Moving on up
What to consider when climbing further up the property ladder. James Dawes of JWD Mortgages explains more...
Whether you're looking for your dream home or want something more suitable for your current needs, you may have been thinking about moving home recently. As we all know, it can be hard to move up the property ladder.
Is your current home in a location you love, but just doesn’t have enough room for all of your belongings? Do you feel stuck on the property ladder? Always finding yourself overstretched and struggling to find that extra deposit for a move up, or even just that little bit more space?
The cost of housing within your current area may be too high, or you could simply not have enough saved to afford your next move. This can be even more problematic if you are married with children and think that buying a bigger home will help to provide stability for your family. With this in mind, there are some things that you will need to consider when looking at how to move up the property ladder.
Selling your current property first
Most people sell their current home at the same time as buying a new one, forming a property chain. However, if you decide to sell before you buy your next property it gives you the advantage of remaining in control of your property sale because you won’t need to make a quick sale, or be pressured into selling cheaply.
Selling before buying your next home also puts you in a stronger position when buying. The seller you want to buy from would almost certainly prefer a buyer who has the cash in the bank rather than entering a chain, where their sale is dependent upon you finding someone to buy your property.
You may get a better price on the property you are buying if you find a seller who is keen to move quickly. If you put in a good and fair offer the buyer is unlikely to take another if it means entering a property chain, so you are less likely to be gazumped.
You will know exactly how much you can spend on the property you are buying because you’ll have the money from your sale in the bank – buying your new home won’t be dependent on you achieving the expected price on your existing one. But before you choose this option make sure as many things as possible are organised beforehand, such as getting your mortgage pre-approved so you can buy quickly.
If you put in a good and fair offer the buyer is unlikely to take another if it means entering a property chain, so you are less likely to be gazumped.
Choosing your next property
The first step is identifying the area you want to live in. What you can afford will be a key deciding factor for where you will focus your property search. You will need to take into consideration whether it is more urban, suburban or rural. Think about commuting time and ease of getting around, proximity to shops and restaurants, and the quality of schools in the area, if you have or are likely to be planning a family in the future.
Once you’ve found a property, learn as much as you can about it. When you go to the viewing, if it’s an older property, take your time to make sure the rooms are big enough, that there is plenty of natural light and no signs of damp. Also check the condition of the electrics, heating, windows and roof.
Ensure it is a home you will grow into, as people tend to like having more space
as they grow older. Do you have enough bedrooms and a garden? Think about future potential or changes you might be able to make to add space if you need it.
You are unlikely to find a property that has everything you want, so you may have to make trade-offs. Being next to a busy road reduces prices, but if the noise doesn’t bother you then it could be an opportunity.
Many people don’t want to live right next to a school because of the noise from the playground, but if you are always out in school hours it won’t matter. You pay a big premium for off-street parking, and it reduces car insurance costs, but do you really want it?
People will often spend more for a garden, but if you aren’t that bothered, then it won’t be money well spent. If you don’t have a large budget and want to live centrally, living in a flat above a shop could prove perfect.
Mortgaging your new property
Before you start searching for your next home, you’ll want to find out how much you might be able to borrow unless the equity in your current property is substantial or you have access to an amount of money that means you do not need to apply for a mortgage to secure your new property.
But if you already have an existing mortgage and do require mortgage funding to move to another property you will either need to start a new mortgage or there may be the option to take or ‘port’ your existing mortgage to your new home.
You will need to consider the following: Does your existing mortgage have early redemption penalties? Is your current mortgage portable? Will additional borrowing be needed to buy your new home? Is the current rate better than any new rate that could be obtained in the open market today? Will any other penalties apply if you move home while you have a mortgage?
Costs to consider
Aside from the obvious cost of potentially servicing a larger mortgage, there are some additional costs to factor in, including:
STAMP DUTY RATES IN ENGLAND AND NORTHERN IRELAND
Stamp duty rates in England and Northern Ireland are exactly the same. It is officially called ‘stamp duty land tax’ (SDLT). The point you start paying stamp duty will be £125,001:
£0 - £125,000: 0%
£125,001 - £250,000: 2%
£250,001 - £925,000: 5%
£925,001 - £1.5m: 10%
Over £1.5m: 12%
Your deposit Generally, the larger the deposit you can pay, the more likely you are to be given a mortgage.
(subject to a mortgage affordability assessment), and the lower your interest rate is likely to be. On average, you may need at least 5% to 20% of the purchase price (for example: £10,000 to £40,000 when buying a £200,000 home).
Mortgage arrangement fees These might include: a booking fee of £99 to £250; an arrangement fee of up to £2,000; and a mortgage valuation fee (£150 or more). It’s best to pay these upfront rather than adding them to your mortgage, otherwise you’ll be paying interest on them for the life of the mortgage.
Mortgage valuation fee The mortgage lender will assess the value of the property to establish how much they are prepared to lend you. A valuation can cost between £150 to £1,500 based on the property’s value. Some lenders might not charge you for this, depending on the type of mortgage product you select. The lender’s valuation is not like a full structural survey so it might not identify all the repairs or maintenance that might be needed for an older property.
Legal and conveyancing fees You’ll normally need a solicitor or licensed conveyancer to carry out all the legal work when buying and selling your home. Legal fees are typically £850 to £1,500, including VAT at 20%. They will also carry out local searches, which could cost you £250 to £300, to check whether there are any local plans or problems.
• Survey fees Surveys can range from a basic home condition survey costing around £250 to a full structural survey from £600 or more. If you are buying an older property paying for a good survey could save you money on repairs in the long run.
• Estate agent fees This is only paid by the seller, not the buyer, for the estate agent’s services. It is negotiated when they put the property on the market. Fees typically cost between 1% to 3% of the sale price plus 20% VAT, or a flat fee for online estate agents.
• Energy Performance Certificate (EPC) costs If you’re selling your property you’ll need an EPC to show to prospective buyers that provides information about your property’s energy usage and typical energy costs. It also gives recommendations on how you can increase your property’s
efficiency, ultimately reducing energy usage. Prices typically start at £35. But if yours is a large property or it’s situated in an expensive city, the cost of an EPC could be a lot higher. £120 wouldn’t be uncommon.
• Storage costs Shop around to compare prices and security arrangements, and to get a sense of average costs. Estimate the length of time that you’ll need storage, because prices will depend on this.
• Removals fees The average removal costs will vary from location to location. Some removal companies charge on an hourly basis but they may also charge you a flat fee for an additional service. Check the removal firm you hire is insured. If you’re moving yourself, think about arranging insurance cover. Check if your existing home insurance policy will cover your move – many policies will if you’re using a professional removal firm.
You should also factor in ongoing costs, such as:
• Property maintenance
• Insurance policies
• Council tax
• Utility bills
• Ground rent and service charges (if applicable)
• Mail redirection costs
The cost of rebuilding your new home isn’t the same amount as the price you pay for the property, or how much it’s currently worth. The rebuild cost is usually less, as it doesn’t include the value of the land. If you have made a mortgage application, you’ll have received a valuation which will include a rebuild cost. Some insurers may estimate this cost for you based on the number of bedrooms you have, known as a ‘bedroom-rated’ policy. And some may provide an unlimited value so you don’t need to specify the rebuild costs.
READY TO DISCUSS BUYING YOUR NEW HOME?
If you are looking to buy the next home of your dreams, then finding the right mortgage for you and your individual circumstances is paramount. Getting a mortgage is one of the biggest financial decisions you’ll make, so it’s important to get it right.
To discuss how we could help, contact JWD Mortgages – telephone 01225 560802 – email Enquiries@jwdmortgages.co.uk
At different times, you may speak to advisers from either Cornwall or Bath locations.
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You must take care when securing a mortgage on a property, your home or property may be repossessed if you do not keep up mortgage payments.