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  • FIRST POST
    • wirralmatt
    • By wirralmatt 5th Feb 18, 2:38 PM
    • 5Posts
    • 3Thanks
    wirralmatt
    Affording my second home
    • #1
    • 5th Feb 18, 2:38 PM
    Affording my second home 5th Feb 18 at 2:38 PM
    Hi!

    My wife and I bought our first property together a little over 18 months ago. We have added some value to the property and I believe we have some equity in the property (by virtue of added value and the original deposit).

    We are now ready to move to our second property, and I am confused!! We could afford to increase our monthly payments on our mortgage, but the fees, survey and costs associated with moving (from our experience last time) are way beyond us at the moment.

    Could someone talk me through (in very simple terms) how the cashflow works - do I basically have to find the costs from somewhere else in advance of moving, or is there a way I can get the cash out of my current or new mortgage without incurring silly costs?

    Sorry if this all seems a little simplistic!

    Thanks

    Matt
Page 1
    • Cyclemonkey1
    • By Cyclemonkey1 5th Feb 18, 2:46 PM
    • 26 Posts
    • 33 Thanks
    Cyclemonkey1
    • #2
    • 5th Feb 18, 2:46 PM
    • #2
    • 5th Feb 18, 2:46 PM
    When you say second home do you mean selling your current one and buying a new one or buying an additional home?


    If it is the first one then you will use the money you get from your buyer to pay off the mortgage on your current house - anything left over will be what you have to play with in terms of money for deposit, fees, stamp duty etc.. for your next house.


    So for example if you have a mortgage of £100,000 and your house sells for £150,000 then you have £50,000 to put towards your next purchase. Some of the associated costs - solicitors fees, stamp duty etc.. can be settled once you have sold.


    If you are struggling for any savings up front for searches, surveys and removals maybe it isn't the right time to trade up - 18 months isn't a very long time at all to own a house.
    • hazyjo
    • By hazyjo 5th Feb 18, 3:31 PM
    • 10,652 Posts
    • 13,935 Thanks
    hazyjo
    • #3
    • 5th Feb 18, 3:31 PM
    • #3
    • 5th Feb 18, 3:31 PM
    Unless the market has been booming, you'll nearly always lose money on moving after that short a period.

    This is why it's wise to move as few times as possible in a short period of time.

    In what way is the house now unsuitable, or did you buy it as an investment to add money to short term? If the latter, it doesn't sound like you did much homework re profit.

    I'm with Cyclemonkey1 in that it's a bit confusing. Give us some figures and we might be able to help.

    I've never 'saved' towards moving. I've had (or been overdrawn enough!) to pay for searches, removals, etc, but the rest comes out of my equity.
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes
    • Cyclemonkey1
    • By Cyclemonkey1 5th Feb 18, 3:40 PM
    • 26 Posts
    • 33 Thanks
    Cyclemonkey1
    • #4
    • 5th Feb 18, 3:40 PM
    • #4
    • 5th Feb 18, 3:40 PM
    If you are in an area where prices are high enough to pay stamp duty that will be an additional cost.


    I would get a valuation, work out how much a new house is and then do a budget. Firstly you need to see if you have enough equity in your current property to fund - estate agent fees, solicitors fees, removal fees, stamp duty, deposit on the new place etc... If you don't have enough to comfortably fund all of that then I would think about staying where you are. I seriously doubt prices have gone up that much in a year and a half that your place is worth that much more than when you bought it.
    Last edited by Cyclemonkey1; 05-02-2018 at 3:55 PM. Reason: Typo
    • paddycharlie
    • By paddycharlie 5th Feb 18, 4:24 PM
    • 76 Posts
    • 94 Thanks
    paddycharlie
    • #5
    • 5th Feb 18, 4:24 PM
    • #5
    • 5th Feb 18, 4:24 PM
    Also check the terms of your mortgage as their may be an early redemption fee if you repay it so soon
    • Ozzuk
    • By Ozzuk 5th Feb 18, 4:39 PM
    • 1,348 Posts
    • 1,979 Thanks
    Ozzuk
    • #6
    • 5th Feb 18, 4:39 PM
    • #6
    • 5th Feb 18, 4:39 PM
    See if you can port your mortgage, that will help keep costs down. I tend to move every 2-3 years as I get bored, but I buy property I can hopefully make money on (not so easy now, no comment from Crashy needed).

    you'll find it a lot more stressful process than FTB. I would suggest having a look around to see what you can afford but don't look too hard until you get an offer on your place - then go hunting. Nothing worse than seeing your dream home when you haven't sold yours.

    You are then faced with managing a sale and purchase - if you can combine these then great, I usually try and minimise the chain by buying somewhere with no onward chain, but you can't always do that. Similarly consider the position of the people buying yours to limit the chain.

    You can of course move out and rent, this gives you the most freedom and puts you in a great place to buy, but obviously has the pain of moving twice, and additional costs. You also risk losing the ability to port mortgage - my lender said no porting if there was a gap, but in the end I did it anyway, they then decided not to penalise me and froze the mortgage (yey Nationwide, saved me over 2k in fees). Was less than 2 months though.

    As others have said, can be a costly business moving against so quickly - unless you've been lucky and bough at a good price. If you are lucky enough to generate extra value in a short space of time then you will find people might not like it - I had comments from the 'x'k plus uplift in value on a bungalow I flipped, people expected I would be open to low offers based on what I paid so I had to wait a bit longer for a buyer.
    • wirralmatt
    • By wirralmatt 7th Feb 18, 9:41 AM
    • 5 Posts
    • 3 Thanks
    wirralmatt
    • #7
    • 7th Feb 18, 9:41 AM
    • #7
    • 7th Feb 18, 9:41 AM
    Thanks for the advice and comments.

    I am talking about selling my first home and moving to a second home. Not buying an additional home. Sorry for the lack of clarity.

    Because the house we bought was being sold by a couple who were divorcing, and because it was in a horrible state (so bad that the estate agent had no photos of the inside and only two of the outside), we got it for a really great price (Asking price was £110,000, we paid £100,000). We haven't had it valued yet - that's next on the list if we can work out how to make the cashflow work for the fees and stuff.

    In terms of adding value, from the prices of identical houses in my street I believe that we have added about 20% (£20,000) to the value of the house, against what we paid. We have completed a full rewire, redecorated throughout, replaced the bathroom, and redone the garden.

    Before we look to sell we will also be making improvements to the front of the property including modernising the porch, relaying the driveway, repainting the front of the house, and some basic landscaping.

    We have addressed everything that came up on the original survey, with the exception of some wear and tear on the kitchen cupboards and some sections of laminate flooring.

    Thanks

    Matt
    • Red-Squirrel
    • By Red-Squirrel 7th Feb 18, 11:22 AM
    • 2,787 Posts
    • 7,445 Thanks
    Red-Squirrel
    • #8
    • 7th Feb 18, 11:22 AM
    • #8
    • 7th Feb 18, 11:22 AM
    Why do you want to move?
    • csgohan4
    • By csgohan4 7th Feb 18, 11:35 AM
    • 4,552 Posts
    • 2,841 Thanks
    csgohan4
    • #9
    • 7th Feb 18, 11:35 AM
    • #9
    • 7th Feb 18, 11:35 AM
    Thanks for the advice and comments.

    I am talking about selling my first home and moving to a second home. Not buying an additional home. Sorry for the lack of clarity.

    Because the house we bought was being sold by a couple who were divorcing, and because it was in a horrible state (so bad that the estate agent had no photos of the inside and only two of the outside), we got it for a really great price (Asking price was £110,000, we paid £100,000). We haven't had it valued yet - that's next on the list if we can work out how to make the cashflow work for the fees and stuff.

    In terms of adding value, from the prices of identical houses in my street I believe that we have added about 20% (£20,000) to the value of the house, against what we paid. We have completed a full rewire, redecorated throughout, replaced the bathroom, and redone the garden.

    Before we look to sell we will also be making improvements to the front of the property including modernising the porch, relaying the driveway, repainting the front of the house, and some basic landscaping.

    We have addressed everything that came up on the original survey, with the exception of some wear and tear on the kitchen cupboards and some sections of laminate flooring.

    Thanks

    Matt
    Originally posted by wirralmatt
    Bare in mind that what you paid to renovate will not always add the same amount to the house price.
    "It is prudent when shopping for something important, not to limit yourself to Pound land"
    • Cyclemonkey1
    • By Cyclemonkey1 7th Feb 18, 1:10 PM
    • 26 Posts
    • 33 Thanks
    Cyclemonkey1
    That is what I was thinking - you only managed to knock £10K off the asking price for a house you said was in a complete state. However a lot of these improvements, rewiring apart, seem to have been cosmetic. Not sure you will make much more than £10k back in eighteen months.
    • DaftyDuck
    • By DaftyDuck 7th Feb 18, 1:30 PM
    • 4,193 Posts
    • 8,720 Thanks
    DaftyDuck
    .... and, before you get excited by the Estate agents' valuations, remember these are likely inflated guesstimates to get your business, and your achieved selling price will be lower, especially when said agent gets his slice.

    Unless you are doing much of the work yourself, on a house at that price point there is very little room for price improvement above what you spend. Indeed, you'll often come out at a loss after sale.

    Why, after such a short period, are you looking to move? Costs of moving really eat into any potential profit, particularly if you have lived there so briefly.
    • TBagpuss
    • By TBagpuss 7th Feb 18, 1:56 PM
    • 6,570 Posts
    • 8,537 Thanks
    TBagpuss
    In terms of your original question, things like your survey and searches have to be paid upfront, so you would need to have enough to cover those costs. Moving - I think most movers require at least a deposit in advance and the balance on moving day, so again you would need to have access to funds for that.

    Solicitors fees and estate agents costs would usually be taken out of your sale proceeds on completion day, so you don't have to have those saved in advance but it will mean you have less money available for your new property.

    you'll also need to budget for those costs, and for stamp duty etc, whatever the mechanics are for actually paying them.

    As you say that you can afford higher mortgage payments, I'd suggest that you get a rough idea of what you could afford in mortgage payments and start putting the diference aside (i.e. if you currently pay £700 a month but think you could get, and afford, a mortgage where the repayments are £1,000 a month, start putting £300 a month into savings.
    This has a double benefit. First, you can get used to living on the lower net income you'll have after moving, and Second, you'll start to build up some savings to cover the costs of a move.

    As others have said, 18 months is a very short period to own a house for, it's worth thinking about why you want to move so fast, and whether it is in your best interests to do so. (potential buyers may raise questions about why you are moving on so quickly)

    As CycleMonkey says, sit down and work out a budget - cost of the new property + stamp duty + removal costs + costs of purchase (legal fees, searches etc ) + costs of sale (estate agents, legal fees etc) + contingencies .

    Do a second budget looking at your likely outgoings if you do move - not just the higher mortgage but also any other changes, things like higher council tax sand bills if you move to a bigger property, and so on.

    if you are still confident that you can afford it and that it is practical for you, then go ahead.

    Do bear in mind that sold prices are a much more reliable indicator of value than asking prices, and that a good deal of what you have done sounds as though it was / will be cosmetic, so will have little impact on the value of the house, although it may make it easier to sell.


    In your place, i would focus on doing work to the house which would make it a pleasanter place to live in for you and your wife, so you enjoy it as your home. Save the money that you can - either by overpaying your mortgage or by putting it into a savings account or ISA, and consider moving when you have some savings available and and a bit of surplus for unexpected additional costs.
    • Niv
    • By Niv 7th Feb 18, 2:11 PM
    • 1,611 Posts
    • 1,391 Thanks
    Niv
    Thanks for the advice and comments.

    I am talking about selling my first home and moving to a second home. Not buying an additional home. Sorry for the lack of clarity.

    Because the house we bought was being sold by a couple who were divorcing, and because it was in a horrible state (so bad that the estate agent had no photos of the inside and only two of the outside), we got it for a really great price (Asking price was £110,000, we paid £100,000). We haven't had it valued yet - that's next on the list if we can work out how to make the cashflow work for the fees and stuff.

    In terms of adding value, from the prices of identical houses in my street I believe that we have added about 20% (£20,000) to the value of the house, against what we paid. We have completed a full rewire, redecorated throughout, replaced the bathroom, and redone the garden.

    Before we look to sell we will also be making improvements to the front of the property including modernising the porch, relaying the driveway, repainting the front of the house, and some basic landscaping.

    We have addressed everything that came up on the original survey, with the exception of some wear and tear on the kitchen cupboards and some sections of laminate flooring.

    Thanks

    Matt
    Originally posted by wirralmatt




    So, let me get this right. You think the house is now worth 120k?


    How much did the refurb cost?


    How much were your buying costs?


    How much are your selling costs? (EA + solicitor)


    How much are removal costs?


    Put on Market for 120k it will probably sell for less (I would expect 115 – 118).
    All the 'added value' you talk about is pretty much gone in your costs.


    If your reason for moving is to ‘flip it’, don’t bother.
    YNWA

    Target: Mortgage free by 58.
    • wirralmatt
    • By wirralmatt 15th Feb 18, 11:33 AM
    • 5 Posts
    • 3 Thanks
    wirralmatt
    @TBagPuss Thank you for such clear advice and for addressing my questions.
    • wirralmatt
    • By wirralmatt 15th Feb 18, 11:35 AM
    • 5 Posts
    • 3 Thanks
    wirralmatt


    So, let me get this right. You think the house is now worth 120k?


    How much did the refurb cost?


    How much were your buying costs?


    How much are your selling costs? (EA + solicitor)


    How much are removal costs?


    Put on Market for 120k it will probably sell for less (I would expect 115 – 118).
    All the 'added value' you talk about is pretty much gone in your costs.


    If your reason for moving is to ‘flip it’, don’t bother.
    Originally posted by Niv

    Thanks for the comment. This is not about making any money out of it, this is simply about taking the next step on the ladder to the dream house. I don't care if we make a profit on it - this is about working towards the ideal home.
    • PasturesNew
    • By PasturesNew 15th Feb 18, 11:37 AM
    • 62,818 Posts
    • 368,065 Thanks
    PasturesNew
    Re deposit for the new house - you don't need to have this available, in cash. Just make sure your solicitor knows you don't have that cash sitting around and it'll come from the sale of your current house. There will then only be a "theoretical/mythical deposit" at exchange, when you're liable to pay the deposit if (say) something went wrong and you pulled out .... but you don't need to actually have the money available.

    Solicitors do it all the time, else few people would be able to move.

    At exchange you "hand over the deposit" - but you won't. You will simply be committing to that much money and will "owe" it. Your solicitor needs to know this, but it isn't something unusual at all.
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