Hello, I bought a one-bedroom flat in 1997 for £45k in London. It's now valued at £235-275k. I owe the mortgage lenders less than £30k.

My mortgage repayments per month are £250. I wish to upgrade to a two-bedroom (£350k max) but am trying to avoid huge repayments. Is a £350k flat beyond my reach? What would you advice? I do not plan to rent out the extra room as I need the extra space as part of career change.

Asked by dawnoei

14 Answers

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Answered by John Stirling, IFA in Saffron Walden, ESSEX
Well, if yours is worth £275k, and the one you are looking to upgrade to is £350k, then your new mortgage would be [cost of new property] - [achieved selling price of your home] + [your existing mortgage] + [costs of buying/selling/moving] - [any existing cash you have].

So to put some rough numbers in;

£350k - £275k + £30k + £18k - £0 = £123k

I am pricing stamp duty at 3% of your purchase, and selling costs of 1.5%, and a bit for legals/moving/etc, and assuming you have no spare cash to put towards it.

So that would mean your new mortgage would be £123k, which over 25 years would be around £615 pm assuming a 3.5% interest rate. If rates rise that could go up a lot.

Obviously if yours doesn't go for that much then your new mortgage, and payments, would be more.

As to whether that is beyond your reach - you don't declare your income or expenses, so it's a little difficult to say whether that is possible, or affordable - but it isn't ridiculous compared to many (or my) mortgage, but it is quite a big jump from where you are now.

Does that help? | 05.08.12 @ 22:27
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by Syed Imran, IFA in Edinburgh, MIDLOTHIAN
There are several options you can work on. The best thing for you to do is rent out your existing property & move into your new property on a let to buy basis OR you can buy the new property on a buy to let basis but in that case you wouldn't be able to move into the new property. Which option best suits you depends on your INCOME, circumstances, desires, age, passport & aspirations. You can call me on my cell # 07545321393 or on my email address syed@financialoutlook.co to discuss further. Regards | 05.08.12 @ 22:45
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Thanks to both your replies. My take-home pay is £1650 per month, I have £5000 in an ISA, so yes, a £600 plus mortgage would be a big jump and a shock. I want to concentrate on having just one bigger flat and selling the current one. I am wondering if I should keep say, £40,000 from the potential sale of my flat as a back-up, in case I change jobs to a less full-time one. | 05.08.12 @ 23:34
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by John Stirling, IFA in Saffron Walden, ESSEX
Hmm, the old 'keep some cash back' plan eh? Well, if your net income is £1,650 then your gross is around £2,150 or so (or not?) - giving you an annual income of around £25k give or take, so whilst you would probably be able to get the mortgage I calculated above, I think you would struggle to convince many lenders (certainly high street) that you should hold back an additional £40k.

I definitely concur with you that one property is enough - your description of yourself yells out 'low risk', and gearing up to buy multiple properties isn't.

If you are set on this plan then you probably need to firm up pricing from local agents, you gave quite a wide range for yours initially, and my figures were assuming quite a benign valuation - if there is a bigger price gap between one and two bed properties then you may find it slightly beyond your reach and/or comfort zone.

The other elephant in the room that I haven't addressed yet is that you mention you are doing this for a career change; does the new career have a guaranteed income? If not, can I suggest perhaps trying it on a reduced scale, where perhaps you won't need a second bedroom, and you can prove to yourself that you can support a bigger mortgage before committing.

Of course beware that if the new career is self employed, you may struggle to convince lenders to lend you anything at all until you have a couple of years under your belt, so caution may not be an option unless you can combine it with your current career.

However assuming you decide to proceed, then the whole thing is probably quite manageable, and we'd be happy to assist if you so desire in sourcing the best solution for you - and going through your options to make sure you know what you are letting yourself in for.

Best of luck,

John
| 05.10.12 @ 01:53
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Thank you, John Stirling. Your advice has helped me re-evaluate what I need to do to avoid being in a situation where I would place myself "at risk" (ie easing away from my current permanent job to focus on one that it self-employed), given that I do not have a lump sum to fall back on. | 05.10.12 @ 09:32
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by John Stirling, IFA in Saffron Walden, ESSEX
Well, I am genuinely pleased to help; however if I have caused you to put dreams on hold then I apologise, because I absolutely do not want to be a grumpy old adviser who tells people what they can or cannot do.

I am sure that if you try, you will succeed in your new career, but there is no point in putting it all on the line if you don't have to. It's tough out there at the moment, and anything you can do to reduce the risks you face is worth doing.

Oh, and from a self promotion point of view - for readers of this Q&A - this is what we do, holistic advice that takes account of all your circumstances. You can find us on the web, and our phone number is on here under my profile.

Thanks for reading.

John


| 05.10.12 @ 16:42
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Thank you again, John Stirling. Rest assured, I am still pursuing my dream while keeping close to reality. It will be a busy rest of the year: selling the flat, finding a new one and continuing my current office job while training to be an alternative health practitioner. So the extra room will be for practice. | 05.10.12 @ 17:03
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by John Stirling, IFA in Saffron Walden, ESSEX
Aha, I did wonder. Yes, you'll be very busy, but it sounds to me like a staged conversion should be possible. I know several alternative health practitioners (Acupuncture) who have reduced their days in their 'real' jobs whilst increasing their private practice. It seems to take around 24 months to get to the point where full time is a practical proposition financially. Have you considered renting some office space near you? - you will probably end up paying about the same in total as the cost of an increased mortgage, but without the risk of it being your mortgage, and without the costs of moving.

It is of course slightly less convenient to have to go out of your home to meet clients, but for some people that sense of separation of work and home life can be a benefit too. | 05.10.12 @ 17:21
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Thanks again. Good idea about renting office space but my employers aren't keen on reduced working days and our office is in Knightsbridge, so finding office space for my preferred alternative career will cost an arm and a leg. Oh well. | 05.10.12 @ 17:33
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by John Stirling, IFA in Saffron Walden, ESSEX
Hmm, I'd rent close to home, rather than the office. If you are going to be weekends only initially then you may even be able to find someone with a weekday practice who would share with you at the weekend, so lowering costs even further, and providing you with working accommodation which really fits what you are trying to do.

I know some alternative health practitioners act as a cooperative in terms of their working accommodation, and I would have thought that finding a coop where they will accept you as a 'trainee member' would be worth a try. Of course what works out here in the countryside isn't necessarily what works up there in central London, but worth a go? | 05.10.12 @ 17:44
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Thank you, John. That's a very good idea. I am hoping to become part of a community of practitioners and yes, it will definitely be worth trying to see if it might be possible to work with them. The two-bedroom is still the next step. The good thing is that my mortgage lender yesterday said it will provide me with the loan to buy a flat up to GBP350k. Ideally, if I find a two-bedroom for less, this will reduce my loan and repayments. Am now looking to see if there are lenders who can provide better deals. | 05.11.12 @ 11:45
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
Answered by John Stirling, IFA in Saffron Walden, ESSEX
That is good news, and almost certainly a good option (depending on your existing lender of course). If you would like an independent view of the 'best' option for you (I would guess you should look for a fixed rate, capital repayment over a reasonably long term, low reversion rate, which is the rate it goes back to after the end of a 'deal' - but without detailed personal information one can't be sure) then drop me a line directly - johns @ acwealthmanagement.co.uk. If you ask us to act then I have a chap who is something of a mortgage specialist and lives in North London (he calls it South Essex, but for us country chaps it is clearly London!) - alternatively we can do everything by phone. Our costs are reasonable, and usually covered within a lender 'procuration fee'. No obligation for chatting. Best,

John | 05.11.12 @ 12:05
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by dawnoei
Hello John, thank you for your time and advice. I will certainly keep A & C in mind.

And London certainly isn't South Essex...,Oh dear! | 05.11.12 @ 12:11
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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Answered by christopher
I believe you should rent out your existing property and get relocated in your new property. However, it depends on your income, family circumstances and other factors as well. Also, it’s hard to get permission to convert your one bedroom flat into 2 bedrooms, since it require your local council's permission. However, for your help you can contact Plazaestates firm whose professionals could guide you in the right manner. | 01.07.14 @ 12:36
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$commenter.renderDisplayableName() — {comment} | 11.21.17 @ 04:35
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John Stirling
John Stirling, IFA in Saffron Walden, ESSEX

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