Upsizing

AHIM · 3 October 2017 at 10:12AM

I purchased a property in 2009 for £200000 and am looking to upsize to a property worth about £550000. I have a number of questions regarding this which I hope you can help me with:

A) The price of a nearby flat of exactly the same size and shape recently sold for £325000. Another flat of exactly the same size and shape went for £295000 in January 2016. Would it be reasonable to conclude from this that my flat would have increased to at least £325000? Also, I have paid £130000 into the flat. As such, could I conclude that the deposit for a new property would be £125000 [profit from flat] + £130000 [equity] = £255000?

I don't have too much cash in hand at the moment (only £5000) so presumably I would need to save up for stamp duty (or could I use the profit from my existing property for this)?

C) My salary is currently about £57000. I am guessing that I would be allowed to borrow about 4 times my salary from a bank. That would mean about £228000. Is this a reasonable assumption?

D) Other expenses include solicitors fees, estate agents etc.... How much does this typically cost?

E) I am 39 years old. Can I still get a mortgage as I have read in a few places that the payment for mortgages should be completed before the age of 65. Is this correct?

F) Are there any other expenses that I have missed?

Thank you

Scotbot · 3 October 2017 at 10:21AM

Firstly get 3 valuations from Estate agents, it's free. Go with the lowest valuation for your budget. This will also tell you how much their fees are,
Secondly get online quote from a solicitor for selling and buying. Again free. You can pay stamp duty out of the equity from your current flat whatever that is. Can't help with the mortgage question.
Other fees are survey costs.

hazyjo · 3 October 2017 at 10:31AM

A) Probably, presuming the lease length is similar and you're on a similar floor. If you're in a middle floor flat, it might not sell quite as easily. Also depends on location - some areas have increased, others static, some have dropped. The figures look right.

You can use the equity.

C) Try some calculators - impossible to predict without knowing your outgoings. 4x sounds roughly right. Shouldn't be too risky on a large-ish salary but not sure if the bank will see it like that.

D) I'm selling at £515k and buying at £430k. My buying costs are in the region of £20k (removals, EAs, survey, solicitors, stamp duty, etc).

E) I'm 47 and getting one, but mine is for 16 years. Some offer longer terms, but they're limited. If you can get one paid off by 64 (what some require), that gives you approx. 25 years still so you're fine.

F) Lots of smaller ones, but nothing major leaping out.

I've not done the maths with your figures, just answered questions.

hazyjo · 3 October 2017 at 10:32AM

Also, negotiate with EA fees. You shouldn't have to pay more than 1%. Get a good mortgage broker if you're not confident doing your own mortgage homework.

YBS have good calculators and mortgage products. Always come out good for me.

scottishblondie · 3 October 2017 at 10:44AM

Assuming that you do have equity of £255k (sale price less outstanding mortgage) and can borrow £228k, that gets you to £483k. This means you would have a shortfall of £67k on your desired purchase price of £550k. Realistically with very little cash to hand you'll need to subtract from your equity:

- Estate agent fees for sale (negotiable, usually a percentage of the sale price)
- Solicitor fees for sale
- Solicitor fees for purchase
- Survey and mortgage fees
- Moving costs
- Stamp duty (£17.5k on £550k purchase)

Which looks to put you very roughly at a shortfall of at £87k or more. I'm afraid to say that at this moment in time, upsizing to a property at that price point appears to be out of your reach.

saajan_12 · 3 October 2017 at 11:01AM

AHIM wrote: »

I purchased a property in 2009 for £200000 and am looking to upsize to a property worth about £550000. I have a number of questions regarding this which I hope you can help me with:

A) The price of a nearby flat of exactly the same size and shape recently sold for £325000. Another flat of exactly the same size and shape went for £295000 in January 2016. Would it be reasonable to conclude from this that my flat would have increased to at least £325000? - No, two properties are not representative as they could be skewed by specific circumstances. Better get a valuation from (a few) EAs (and haircut this as they will be optimistic). Also, look at the average SOLD price (not for sale) of several properties in the area / same no. bedrooms. Also, I have paid £130000 into the flat. - Was this 13k interest or capital repayment? Irrelevant though. As such, could I conclude that the deposit for a new property would be £125000 [profit from flat] + £130000 [equity] = £255000?
Equity = Current property value - Mortgage balance
- Current value from average of EA valuations / several sold prices
- Mortgage balance from the latest statement you recd or ask your current lender.

I don't have too much cash in hand at the moment (only £5000) so presumably I would need to save up for stamp duty (or could I use the profit from my existing property for this)?
Before completion you're likely to need to pay:
- solicitors & searches fees
- mortgage broker fees
- survey costs
- mortgage application fees
- 10% deposit on exchange(you can pass on 10% deposit from your sale and either top up the rest or negotiate a lower % on your purchase)

The rest can be paid on / after completion from your sale proceeds and any mortgage you get on the new property, e.g.
- pay off mortgage balance
- Mortgage Early Repayment Charges (if any)
- stamp duty
- balance of solicitors fees
- EA fees
- balance of purchase price (usually 90%)

C) My salary is currently about £57000. I am guessing that I would be allowed to borrow about 4 times my salary from a bank. That would mean about £228000. Is this a reasonable assumption?- broadly reasonable but get an AIP from a lender to get a better idea.

D) Other expenses include solicitors fees, estate agents etc.... How much does this typically cost?
Solicitors & searches £500-£2000 depending on area / which searches you do
EAs typically 1-2% of sale price

E) I am 39 years old. Can I still get a mortgage as I have read in a few places that the payment for mortgages should be completed before the age of 65. Is this correct? - You'd be fine with a 25year mortgage

F) Are there any other expenses that I have missed?listed above

Thank you

Get more solid numbers by
- Current property value: Get 2-3 EA valuations and look at a larger sample of sold prices in the area

- Mortgage balance: find a statement from your lender showing the balance left to pay off and any ERCs

- Equity: Current property value - Mortgage balance

- New mortgage affordability: Get an AIP from a lender or speak to a mortgage broker

- New property budget = New mortgage affordability + currenty equity - costs

AHIM · 3 October 2017 at 11:50AM

All your responses have been very useful. Thank you very much.

- Based on your suggestions I will try and get valuations from EA's regarding my current property price.
- In terms of my equity, the last letter I have from my lender (from a few months back) states that I still owe 68K so my equity amount is a little over 132K.
- I will also try and get an Agreement in Principle to confirm my mortgage amount.
- It does seem however that 550K is outside of my price range for the time being. In fact 500K is outside of my price range. I typically save about 1.5K per month, so in my estimate it will take about 24 months to save another 36K which should get me to the 500K figure. That said, prices will probably increase between now and then so I might need to save more. Further, I will be 2 years older so might find it more difficult to get a mortgage for a 25 year term.

Thank yo once again

hazyjo · 3 October 2017 at 11:54AM

If you do sign up with an EA, you can also negotiate the tie-in period. I hate signing up for more than 8 weeks. My current one was 6, although it did take longer than that to sell. Some on here are ridiculous lengths like 20-odd or 30-odd weeks!

Is there nothing around your new budget that would be of interest? It'll be a big-ish jump from what you're selling - although if you're buying in a pricier area, I understand you may not get quite so much bang for your buck.

AdrianC · 3 October 2017 at 12:58PM

AHIM wrote: »

I purchased a property in 2009 for £200000 and am looking to upsize to a property worth about £550000. I have a number of questions regarding this which I hope you can help me with:

A) The price of a nearby flat of exactly the same size and shape recently sold for £325000. Another flat of exactly the same size and shape went for £295000 in January 2016. Would it be reasonable to conclude from this that my flat would have increased to at least £325000?

It may or may not be a reasonable assumption. Are they in very similar internal order?

Also, I have paid £130000 into the flat.

What do you mean by that?

As such, could I conclude that the deposit for a new property would be £125000 [profit from flat] + £130000 [equity] = £255000?

How much is your remaining mortgage? Subtract that from the sale price.
If you have a £70k mortgage, and the flat sells for £325k, then you have £255k equity. Before the costs of moving.

I don't have too much cash in hand at the moment (only £5000) so presumably I would need to save up for stamp duty (or could I use the profit from my existing property for this)?

Sure, but you're borrowing the money instead, and paying interest on it.

C) My salary is currently about £57000. I am guessing that I would be allowed to borrow about 4 times my salary from a bank. That would mean about £228000. Is this a reasonable assumption?

Perhaps, if your credit record supports it.

BTW - if you earn £57k, how come you only have £5k in savings? You will have roughly £3,400 per month after tax. Your current mortgage is going to be costing you a tiny fraction of that. What are you doing with the rest?

D) Other expenses include solicitors fees, estate agents etc.... How much does this typically cost?

How long's a piece of string. Call it 1.25% for the EA and £2,500+ for the other sale/buying fees. Round it up to £7k, and you're probably not far out.

E) I am 39 years old. Can I still get a mortgage as I have read in a few places that the payment for mortgages should be completed before the age of 65. Is this correct?

It depends. You'll only be 64 in 25 years time, and your state retirement age will be 68 anyway.

F) Are there any other expenses that I have missed?

Oh, probably a whole load. Removal costs, decorating the new place, new furniture, etc etc etc. You can spend as much as you want to spend.

AHIM · 3 October 2017 at 1:33PM

It may or may not be a reasonable assumption. Are they in very similar internal order?

More than likely as my property is in reasonable condition. Truth be told I think that EA's are probably the best option to verify this assumption.

“Also, I have paid £130000 into the flat."
”What do you mean by that?"

That's my approximate equity in the current property. So I have about 70K left to pay.

BTW - if you earn £57k, how come you only have £5k in savings? You will have roughly £3,400 per month after tax. Your current mortgage is going to be costing you a tiny fraction of that. What are you doing with the rest?

For the last few years I have been making regular over-payments on my mortgage, so I typically save about 5k every 3 months which I put into the mortgage.

Oh, probably a whole load. Removal costs, decorating the new place, new furniture, etc etc etc. You can spend as much as you want to spend.

In terms of decorating, new furniture etc... I am thinking that this can wait as it is not essential. I was focusing more on immediate essential costs relating to making the move.

Cheers

AHIM · 3 October 2017 at 1:35PM

Is there nothing around your new budget that would be of interest?

Possibly, but I would need to compromise either on the state of the property or the location (or both). I have a feeling I might need to go down this route.

Cheers

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Upsizing

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