Mortgage advice please

[andrewc]

I know I should talk to a financial adviser, but there are so many well informed people on this forum I'll start here.

I paid my current mortgage off 5 years ago, 9 years early. The flat I bought is realistically  worth about £70K in the current market.

I can buy a larger flat in the same development for approx £100K.    I'll need a mortgage to do it, but want to get something that won't penalize me if I'm able to pay it off early.   

I'm currently 46, have no dependents or outstanding debts. 25 years with my current employer. Salary approx £35K. Cash savings to fund a deposit and am paying regular sums into company sharesaves.

Would one of the offset mortgage types be suitable ?  I'm thinking of banking the proceeds from the sale of the existing flat until I'm past the period when they can hit me with early repayment charges and then using them to clear the residue of the mortgage.

All advice welcome, I've not looked at this sort of thing in years.

[iakobski]

Sorry if I'm being thick, but why don't you use the proceeds from the sale of your flat as downpayment on the new one? It wouldn't make sense having savings in the bank if you still have a mortgage.

Offset mortgages tend to be more expensive than what you can get on normal deals, but they are great if you have intermittent income as you can pay in at any time and still have the option of taking it out again without notice. They are also quite good if you tend to save up for big purchases as you effectively get the mortgage rate on your savings, tax free, with instant access.

[andrewc]

I'd be planning on buying and moving into the new flat before selling the old one.   The market here is quite seasonal as I'm immediately adjacent to a university campus. Best time to sell is when Mum & Dad are looking to buy their kids somewhere to live for the next 3 years.

[Mrs Pingu]

And presumably the best rates are still being offer to those with the lowest loan to value ratio.

[Rapples]

Why not become a capitalist.

Offset mortgage

Rent existing flat to Students

It's on the same development so no letting agents fees etc

Stick rent in savings account to reduce interest/term of mortgage

If the proverbial hits the fan you have a buffer of savings giving you time to sell the flat

Simples

Just a thought

[border-rider]

I suppose it depends how confident you are about the value of flats sustaining in the future.  You'd have to balance the rental income against not only the mortgage and upkeep costs but also any fall in value.

If you're just selling one and buying another then the value-at-risk is just the differential.  Since that's only 30k and you're unlikely to lose more than a certain percentage of that, it's a lot less risky than punting 170k into the property market just now.

I'm not sure I'd move into buy-to-let just at the mo myself, though I have just bought a house to live in (accepting that I'm likely to be losing money on that in the next few years, but since I'm not buying it except to live in, don't intend moving for a long time and we don't have a mortgage it's not that much of a worry)

Flats seem to be falling in value quite fast at the moment, but I suppose that it may be that where you are (with the university factor) there's a more stable market.  

[andrewc]

Don't think I fancy the hassle of becoming a slumlord 

Prices seem to be dropping slightly on this estate, but I'm not looking for an investment, just somewhere cheap an convenient to live. There's a glut of newbuild shoeboxes in the city, but they are stupidly priced in most cases, and Georgian conversions, while nice are pricier.

[Jacomus]

Why move? If you are happy where you are, seek to maintain IMO.

[Pancho]

I'd agree with Jacomus.

In these difficult times, better to be shedding debt and accumulating assets and investments. If you're pretty damn close to being mortgage free, I'd do that first. If you still want to move at that point, do it then.

[andrewc]

I am mortgage free, but want to live somewhere where my kitchen isn't part of my living room, and where I don't need to carry my bikes up or down 8 flights of stairs everytime I use them.

[closetleftie]

If you are mortgage free, increasing your standard of living by living somewhere bigger is certainly reasonable. You are clearly buying the flat for somewhere to live (much like MV) and market trends therefore are not that relevant to you.

The offset mortgages that I looked at a year or so ago all were very flexible with no repayment penalties. But TBH, for a relatively small mortgage with 70% equity in hand it may be reasonable just to go on a variable rate of some description, to get the lowets possible early repayment penalties. My guess is that the effect of having a very low LTV mortgage would outweigh most gains due to offsetting against a larger mortgage, which would by nature have a higher rate attached.

[andrewc]

Hmm ,  well I went to look at the flat which caught my eye.  Perfectly nice, on the market for £105,000 which I suppose I'd have to make an offer against. Seller  says she put it up for sale on a whim and hasn't got a new property lined up herself, but wants to move as the estate is getting a bit run down (true, but not that bad!)

Phoned my bank (First Direct) for a chat about a new mortgage, first faux pas "Oh, you'll only give me a 16 year mortgage as my company plans to retire me at 62...  

 She made the comment that they don't provide bridging finance, which I suppose is essentially what I'm after,  but I don't see what they can do if I take out a mortgage ,  sell my current place and then pay the balance of the mortgage off in 6 months or  a year ?  

Based on a property value of £105,000 and a deposit of £28,000 over 16 years

75%    2.79%    -    2.9% APR        Arrangement fee £99    Monthly payment £498  No charges for overpayment or lump sums & no early repayment charge.

Does that sound about right ?    I suppose the next step is to get a mortgage offer & then find a solicitor to make the offer ?

[Feline]

I am not sure in your position I would sell a 70k flat to buy a 100k one. When you take into account all the costs of moving it will be a big % of the jump in value you will be making. On your income with a hefty deposit from selling your existing flat you would be able to afford a much larger jump in price and have yourself a very nice gaf for the future (and a good investnent). That's MO for what it's worth 

I still think the simple repayment mortgage is the way to go, but as you say make sure that any early repayment clauses are fair. I am relatively better off property-wise than everyone else I know who opted for some different kind of mortgage. I have the deeds to my 4 bed house in a safety deposit box 

[border-rider]

You make the offer yourself, through the estate agent.  But for goodness' sake don't go in at full asking price in this climate.  

You need to do a bit of research to see what similar places have *sold* for recently (not asking price - they're typically 10-20% apart; check the Land Registry data) and have that as your target price, ie go in well under (10% or more, maybe much more) and aim to converge on a price that's realistic.

[Accepting that if the owner doesn't really want to sell and you really want the place, you may have to pay over the odds]

If the vendor has nowhere to go you also need to make the offer conditional on her moving out within a set period, or it could drag on for years.  Again, if she's not really wanting to move this may be an issue.

all-in-all I'd be wary of anyone saying they are selling on a whim.  

[border-rider]

. I have the deeds to my 4 bed house in a safety deposit box 

These days it's all done via the Land Registry returns; the paper deeds are of historical interest only once that's been done.

[Feline]

. I have the deeds to my 4 bed house in a safety deposit box 

These days it's all done via the Land Registry returns; the paper deeds are of historical interest only once that's been done.

Yeah, although what I was meaning was that they are in my hands not a mortgage company I would rather not lose my paper deeds in a house fire etc.

[andrewc]

My existing flat is tiny and I'm fed up with the "open plan" living room/kitchen.  The one I was looking at is one of the largest flats in the development, there are only 10 that size and they don't come up very often.    It wouldn't be an investment purchase,  it's never going to be a trendy or desirable area, but they are well built, and even for Liverpool quite cheap for the amount of floorspace. Band A council tax as well....

I don't want to be paying a mortgage long term, I want something I can clear fairly quickly then, start stashing money into some sort of retirement fund, as I doubt I'll survive to retirement with my current employer.

[Pancho]

1. For the mortgage, search everywhere - inc all of market brokers and direct to lenders. Read the Ts & Cs. I'd be wary of variable rates as it's unlikely rates will stay low over even 5 years. But do some sums on that. 2.5 pc for a couple of years might offset 6 pc for a short time.

2. For the offer, research. Use the various houseprice sites for local info. Flats have been hammered recently. Don't offer anything too close to asking. And I'd deal direct with the seller - leave the EA out of it.

[Mrs Pingu]

As MV said, it does seem a bit odd this 'putting one's flat on the market for a laugh' business.
Personally I would go in with a clear head and try not to get your heart too involved in this one leading to you paying over the odds. Chances are that someone else in the same development (if it's a reasonable size) will want to move in a another few months, and they might actually really want to move, rather than just to see who bites, putting you in a better bargaining position surely. It might even turn out to be at a better time for you (i.e. a period when you could get your flat sold on rather than having to hang on until the start of the next uni year.)

[Polar Bear]

. I have the deeds to my 4 bed house in a safety deposit box 

These days it's all done via the Land Registry returns; the paper deeds are of historical interest only once that's been done.

Yeah, although what I was meaning was that they are in my hands not a mortgage company I would rather not lose my paper deeds in a house fire etc.

Assuming of course that your land is actually registered land of course. 

[Mrs Pingu]

I haz pointed out the interjection to the mods.

[Polar Bear]

I haz pointed out the interjection to the mods.

You were not the only one   

[border-rider]

Hmm ,  well I went to look at the flat which caught my eye.  Perfectly nice, on the market for £105,000 which I suppose I'd have to make an offer against. Seller  says she put it up for sale on a whim and hasn't got a new property lined up herself, but wants to move as the estate is getting a bit run down (true, but not that bad!)

Phoned my bank (First Direct) for a chat about a new mortgage, first faux pas "Oh, you'll only give me a 16 year mortgage as my company plans to retire me at 62...  

 She made the comment that they don't provide bridging finance, which I suppose is essentially what I'm after,  but I don't see what they can do if I take out a mortgage ,  sell my current place and then pay the balance of the mortgage off in 6 months or  a year ?  

Based on a property value of £105,000 and a deposit of £28,000 over 16 years

75%    2.79%    -    2.9% APR        Arrangement fee £99    Monthly payment £498  No charges for overpayment or lump sums & no early repayment charge.

Does that sound about right ?    I suppose the next step is to get a mortgage offer & then find a solicitor to make the offer ?

Quite a brave move buying whilst you still haven't sold your flat

I'd at least get it on the market and see how much interest there is at the price you think you'd get for it. 

[andrewc]

I could  handle the new mortgage without selling the current flat Mal, but ideally i'd like to offload it shortly afterwards and use the cash to pay down the balance.     It badly needs decorating and it would be easier to do that after I've moved out!

[border-rider]

It's harder to sell an empty place, and you look desperate (I've been there, in 1994, when we had 2 houses & a bridging loan  )

You might also want to be sure that the 70k you think you'll get isn't quite a bit less than that. That might affect how close to 100k you think the new place is actually worth.