To think it's not easy to know how much you can afford?

[yesitssea]

We want to move house, we own our current and want to upsize.

My mum said 'what's your budget?' And I said I don't know.

She scoffed and said 'well how don't you know?' And I just said I couldn't tell her....

I know how much we have in equity, how much left on mortgage, our incomes and how much we could afford a month.

But I don't know how much an interest rate is or what it means, and I don't know how much the bank would be prepared to loan us?

We have both had wage increases and the current house has increased in value:

Is it always this hard?

Talk to a mortgage advisor, they will give you an idea of what banks would be willing to lend and how much your repayments would be.

Google mortgage calculator.

Have you had your house valued? And you can do online mortgage calculators that can tell you what banks might lend you. Then you should have an idea and can start looking at houses

If you know your salaries and all other income, and ongoing expenses such as childcare, you can enter that into a mortgage calculator on any bank’s website and that will say how much the bank will lend you. They will normally lend up to a certain percentage of the property’s value.

If you know the value of your house and can work out the amount of equity in, plus savings, minus stamp duty and moving costs - that’s around your total budget.

Does that make sense?

Well, it is and it isn't.

It's easy in that you can get a valuation on your current property (taking into account that you might need to take less than the asking price) and set up an appointment with the bank to discuss what they'd be prepared to lend you. They can explain interest rates etc.

You must have got an idea of this when you bought your current place though, surely?

It's not easy in that you never know what the future holds re. jobs, interest rates etc.

Just be cautious - don't overstretch yourselves.

For your budget you should also remember stamp duty, legal fees and moving costs. This will be £££ and you either need to borrow to cover it or take it out of any profit you make from selling your current house.

For the mortgage there are lots of online calculators, you can put in different terms e.g. 25yr or 20yr and different interest rates to work out what is affordable. Interest rates are much better/lower if you have a good sized deposit as the bank is taking less risk so will give you a lower rate. Aim for at least 10% deposit, 20% or more is great and will get you onto lower interest rates.

Our house was our first property and it was fairly cheap at the time- £140k. We put £30k down on a deposit.

Our mortgage now stands at 80k left and the house is valued at £300k.

So I think that means I have £220k in equity? Is that right?

Roughly yes, less any legal fees, selling fees, stamp duty and early repayment fees which may be payable. The equity then becomes your deposit for your next house (or full payment) etc with that amount of be speaking to both an independent mortgage advisor and an independent financial advisor as it may be worth you carving it up and investing elsewhere rather than ploughing all into one house. Depends entirely on what you want in the next house and how much they cost at the moment. Now is a great time to sell, less so to buy.

No we want to buy a larger house with a garage.

We both earn around the 50k mark so would it be reasonable to think we could afford something about 400k?

yes with 100k income you will definitely be able to borrow 200k

Earning 50k each, so 100k between you? 400k mortgage + your 220k equity would be 620k. Obviously this will be impacted by your ages, existing financial commitments, etc...

I’m with your mum, you’re not even first time buyers. You have all the facts and figures, and the trickiest bit: understanding your own attitude to risk and ideal home. So whilst I’d expect a budget range, or a maximum, rather than an exact number, I think you should be able to work it out.

For me it’s a combination of:

• what equity I have


• what extra money I’m prepared to put in


• how much the banks will lend me


• how much I’m comfortable paying back now


• how much on top to allow for interest rise (also considering fixed rates)


• how much I even want to be paying back. I could afford double my mortgage now, but I’d rather have a 3 bed semi than a 4 bed detached, and retire 5 years earlier

Don't over stretch yourself, a mortgage should hurt until you grow into it, it should never cripple you.

If you don't know what interest rates and mortgages are all about, you''re hopelessly out of your depth. Listen to your mother.

This is so rude🙄

@yesitssea there’s a difference between what you can afford and what the bank will lend you. I agree with the pp who said £620k sounds right.

google mortgage calculators which will give you an idea of repayments at that value

So you roughly know how much equity you have. You need to pay selling fees, solicitors fees, stamp duty, moving costs and maybe some towards doing up the new property
Nationwide is an easy to use website it works out how much you could borrow and also gives you the monthly payments based on what their rates are currently

Find an affordability calculator online, that will help you to decide what size of mortgage you are comfortable with based on the repayment amount.

You know what your monthly income is, would you be comfortable paying £800, £1000, £1500, £2000.... a month.

It's all well and good knowing that your income means you could get a £400,000 mortgage but if you know that you have outgoings that mean you could only afford to pay £1000 a month then that will either limit the amount you can borrow or mean you are paying it back for a much longer term.

This solicitor is a) brilliant - but b) gives you detailed costs as an easy to get instant quote so you know what it would cost to buy and sell
www.fidler.co.uk/mobile/index.cfm?CFID=4886272&CFTOKEN=54520328
Don't forget stamp duty on the house you buy -
Don't forget Estate agent fee (usually a % of the final sale figure) and the vat at 20%

Watch your current mortgage for any redemption charge.
Budget in for removals.

Then use some mortgage calculators

it is not just affording mortgage now but what if interests raise by 3% or 5% or even 10%
this is not your first property there is no need to maximise borrowing
try and make sure mortgage is paid off before you are 60 as you might want to go part time then,
do not pay a 600k house just because you can access 600K if a 450K house would be all you ever needed and wanted
normally you can borrow 3-4 times joint salary so that is 300-400K you have 220 equity so you could have a budget of 520-620K but would you have enough to pay if interests rates soared as it looks like a global recession is heading this way, house prices might fall also my answer would be different is you are nearer 50 than 30, at 30 you might still get significant promotions but might have childcare at 50 you are probably already at max earnings and need to think of pension provision,
it depends on how much you need you suggest 400K which sounds on your earnings quite ok 220 equity 200k morgage = 420 allow 20K for fees etc you could go 450 but there is no point in buying a 600K house then struggling
financially if your car breaks down or having to watch every penny at supermarket, much better to have nicer life in smaller house

You can borrow 4.5 x your combined income so 450k + 220k deposit means the top of your budget is 670k. I know lots of people are saying don’t stretch yourself but we have never found 4.5 x our income a stretch. We have managed to pay nursery and schools fees on top of our large mortgage. Obviously if interest rates massively increased it would be harder but we are fixed until 2030 now.

I wouldn't even ever consider something 600k+ that feels huge.

I think we are going to go 400-450 We live in the north east so houses are not that expensive really. We will book an apt with a mortgage adviser and see what they say.

Thanks for the advice guys