Trying to understand moving up the property ladder, looks like I made a mistake in the first place

user1977

1122abc said:

House_owner said:

You sell your house for 600k, you pay back the mortgage of 480k, you are left with 120K. 
Take away from that the estate agent fees for selling, the solicitors fees for selling and buying and the likely stamp duty on the next house and that is how much you will have available as a deposit on your next house.

Sorry I’m a little confused. I think that 120k will not be available to me as I will need a larger mortgage?

Why do you think it will be "not available" to you? Where do you think it goes?

hazyjo

1122abc said:

House_owner said:

You sell your house for 600k, you pay back the mortgage of 480k, you are left with 120K. 
Take away from that the estate agent fees for selling, the solicitors fees for selling and buying and the likely stamp duty on the next house and that is how much you will have available as a deposit on your next house.

Sorry I’m a little confused. I think that 120k will not be available to me as I will need a larger mortgage?

I'll try and explain really simply.

Figures used as an example only.

- Buy a house for £600k
- £100k put down as a deposit from savings
- Mortgage for £500k

You want to move again... so this happens:

- Sell your house - now worth £700k
- Mortgage gets paid off in full to the bank (now £450k as some of it has been paid off)
- That leaves a remaining balance of £250k - that is your profit ('equity')
- Use that £250k as a deposit for next house
- Find the balance between that and the purchase price - with a mortgage, and/or use other savings

This usually happens simultaneously, although some sell then buy later. And I've not accounted for stamp duty, fees, charges, etc - that'll all be £20k probably!

Sarah1Mitty2

1122abc said:

Is my understanding correct?

Purchased property for 580k in 2021
Current mortgage is £480k
Imagining it sells for 600k (optimistic thinking)
I get 20k profit

I want to buy a property that is max 700k
I need a deposit of 10% - 70k
Plus stamp duty of £22.5k!!!

So I need to raise up to 92.5k

I could get a mortgage of 630k (4.2x income of 150k) so I’ll have to give a 10% deposit 

Is this how it’ll work?

I’m not sure what I’ve benefited from getting on the property ladder in the first place since my initial deposit was 87k. I should have just  continued saving, bought my “forever” home in the first place and saved on the stamp duty and hassle of a chain. 

I honestly can`t see you getting the 580k back now, you bought right at the peak of the market it looks like, can you stay in the house for a few years? "Property Ladder" can`t really be used now since rates started going up. I would avoid any more borrowing TBH.

Sarah1Mitty2

hazyjo said:

1122abc said:

House_owner said:

You sell your house for 600k, you pay back the mortgage of 480k, you are left with 120K. 
Take away from that the estate agent fees for selling, the solicitors fees for selling and buying and the likely stamp duty on the next house and that is how much you will have available as a deposit on your next house.

Sorry I’m a little confused. I think that 120k will not be available to me as I will need a larger mortgage?

I'll try and explain really simply.

Figures used as an example only.

- Buy a house for £600k
- £100k put down as a deposit from savings
- Mortgage for £500k

You want to move again... so this happens:

- Sell your house - now worth £700k
- Mortgage gets paid off in full to the bank (now £450k as some of it has been paid off)
- That leaves a remaining balance of £250k - that is your profit ('equity')
- Use that £250k as a deposit for next house
- Find the balance between that and the purchase price - with a mortgage, and/or use other savings

This usually happens simultaneously, although some sell then buy later. And I've not accounted for stamp duty, fees, charges, etc - that'll all be £20k probably!

They bought for 580k in 2021, I will stick my neck out and say that selling for 700k is not going to happen.