Planning your home move

 

The time has come to upsize, maybe because you have a baby on the way or need to move for work? Or maybe you are just in a better financial position and can afford something a little bigger. But how do you work out what you can afford to buy? How do you work out how much deposit you have available or how much you can afford to borrow on a new mortgage? 

Well, this guide is going to show you exactly how to do that! 

 

Firstly, the deposit you are going to put down on a new property is going to come from your current home, but before we get to that point you are going to need to get your house on the market for sale. The most important thing being that any estate agent you put on offer through for a future purchase will want to see that you have a sale agreed on yours to class you as ‘proceed-able’. So, we need to get your house on the market first. 

To establish a value for it we suggest getting a number of local estate agents round the appraise the property for listing on the market. You may get a different figure from each agent so best to get more than one to get an average. Be wary of the agent that suggest a higher figure than the rest as some agents will tell you the highest figure possible to secure your business. 

Now the price you the list the property at may not be the value it sells for, so best to air on the side of caution when it comes to calculating what figure you will receive on completion. Best advice is to decide on a minimum figure you will sell the property for and reject any offer that comes in below that figure. This may be a fall-back figure under the listing price but still a figure that makes a new purchase work. 

 

During the market appraisal the estate agent will set out their fees for selling your home which may be a flat fee or a % of the sale price. You will also need a solicitor to act on your behalf to sell your existing property and help you buy the next property. It is a good idea to speak with a few solicitors to get figures from them to get a rough idea what this will cost so you can factor this into your budget. 

 

Now that you have your current house on the market or ideally sold by now, you should get a redemption figure from your current lender. This figure is your outstanding mortgage balance, and this will help you understand how much equity you have in your home, its this equity that you can carry over as a deposit to a new property. You can choose to use all or some of it, the choice is yours. 

 

You can ask for a redemption figure to included and exclude any early repayment charges, and ask when your current fixed rate deal comes to an end. If you are close to the end of your current fixed rate deal you can look to leave that deal and start a fresh without penalty (if a new lender is the cheapest option). 

 

The simple equation for calculating your equity is property value – redemption figure = equity. You then take that equity figure and deduct the moving fees (Estate agent and solicitor), to give you the amount of money you have left over to use as a deposit for a new property. 

 

The deposit amount you wish to use will depend on the property you intend to buy. If you are buying a property at the top of your budget or a property that requires no renovation work at all, you may choose to use the full deposit. This may be to allow you to buy at the top of your budget or to reduce your mortgage to secure a better mortgage product. If you are buying a property that requires some renovation work, you may decide to hold back some of the deposit to cover the cost of those works. You cannot borrow more than the purchase price, so any money to cover the renovation will need to come out of own funds (the equity from your current property sale). 

 

When it comes to finding a new mortgage for your new property purchase it may be more cost effective to stick with your current lender. This may be to avoid any exit fees if you are still within your fixed rate period, or they can offer you a better rate as an existing customer when porting your mortgage. 

 

Once you have the best option that fits your needs from your existing lender you can now compare this with what the rest of the market can offer you. It may be as a new customer a new lender may be a cheaper option as they have better rates. Depending on the exit fees with your current lender it may be cheaper to pay the exit fees and start fresh with a new lender due to the savings that could be made. 

 

To put an offer in on a property you will need to be able to prove your ability to get a mortgage in the form of a mortgage in principle. With a property target in mind and your deposit calculated you will now know how much mortgage you require to complete your intended purchase. You will then need to secure that figure either with your current lender if you are porting your existing mortgage or with the new cheaper lender if you are moving over to them. 

 

After viewing the property and falling in love with it, its time to put your offer forward. To qualify your offer the estate agent will ask for your proof of mortgage (mortgage in principle), your proof of deposit in the form of your sale agreed memorandum of sale along with 2 forms of ID. 

 

Now that you have had your offer accepted your mortgage adviser can now find you a mortgage to perfectly suit the purchase price, your requested loan amount and your plans for the property. 

 

If you are buying and selling a property at the same time you will typically complete both sides of the transaction on the same day. The funds from your buyer will move to your solicitor for them to move the allocated deposit to your seller’s solicitor and request the money from your lender. Any outstanding costs for the purchase will be deducted from your equity and the surplus paid to you.