Can I Afford to Move House?
No matter the reason you have to move, the process of moving house can be a tough task.
Whether you’re looking to downsize, upsize, move closer to work or disappear into the countryside, moving house can be a tough task. While we all wish it was as simple as upping sticks, popping your house on the market and selling it instantly to frolic off into the distance, you’ll need to understand some of the hidden costs of moving as well as the ins and outs of selling your property.
If you’re looking for advice on whether you can afford to move house, you’re in luck – I’m a mortgage adviser and estate agent with offices based in Worcester and Malvern. Take a read of my guide for figuring out what you can afford when moving house, covering everything you’ll need to take into account before making the decision to jump ship.
1. Get your property valued
The first step to deciding whether you can afford to move house is to calculate your equity. When moving house, equity means the value of the property that you currently own. To do this, you could potentially get your property valued professionally, or you could even estimate this based on other similar properties you have seen. You should definitely keep in mind that your house price could be more or less than this figure, by the way!
2. Factor in the redemption figure on your mortgage
Now that you’ve estimated or valued a sale price of your property, you’ll need to figure out the redemption figure on your mortgage. Remember, this isn’t just the balance that’s on your statement. The redemption figure may include penalty charges if you’re in the initial period of a scheme, and it may include administration charges for closing off the mortgage account. It’s a good idea to keep a note of these, as you don’t want any hidden costs to jump out at you if you do find that you can afford to move. These costs will be added onto whatever your current mortgage balance is.
Plus, if your existing lender turns out to be a good option for buying your new house with, you may be able to avoid the redemption payment by transferring those terms to your new property. This is what’s known as a portable mortgage.
It’s also important to know when those redemption payments expire on your mortgage, as if you wait longer to sell your property, you may bypass the time period where you’ll need to pay these. This can help you avoid some of the hidden costs associated with selling your property and add a nice bit of extra cash onto your deposit, or if you’re moving somewhere that needs a bit of love, your renovation costs. New kitchen, anyone?
3. Check the legal fees for the sale of your home
Typically, legal fees for selling are lower than the costs of purchasing, but you can probably factor in a similar amount to what you paid when you bought your home. You’ll need to pay fees for a solicitor as well as fees to close down your details at the land registry for that property.
Most of the time, you can get a quote for both the legal fees of buying your new property and selling your existing one. You’ll need to factor this cost in, as well as the fees mentioned above, into your moving costs. Moving day champagne might have to be put on hold if you forgot about this one.
4. Calculate your sales proceeds
Once you’ve assessed the above costs, you can calculate the amount of money you have to work with by starting with your sale price and subtracting the redemption figure and legal fees to get a figure for your sales proceeds. This is the figure you’ll need to use in order to plan the purchase of your next property.
5. Factor in fees for purchasing your new property
Here we go again! You’ll know from buying your existing home that the figure you’ve got from your sales proceeds can’t all go to a whopping great deposit. You need to factor in the cash payments you need to make, such as legal fees, disbursements and land registry costs that your solicitor will collect from you. This also includes any costs associated with your mortgage as well as getting the property inspected.
It’s also essential for you to factor in Stamp Duty Land Tax, which you may need to guess at this point as you may be guessing the purchase price of the kind of property you’re able to afford from the figures you’ve already got calculated. You can reshuffle your budget once you’ve calculated this cost, which can make your final estimate a bit more accurate.
Not only will you have to calculate and factor in the above fees for your new property, but you’ll also need to take off potential renovation costs. At this point it can be difficult to estimate if you don’t know what kind of property you’re going to purchase, but every home is different, and you might fall in love with somewhere that needs a bit more attention than a fresh coat of paint.
6. Add on any additional savings you’ve accrued
Don’t forget to add in any money you’ve saved towards your new property to the final figure, as this can help bump up your budget. It’s also a good idea to factor in any money you’d like to keep aside as a reserve, as if something goes wrong or you run into an unexpected additional cost, you might need it!
If you’d like to pay off any existing debts with those savings, for example credit cards or car payments, it might also be worth taking this into consideration, as it may increase the amount of money that mortgage providers are willing to lend you as you’ll have fewer outgoings each month.
7. Buy your new home!
Now you’ve calculated the figures above, you can find out your deposit, and in turn, find out how much a mortgage provider is willing to lend you. This figure will help you decide just how much you can afford.
How Can I Help You?
My name’s Gareth (Big G for short), and I’ve got over 20 years’ experience within the property industry. I know that moving out can mark a milestone, whether that’s adding an extra room for a new addition to the family, moving closer to that dream job you finally landed or downsizing and reaping the rewards. It’s not an easy feat, but you don’t have to do it alone!
I’m here to help you sell your property and purchase your new one. If you’ve got a question or would like to know more, give me a call on 01905 426000 and we can chat about where you’d like to go next.
Written by Gareth Evans, Mortgage Adviser & Director