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How do you manage to move up the property ladder?

(13 Posts)
SexNamesRFab Mon 05-Sep-16 17:56:22

DH and I bought our house (3 bed terrace) in 2011. We bought it for 230k, it's now worth about 450-500k. We extended, plus the area has become really popular. At the time we bought, the next house up (4 bed semi) would have been about 400k. Houses like this are now on for 700k <weeps>.

Our income has risen and we are starting to amass savings. I can see in about a years' time we would like to move up (mainly to give DD2 a decent sized bedroom). But how would this be possible when property has gone up so much? And it might go up again before we're ready to move?

Would we be better off investing in a buy to let somewhere cheaper? How does this work when you already have a property? My main reason for doing this would be to try and have enough invested to provide a deposit for my DC.

A few of my friends have either moved up to the next sized property or turned their houses in into buy to let and bought a bigger house to live in. Obviously, I can't ask them how they have managed to afford this as I'm too British. So how does it work? confused

YelloDraw Mon 05-Sep-16 18:10:28

Savings, bonuses, inheritance, larger salaries and larger mortgages, move to a cheaper area but move bigger etc

A few of my friends have either moved up to the next sized property or turned their houses in into buy to let and bought a bigger house to live in

It used to be relatively easy to leverage up one property onto a BTL mortgage and extract the capital and by elsewhere. Several friends remortgaged their 1 bed london flats riiiiight up to the max lenders would lend on a BTL, and moved out of london and used that cash as deposit and got a residential mortgage on a family home. So they now have a lovely family home and still have a nice little 1 bed BTL earner.

sugarmonster64 Mon 05-Sep-16 18:13:30

Increased mortgage based on increased wages largely - using whatever equity we had in the houses as deposits. Not living in London or anywhere where house prices are rising at an obscene rate helps

alazuli Mon 05-Sep-16 18:21:33

Ah, that's a good idea, YelloDraw. My dream is to buy a flat in London and then move to the seaside. Had thought about selling the flat but your way sounds much better!

SexNamesRFab Mon 05-Sep-16 20:15:30

Sugar - obscene is the word for it.

Theoretically, if we swapped our mortgage to BTL and our house was valued at 450k, would we be able to withdraw the equity less a 25% deposit? This would be approx 115k.

Then do banks still loan up to x4 joint salary? This would be approx 400k. So we'd have a budget of 515k plus savings?

GoodStuffAnnie Mon 05-Sep-16 20:19:59

This is so so risky though. You are so exposed to the uk property market. When prices go down you will loose on two properties.

GoodStuffAnnie Mon 05-Sep-16 20:20:41

The description property ladder is redundant. It is now just a property step.

Muddle2000 Mon 05-Sep-16 21:19:03

Btl is not such a good deal now People used to be able to get tax relief on their BTL mortgages but the law has now changed There is also additional amount to pay in Stamp Duty on BTL purchases
Second properties can attract other taxes so take professional advice
In the past some parents would get a second property for dc and mates
to live in while at uni and then sell it for dc to have home deposit
The market has always gone up and down and HISTORICALLY seems
to even out over a 10 year period

YelloDraw Mon 05-Sep-16 21:33:00

Btl is not such a good deal now People used to be able to get tax relief on their BTL mortgages but the law has now changed

Yeah also I think it has got a lot harder to do that leverage up and extract thing

Coughingchildren5 Tue 06-Sep-16 18:12:33

You need to think about moving to a cheaper area to afford more space. Or, putting all your equity and savings against a new more expensive house and remortgaging for a longer term at current low interest rates so that the monthly repayments are affordable.

Imperialleather2 Tue 06-Sep-16 19:32:01

If you keep your flat you will pay an additional 3% on the house you buy which at 700k is an additional £21k over and above standard sdlt. Ouch

The way you move up in theory is that you start to earn more so you save up and borrow a bit more and hey presto.

However the problem comes when house price inflation is completely out of sync with wage inflation- like for the last howsoever many years.

SexNamesRFab Wed 07-Sep-16 19:24:54

Thanks - this is all really helpful. I don't think we're moving!

wowfudge Wed 07-Sep-16 20:13:32

Pay off chunks of your mortgage while rates are so low. That way you really make inroads on the capital instead of paying off largely interest. Depending on your mortgage terms you may be restricted as to how much you can pay off in a year. It's well worth doing.

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