How much will you need to borrow to take the next step up the property ladder? This is a question one reader posed to our expert Jack Tutton of SJ Mortgages. Here’s what he had to say…
The Question
I’m a homeowner and have a house which is valued at £450,000. I live with my wife and two children. We would like to move and my wife has her heart set on some new build homes in a nearby estate. The price tag is £800k.
We have around £220,000 left on our mortgage for the current house. My salary is £70,000 a year and my wife works part time and earns £20,000. We have £10,000 in savings but would rather not touch this unless we absolutely have to, as it’s our emergency fund. We pay £1,017 per month currently.
Our current mortgage is 1.99% – but I know mortgages are now more expensive. Are we dreaming too big?
Jack’s Answer
Thank you for your question, based on the information it seems that purchasing a new build home with a price tag of £800,000 would be challenging given your current income.
However, it’s important to speak to a mortgage adviser to conduct a comprehensive review of your situation.
Firstly, let’s consider the affordability of the new home. With your current mortgage balance of £220,000 and a house valued at £450,000, you have approximately £230,000 in equity.
If you were to sell your current home, this equity could be used towards the purchase of the new home. However, you would still need to secure a mortgage for the remaining amount, which is £570,000 (£800,000 to £230,000).
From the mortgage perspective a lender will normally offer a mortgage of between 4.5 to five times your gross annual income which would give you a borrowing amount of around £405,000 to £450,000.
It’s crucial to also consider other costs associated with purchasing a new home, such as stamp duty, legal fees and moving costs. These additional costs will impact your current situation.
In summary it currently looks difficult for you to be able to purchase this property, but we would be more than happy to conduct a full review for yourself to determine what you can and cannot do and make a plan moving forward.
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Meet our experts Scott Barron and Jack Tutton
Scott and Jack are co-founders of SJ Mortgages. With over 15 years industry experience and after working for large corporations, they decided to set up SJ Mortgages with the aim to provide their clients with expert advice alongside a bespoke service.
Being a totally independent whole-of-market brokerage enables them to be completely customer focused and deliver a great client outcome. Being whole of market means that they work with over 120 mortgage lenders and have access to over 10,000 products.
A mortgage is many people’s biggest financial commitment; in the current difficult mortgage market Scott and Jack are here to help you navigate the process and get you the best possible result.
Please click this link to their website to find more information, access to a calculator, blogs and to get in touch with SJ Mortgages.
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