Please explain it to me like I'm two...

[mealienpleasehelp]

Hi all, I'd love some advice on how to go about selling my property/ sorting the mortgage.

My questions are really quite basic I think, so I've changed my username to avoid outing myself as the clueless thicko that I no doubt am!

So I'm in the process of extending my lease (actually this has not officially begun yet - just negotiating with the freeholders) and this will need to be paid for upon sale of the property (because who has 20 grand lying around - I sure don't).

My main question is, I think - at what point can/should I apply for the new mortgage? Can I only do this once I've made an offer on a property? Or does it have to be done before I make an offer/ have an offer on my own property?

Please don't judge or ask why I don't already know this stuff - I really do struggle with stuff like this!

Thanks in advance..

Do you currently have a mortgage which you’re intending to port to the new property with additional borrowing? If so, speak to your current lender about obtaining a DIP which would include the additional borrowing (the £20,000 for lease extension plus, if whatever more you’re wanting to borrow for a new property, if anything.) The DIP will tell you roughly how much in total you’re able to borrow, which then enables you to begin looking at properties which fall into that price range. You would then formally apply for the new mortgage including additional borrowing once you’ve had an offer accepted on a property.

If you don’t currently have a mortgage or aren’t intending to port because you’d be out of any fixed term or penalty period, you can do the same process but with an all of market broker (lots of people recommend London and Country) who will advise on a range of different lenders to help you get the best deal.

Hi @ComtesseDeSpair, thanks for your detailed answer.

I do have a mortgage currently and would need to borrow on top of that. I have been in contact with a mortgage advisor (if he arranges it for me, he'll cost £500 which seems a lot to me, but he does at least have more of a clue than me😁).
So he's already given me an idea of what I can borrow (fairly meagre, but still)..

So it's only once someone has accepted my offer on a property that I can apply? And - sorry to sound dumb - but will this only be approved/processed once I've had an offer on the property I'm selling?

Also - if say, I've been advised that I can look at properties up to £200k, and I find one for 180 - will the lender only lend me that amount, or would I be able to borrow the full 200 and use some for home improvements?

I'm at the point where I don't even know if my questions are ridiculous or not...

thanks again!

Hi OP, this stuff is complicated so don't feel silly for not knowing. It's not like it's taught in school! I've only bought as a first time buyer so I'm unsure of the process when you're buying and selling but the decision in principle (DIP) you can do before offering on a specific property. This is just a guideline as to how much you can borrow. Once you find a property you like and have an offer accepted, the bank that's given you the DIP will send a surveyor round to the property to check it's suitable to lend the money against (they check for problems like structural issues). Providing it meets their requirements then you get the real mortgage offer meaning the bank will go and lend to you. When you apply for a DIP (you can do this online) you input your current outgoings but if you're selling your house then you won't be paying the current mortgage when you buy a new one so I don't think it would count against you. Your broker should help with this – I used a great one who was really supportive with all my questions as I too was clueless when I started! :)

Ah, thanks very much @Ratisshortforratthew (laughed at your username btw!) good to know your broker was worth it!

Ok, I do feel more clued up now thanks both :) feeling a bit more positive and ready to take some action. Being a life long procrastinator and ditherer does have its drawbacks😫

Don't feel bad about not knowing. It's so complex.

So the steps are

1. Mortgage in principle. Sounds like you've done this. This will tell you how much you can borrow
2. Calculate the overall sum that you will have when you sell your house, once you have paid back your existing mortgage and any fees.
3. You will then know your budget. Remember, most lenders only lend 90% of the property value, so you are expected to fund your 10% deposit yourself.
4. Choose a property
5. Put in offer
6. Offer accepted
7. Progress mortgage
8. Surveys

To be more specific, you will need to consider the following:-

If you have a mortgage, how much do you still owe?
How much are you expecting to sell your property for?
This will give you the equity value (what your left with)
Add this to your MIP figure 200k?

Assume, let's say you have 30k from the sale of your property and £200k mortgage, you can look for properties for up to 230k

The lender, in the scenario above, is only lending 85% of the value of the house.

Let's say you only have 10k left when you sell your house. Although the bank have said they'll lend you 200k, they won't lend more than 90% of the property value. This means you can buy a property worth 100k and only borrow 90k.

Essentially you need minimum of 10% deposit and the mortgage makes up the rest. Some lenders do consider 5% but the terms are often not great.

Hope that makes sense?

Hi @Newbie8918 thanks so much, that makes perfect sense. Very much appreciated 😊

It is all so complex, not to mention the bizarre and outdated (IMHO!) crazy expense of extending the lease.

I just so want to move now, I've been procrastinating for sooooo long I just need to make the jump!

Thanks again x