How the hell does house buying work

[mortgagefordummies]

We have a house worth around 200k that is owned outright. We need to move house for more space. Where we are we can get what we need for about 400k.
How the hell does it work?
The house was gifted so we're both new to this and never had a mortgage before.
Thanks !!

Best thing to do is first speak to a mortgage advisor to see how much you can borrow, and what the monthly payments will be. L&C are good (and free), otherwise I'd find a personal recommendation for someone local to you. Obviously you'd need to borrow the remaining £200k. Might also be worth checking your credit scores.

Can we not just get an estate agent out to value and put ours in the market and go from there ? See totally clueless here !
Once ours is on the market are we then free to put in offers ? How does that part work? Do we find a house we like, offer and then apply for a mortgage or do we get a mortgage for £200k and then start looking?

Speak to a mortgage advisor and get an agreement in principle, then you’ll know what you can realistically afford.

Speak to estate agents to get a valuation on your property.

Have a look around and make sure you can get what you want with what you can afford, then put your house on the market.

It’s a very slow market right now. You may be able to get away with doing some viewings with yours on the market, but you probably won’t get an offer accepted on something else unless yours has an offer accepted on it.

You find something you like and make an offer (you may have to make several offers) and if it’s accepted, you engage a solicitor for conveyancing, send estate agent all your financial details (agreement in principle, proof of funds, etc) and then just do what your solicitor says.

Go to your bank and ask for an appointment with their mortgage advisor. It doesn't mean you have to take out a mortgage with the company you bank with but they'll be a good enough starting point. Basically if you want to buy a house for £400k and yours will sell for £200k you'd need a mortgage for £200k, plus cash to pay for legal fees, stamp duty, mortgage arrangement fees etc.
Mortgage lenders will typically lend you 3-4 times your salary (combined if you're buying as a couple) but bear in mind the affordability of paying it back each month if they'll lend you more than that. There's lots of online tools to play around with mortgage repayment amounts.
You should then get a mortgage agreement in principle from your chosen mortgage company before you start to offer on houses.

Mortgage Essentials - MoneySavingExpert
always start with martin lewis!

You need to get agreement in principle from a mortgage broker or lender before you start looking as otherwise you won't know what your budget is. You can put offers in whenever you like but most won't take you seriously until you are under offer yourself from someone else. So, you put your house on the market and same time speak to mortgage broker so you know what your budget is, wait to get an offer on your house, once you have someone waiting to buy yours you can then start looking as you should know at this point what you can afford and you can then put in a serious offer in somewhere you like if you find it as you have an offer on yours and are "proceedable". Hope that helps and good luck x

Would the 200k we sell for be used as a deposit for the new house ?

What everyone else has said - part of working out your budget would be getting estate agent valuations on current house and part figuring out what you can borrow.

https://www.moneyhelper.org.uk/en/homes/buying-a-home/money-timeline-when-buying-property-england-wales-n-ireland

If you are in Scotland process is different.

Can we not just get an estate agent out to value and put ours in the market and go from there ? See totally clueless here !

If you were buying house same price as your current or less or using saving to cover any additional cost of next house you could do that.

However it sounds like you plan to use this house and borrow the rest - so you need to know what you can borrow and what you are likely to get for this house to work out what prince range you can actually afford so you know what to look at.

Also you'll need extra money for costs - moving costs, stamp duty - agent fees (would usually come out of previous house price) - last few moves we did this totalled about 5K for us - so you need that as well factored in - probably more now,

Yes, you can use the equity in your current home as a deposit for your new one. So in theory you can put down a £200k deposit and then pay the rest with a £200k mortgage. But remember you will have stamp duty, legal and moving fees to pay. And you will possibly need some cash to do renovations in your new place. So you may choose to put down a smaller deposit and take out a larger mortgage.

First step is definitely to get a mortgage agreement in principle so you know how much you can borrow (and hence how much you can offer for a house). I've used L&C (mortgage brokers) before - they are very helpful and can tell you your best options. Give them a call.

It's annoying really as we've spent a bloody fortune doing this place up aswell. We've got to have spent about 50k, sometimes I wish we would've just sold it and never actually moved in

Minus any costs - yes.

That's what we did we last house - used our equity in it for deposit on next house - and covered some costs out sale and some savings and borrowed the remaining as mortgage for next house.

So you end up in a chain everyone moving same day.

We were in a short one but our buyers buyers weren't going to wait and house we wanted sellers were messing around. So we broke the chain and put our stuff in storage and camped at relatives house - as trying to avoid cost of going into rental property and two moves with kids

So if you are look at 400K houses - 200k deposit you'd be looking to borrow roughly 200K ( but factoring in moving costs etc as well.) so do you have enough income to get someone to lend you that?

@SmileyHappyPeopleInTheSun Yes we can afford that, obviously it needs looking at more closely but I think it's fine.
I know we're in a good position with owning the house outright to start with, I'm glad for that as it gets us onto the ladder at least

The 2 main things to do first is to get an Estate Agent round to value your home '& to speak to a mortgage broker to see how much you can borrow on your salaries. Most lenders will go to 4.25 -4.5 times joint incomes, but will then deduct committed expenditure like car loans credit card debt, nursery/ child care fees etc.

Do you have any savings for the fees or will that have to come out of the equity ? Stamp Duty will be £7.5k on a £400k property and EA fees will be around £2.5k -£3k. Both are paid on completion and your solicitor will deal with that. Their fees will probably be £1500 for buying & selling. So all in all you'll be looking at c£12k. Then there are removal & surveyors fees - so another couple of grand. I'd be looking to put aside £15k for all of that.

I think you need to file that under "first world problems" if you were gifted a house that's now worth £200k and you've been living rent and mortgage free!!

I think we could save that just as extra to be honest over the next couple of years if we're very strict with ourselves, then that way we won't need to touch the desposit/sale money.

Surely that would increase the value ?

@MiddleAgedDread Yes you're quite right. Sorry I don't mean to sound how that probably comes across !!

@lemonyellows Isn't there a cap on areas though ? So even with stuff done you can only really get so much ?

Yes, I would definitely think of it as 'how amazingly lucky we are to have been given £150k' rather than 'rubbish, we've spent £50k and are now selling.'

Yes, welcome to home ownership. We spent probably £35K (with a lot more needed) on our first house and we had a 5% deposit not owning the whole house already.

Speak to a mortgage advisor, the calculations online give an idea but don’t really take into account risk factors such as age, self employed, childcare costs. A mortgage advisor will tell you what you can afford and get an agreement in principle. You’ll need that for any offer on a house to be accepted.

Get your house valued. Ask for local recommendations. Get 3 valuations and do your own research as to what is happening in the area. Pick an agent, declutter and clean the house top to bottom. They’ll come over and do photos, floor plan and start marketing the property. When you have an offer, you are proceedable for the property you want to buy. Some estate agents might not let you view their client’s house until you are in a position to proceed, some won’t mind.

Unless you have savings, you’ll need to use some of the sale money for costs. You’ll need conveyancing fees for the sale of your property, purchase of the new one, estate agent fees, potentially mortgage advisor fees (mortgage application fees are usually applied to your mortgage) and stamp duty. You will need savings for costa associated with the removals company or surveyor as you will pay those in advance of moving.

When you sell and have a property that has accepted your offer, you’ll need to wait until the chain is complete or someone breaks the chain. You’ll start the conveyancing process, you’ll need to answer any questions about your house and your conveyancers will do the same for your purchase. You will then (hopefully) exchange, at this point you have exchanged contracts and someone can only pull out of the sale by losing considerable amounts. When you complete, the money from your sale will be transferred directly to your solicitors, they will pay themselves, the estate agent, stamp duty and transfer the deposit to your mortgage company for the purchase of the new house. If you decide to keep some of your sale money back for work on the new house they will also transfer that to you.

@SneakerShoulders Oh we are very lucky and I do know that.

If you'd have to be strict with yourselves to save £15k over a couple of years, can you afford the repayments on the mortgage which would be far more than that?

You're very fortunate not to have any rent or mortgage payments now, will you have a big drop in living standards if you need to add a large monthly outgoing?

@WickieRoy By that I mean no big holidays abroad etc. We've already had 3 this year (bad year mentally for me and needed the time away) so yes we can afford it and wouldn't need 2 years to save that realistically but we would need to cut back on things like holidays which are a luxury.

Don't get me wrong, I absolutely hate the idea of selling a mortgage free house to take on a mortgage it seems insane but we just haven't got the room here anymore so we don't have a choice

Re the £50k you spent on the house - are we talking about essential repairs, without which the house would be unsaleable now? It will help to see it that way. We spent a small fortune on doing a house up once because it was in such a bad state and to my absolute horror when we came to sell not only did we not get that money back but we had to accept a sale price that was less than we originally paid - we'd bought at the height of the market in the late 80s and there had then been a crash. However, swings and roundabouts! We got our present house for an absolute knockdown price as a result of the same crash, and given the state of our previous house when we bought it (naive purchase! never again) we'd never have sold it at all without the remedial works we'd done.