Financial Considerations When Upsizing Your Home
New arrival on the way? or your house is simply too small? . Moving to a larger space can solve many problems and bring new opportunities to your life. However, it is essential to prepare yourself financially before making this significant change. In this blog, we will discuss some financial considerations when upsizing your home.
The best thing to do is sit down with your partner and dissect all of the following costs. You have two elements to the financial costs of upsizing - Moving costs and Ongoing costs.
Moving Costs: These will include Estate Agents fees (between 1-2% of your house value), Land tax (Used to be known as Stamp Duty) click here to access an online calculator, Solicitors fees (usually around £2000 for selling and buying the next house) and removal costs (allow £1000 on average).
Porting Mortgage: If you are currently within a product period (fixed or tracker) with your existing lender then there is likely to be a penalty if you sell your property and pay off the mortgage. In this scenario most people look at what’s called porting their existing mortgage. This means that when you sell, the balance of your mortgage transfers to the next property you're buying, then you continue to pay the mortgage under the same terms as you are now. If the money you make off your existing property (selling price - mortgage balance - moving costs = profit) isn't enough to buy the next property then your existing lender may be able to offer you a secondary mortgage that runs alongside your existing mortgage. This is something you should determine as early as possible in this process. It is pointless moving forward with anything else until you have found out what your existing lender can offer you.
Fixed rate ending soon?: If you are thinking of moving soon and it's likely you'll need to obtain a bigger mortgage then my advice is don't renew your mortgage product. It's important to keep your options open as you may be able to get a far better deal on the bigger house. In this case it's important to speak to an independent Mortgage Adviser as soon as possible.
Determine your ongoing budget: Upsizing comes with additional costs and expenses that you need to keep in mind. It is essential to determine your budget before you start looking for a new home. Consider the extra costs, such as higher mortgage payments, maintenance and repair expenses, larger utility bills that will come with the larger home. You should also account for upgrades and renovations that you may require. A good Mortgage Adviser will help you budget plan to make sure you can afford the move and then the ongoing higher outgoings.
Your Deposit: If you are looking at a larger home, the bigger the deposit the better as it'll keep your mortgage payments down. Assuming your the bulk of your deposit will be coming from the sale of your current house it's a good idea to ask an Estate Agent our to value your property to determine roughly how much you'll have for a down payment on the bigger house.
Check your credit score: A good credit score is essential when it comes to applying for a mortgage loan. A low score can affect your interest rates and result in higher monthly payments. Ensure you have a good credit score by checking your credit report and addressing any problems you find. Try to pay down debts and do not make any large purchases before applying for a mortgage.
In conclusion, when considering upsizing your home, it's vital to be aware of the costs associated with it. Keep in mind that doing your homework and being financially prepared can make the transition to a bigger home smooth and stress-free.
We have superb Mortgage Advisers who can help you with all of the above today. Give Keystone a call today on 01244 836636.