Process and affordability after selling first home

nabznab1

Hi all,

I just wanted to get an idea and some clarification about selling my first home. Apologies if what I’m asking is obvious, but I wanted to know how this process will work when I do plan to buy my second home. 

I purchased my first flat back in 2019 for 200K. I took a mortgage out for 170K. By the time I sell, I should have about 155K left to pay off the mortgage. 

Household income is 50K + personal savings of 40K. 

What I wanted to know is if my flat sells for 240K, what property can I afford to buy? Can someone please show me a breakdown of the calculation? Am I wrong to assume my equity will also include 15K? (170-155). 

I know there are many other variables undertaken, but based on the info above, can someone provide a rough estimate?

Thanks in advance! 

SusieT

240-155-agents-solicitor(-early repayment?) = amount you will get. 
Amount you will get is now the deposit for house 2, but you will also need to pay survey, solicitor (if you do not buy and sell at the same time) and stamp duty. A mortgage will make up the rest, that could be say 3 to 4.5 times your salary, depending on affordability etc. 

ReadingTim

Not quite.  Your equity is the sale price of your current flat, less the outstanding mortage, sale costs etc.  Add to that sum your savings of £40k, and you have your deposit, plus whatever multiple of salary to choose to borrow, which will give you a ballpark purchase price of the new property (but don't forget stamp duty and other purchase costs!).  

nabznab1

ReadingTim said:

Not quite.  Your equity is the sale price of your current flat, less the outstanding mortage, sale costs etc.  Add to that sum your savings of £40k, and you have your deposit, plus whatever multiple of salary to choose to borrow, which will give you a ballpark purchase price of the new property (but don't forget stamp duty and other purchase costs!).  

So wait what can contribute towards my deposit? I’m guessing 40k personal saving plus which option:
-170-155K + 240-200
-240-200K

mi-key

Its easier to think of it as two seperate transactions.

Selling your flat - £240K sale price, minus £155K outstanding mortgage gives you 85K left over.

You can then add your savings to this, which gives you £125K deposit towards your next purchase.

With £50K income you should be able to borrow 4x your salary, so your new mortgage would be for £200K

This gives you a maximum  for a new property of £325K

( Note this doesnt include buying and selling fees etc.. so you should knock off around £5K - £10K for that, but should give you a rough idea of the sort of prices you can look at for properties ) 

nabznab1

Brilliant. Thank you.