings or is it worth trying to increase the equity as well?

The more equity you have, the better.

Whether that's in cash or because you pay your mortgage down further makes no difference. It simply means you need to borrow less. Obviously, paying your existing mortgage down reduces the interest you pay.

Reduce your outgoings as much as possible - no frippery spending... No credit obligations, such as car finance or big mobile contracts.

I assume you don't have any other debts after the cards are paid...?

The faster you can save (whether cash or pay down your mortgage), the better - and it'll help you get into good habits when your mortgage payments are higher and you're thinking of bringing an expensive mouth into the world...

5. Anything else that we need to consider?

Increase income! That doesn't appear to be your cap on purchase price - but given your plans for a family, it can only help you. Especially if your partner moves up from minimum wage.

I'm a realist so would appreciate any advice you can give. I want to know what our gap is between where we are now and where we want to be. So than we can focus our money into the right place for the next 18 months.

Basically, you're on the right road, but just need to a bit further down it.

You also need to consider how saleable your flat is. You're absolutely sure there's no EWS1 post-Grenfell cladding issues in your block? Where are you? Are people trying to move out of urban flats in your area, due to a Covid dislike of commuting and desire for space?

The £5k is separate aiming to have this up to £6.5/£7k by the time we have a baby minimum. Everything else that's leftover will go towards clearing my credit cards off and building our deposit. So yes you're right £21k equity.

Yes I am considering maternity leave even though my partner is on a lower income than me as I have a very stressful job and work long hours so I don't want to go back any sooner than I need to. I am building my maternity pot myself as I'm on the higher wage and have more disposable income to bridge the gap.  He has just this month got a second job so he can work more hours as and when needed to top up his income.

No we have no other debts once the cards are cleared.

Okay that is my aim once the cards are cleared top up my maternity pot and pay down as much as the mortgage as I can every month (up to the 10% allowed per year) to reduce what we owe and increase our equity but now i have more of an idea of what size deposit we will need.

Great to hear we are on the right track but have a better idea of time lines now.

Yes 100% no grenfell type issues to be concerned about. We live in the centre of town and there is currently a lot of demand for these types of properties they don't stay on the market for very long in this block. Obviously none of us have a crystal ball but there has been nothing to indicate we will have any problems selling in the future.