Buying a more expensive home and confused on options

thakil

Hi, I am finding myself a bit confused about what I can and can't do when buying a new home. Apologies if this is a bit basic but all the guides I find don't really spell things out.

We have a house worth around 270, have about 10 or so in savings, and a mortgage of about 170. When we bought our current house we did so with a deposit of 10%.

We would like to buy a more expensive house, so will need to borrow more to do so. We can afford the mortgage repayments, but I wanted to clarify some things.

1) when looking at online affordability calculators, despite indicating that I want to borrow more the numbers always seem to include the debt we already have, unless they are very generous
2) How much can we borrow? My assumption is that it will be based on the equity of the new house, based on our current debt, but I am less sure on this. So for example if we borrow up to 20% equity that will be our current debt plus the new loan. Is this right? 
3) can we spend some of this loan towards paying things like stamp duty and legal fees?
4) Finally for this additional loan, when it comes to the interest rate available I assume this will be based on our overall debt, rather than that of the additional loan on it's own?

Apologies if these questions are confused or obvious, but I find myself a bit baffled by it all!

donutandbeer

The maximum you can borrow is usually 4 to 5 times your annual income. I know in some countries they look more at how much deposit you have and what % of the total value they are willing to lend you, but in the UK LTV rate is only relevant to your interest rate.

FlorayG

You can borrow what you can afford to repay, so that's based on your income and nothing to do with your equity; but of course, the more equity you have the less you need to borrow so that may be where you are getting confused?
Once you have the money you can spend it on other things than the actual house - you just borrow more to pay for the 'extras'

bobster2

You have £100k equity in your current house + £10k in savings.

From this £110k you will need to pay the deposit for the new house, estate agents fees, solicitor and moving costs etc. Plus costs of selling your current house.

Affordability calculations will be based on the new debt and repayments associated with the new property.

dinosaur66

you have equity £100k

savings of 10K

mortgage 170k

you will have to remortgage 

how much extra they give you depends on your income

stamp duty is meant to come out of your own money but you coud borrow  more than you need on the mortgage and so keep your 10k savings

interest rate  will be based on what mortgage you select not the ammount of money

pramsay13

If you sell your house and pay off your mortgage you will have £100k left and your £10k in savings so you will have £110k to go towards your new house. 
The current debt will be included in the calculations until such time as you actually sell the house. This is to stop people being stuck with 2 houses when they can only afford to pay for 1. 

gwynlas

Whilst it is dependent on affordability you can retain some of the equity you have accrued in your current home.

You would probably benefit from giving as large a  deposit as possible to lower interest rates but you could retain money to carry out improvements which will enhance your next property.

_Penny_Dreadful

thakil said:

Hi, I am finding myself a bit confused about what I can and can't do when buying a new home. Apologies if this is a bit basic but all the guides I find don't really spell things out.

We have a house worth around 270, have about 10 or so in savings, and a mortgage of about 170. When we bought our current house we did so with a deposit of 10%.

We would like to buy a more expensive house, so will need to borrow more to do so. We can afford the mortgage repayments, but I wanted to clarify some things.

1) when looking at online affordability calculators, despite indicating that I want to borrow more the numbers always seem to include the debt we already have, unless they are very generous
2) How much can we borrow? My assumption is that it will be based on the equity of the new house, based on our current debt, but I am less sure on this. So for example if we borrow up to 20% equity that will be our current debt plus the new loan. Is this right? 
3) can we spend some of this loan towards paying things like stamp duty and legal fees?
4) Finally for this additional loan, when it comes to the interest rate available I assume this will be based on our overall debt, rather than that of the additional loan on it's own?

Apologies if these questions are confused or obvious, but I find myself a bit baffled by it all!

I don’t quite follow question 2. You have £100k equity in your current home and £10k in savings. What is this 20% equity you are looking to borrow and from where as it seems you want to borrow this in addition to the mortgage for your new home?