Trading up advice

M

mtm

Guest
Looking for the thoughts of the community here on trading up. Ok, here's the scenario.

We bought a 3 bed semi in 2005 for 340k and now thinking of trading up due to growing family. The house is now worth approximately 300-310k (down from a peak of 390k). We currently have an outstanding mortgage of 300k, so although we are not in any real negative equity, we'd still be worried that houses will drop further. We should have about 20k in savings when we wish to approach for a trade up mortgage. I'm in the fortunate position of having been promoted recently, in a secure job, and with my wife's part time work we would have a combined gross income of approx 105k. We would be looking to buy a four bed for between 380k - 420k. We're on a tracker of 2.15% on current mortgage and we'd have the option of converting attic if needed, but this would not be a long term fix (4 kids, 1 on the way - and delighted btw).

My question is this. Should we be approaching the banks now for trading up, is it reasonable to expect a positive outcome, should we sell or rent current house and with all the talk of property taxes and possible stamp duty scrapped is it mad to think about moving at all and live in cramped abode for a year or two. Would really love to here your opinions. Thanks.
 
I would think about staying where you are especially with number 5 on the way! (congrats btw!!)

If you were considering a property @400k... banks are lending max 92%, so you would need deposit of roughly 30k alongside stamp duty of 20k so you'd need to get that together 1st (assuming when/if you go to sell the sale price matches/exceeds mortgage)
 
You have a secure job, very good income.

Have a look at the numbers involved. Talk to the bank about what kind of mortgage you will qualify for assuming your house sells. I'd put the house on the market and keep an eye out on potential buys. If the house sells, you can move on. If it doesn't it becomes a more difficult decision.

If you only qualify for a 90% or 92% mortgage and you also need legal fees, stamp duty etc you must take these into account when looking at the figures.
 
Thanks for that. It's getting both the stamp duty and deposit together within a reasonable time, if we were to move, without using creative accounting (family/credit unions). Does anyone have a view on whether they think stamp duty will be reduced come next budget, as there seems to be the stoking of such an argument in the media at the moment after the McCarthy report?

Is there any evidence of banks lending more than the 92% at the moment. I understand some English lending institutions offered over 100% loans to certain people in the 1980s property crash there, to cover the purchase of a new home and the existing negative equity on the house being sold - I suppose on the strength of an eventual property market recovery. I can't see the problem, certainly if job security and repayments would not be an issue.

Thanks Luckystar. I completely get the 'stay where you are' advice. There might be something in waiting until we've adjusted to one change before getting into the messy business of moving. It's just the space issue.

Vanilla, you are right. If we can't sell we'd have to look at renting out. I presume we'd lose the tracker at that stage on this property and go to investor rates.
 
A good friend of mine and her husband had loan approval in the order of 950k last Autumn. They recently found a property that they liked and went to renew the approval. Their financial and personal circumstances were unchanged other then the fact that their own house had since been sold and cash received.

They were applying for €450k this time around and were turned down - not even one euro offered. The reason: They had 4 kids and fell outside policy .....
 
I can't see Stamp Duty coming down or if it does only slightly as the Government has such as big deficit and need all the tax revenue they can get. A property tax should in theory mean that Stamp Duty should come down, as in the UK where the local Council Tax means Stamp Duty is set very low. But if this is going to happen I can see the Government draggiing it on for as long as possible. You have assume that it isn't going to come down so you make you financial arrangements on the current situation, then if it does it is an added benefit.
 
Looking for the thoughts of the community here on trading up.
I'm in a not dissimilar position and I am waiting until after the budget before making any definite decisions. The kids are all back in school in a few weeks so I'm hoping to be moving ideally next April/May.
They were applying for €450k this time around and were turned down - not even one euro offered. The reason: They had 4 kids and fell outside policy .....
That sounds a bit crazy, which bank was that?
 
A good friend of mine and her husband had loan approval in the order of 950k last Autumn. They recently found a property that they liked and went to renew the approval. Their financial and personal circumstances were unchanged other then the fact that their own house had since been sold and cash received.

They were applying for €450k this time around and were turned down - not even one euro offered. The reason: They had 4 kids and fell outside policy .....


People were quoting loan approval values as if they were status symbols back then!!
The truely wealthly don't need loan approves!!

I would say anyone trading up by taking on more debt is mad in the current enviroment.........we still have a long long way to go to get out of this mess. In the meantime...

  • Tax is going up.
  • Beneifts are going down.
  • Unemployement is going up.
  • Job Security is coming down.
  • Income is coming down/ bonuses are no longer.
  • House prices are still way over priced.
  • Interest rates can only really go up.
  • Banks are getting back to normal lending practises....3-4 x income 90-80% loans.
  • The second hand and rental market are satuated, on average taking around a year to sell your home.
Imagine going to the bank and saying ....er i can't sell my house so i'm going to rent it.....give me a new loan for a second property please?

This actually translates to " I can't sell my home unless I sell for a price that leaves me in negative equity or at a price that means i can't trade up....but i still want you to take a very large risk and lend me money in the current very unstable enviroment"

I know what i would do if was a bank.........Give these people nothing!!
 
I agree with some of your points DT but disagree on others. We are the same position and looking at renting our current property and trading up.

We've had our property valued at about €300K and the exact same property went on the market about 3 weeks ago and sold for exactly that amount.

The banks will check your property in its valuation and its not hard to find out if your type of property is a good investment or not, and that is how they will reach their decision.

I think its best to take a more balanced view on these things and not think that no one can sell their property and are over stretched. There is still a lot of people out there in good jobs who can afford a mortgage and trade up. Prices have gotten reasonable and affordable again and in my opinion depending on the area are bottoming out. The next 12 months could be a good time to find a "home". I remember before when prices were falling some people sat back thinking prices would drop and drop and they didn't and before they knew it they couldn't afford the type of property they wanted. I fear this could happen again.

To the original poster I would go and talk to your bank, see if you can get approval in principal for 6 months. At least you have that and view some properties, and if there is something you really like for you and your family then at least you know what you can afford and in a better position to go for it. Anyway, if you buy new SD doesn't come into play. By the time you make your purchase you may have saved more and the budget could have taken place anyway. We are now in Aug so say if you get it in Sept you will have till Feb 2010 and then you could just apply again if you haven't seen anything.

Buying a family home is completely different than buying an investment property as other factors come into play. And it is for this reason that homes in very good areas with gardens etc tend to fair better than others.
 
I agree with some of your points DT but disagree on others. We are the same position and looking at renting our current property and trading up.

i'm just asking the OP to ask the question to them selves....Why rent? What yeild are you getting after tax? Would you not be better taking the equity and putting it in a bank? How do you plan to pay off the captial?

We've had our property valued at about €300K and the exact same property went on the market about 3 weeks ago and sold for exactly that amount.

How do you know what price it sold for? Asking price isn't selling price....

The banks will check your property in its valuation and its not hard to find out if your type of property is a good investment or not, and that is how they will reach their decision.

Correct, and from what I hear people are shocked at what the bank are coming back with and can't believe the "tough" (realistic) valuations.

I think its best to take a more balanced view on these things and not think that no one can sell their property and are over stretched. There is still a lot of people out there in good jobs who can afford a mortgage and trade up.

Of course but there aren't many and they will be squeezed for more taxes less beneifits/university fees etc later in the year.


Prices have gotten reasonable and affordable again and in my opinion depending on the area are bottoming out.

And in my opinion they have plenty of room to fall alot further.

The next 12 months could be a good time to find a "home". I remember before when prices were falling some people sat back thinking prices would drop and drop and they didn't and before they knew it they couldn't afford the type of property they wanted. I fear this could happen again.

I don't believe there will ever be a rush again which was fuelled by the banks, developers and the goverment. They (we) all got burnt and it won't happen again. In other countries when the bubble burst it took 10-15 years to sort its self out........and my goodness what a bubble we had!!

I have no problem with people buying a "home" at what they see is value. But whats the obsession with keep one to rent/having an investment property?

If they have thought things through and are getting a good yeild/strong capital appreciation then fair enough.....but most talking about this haven't.

They are doing it because they can't sell it at a price they "need". The banks will read them like a book and see the risk and say no way. May be not to ever one but most. (Hopefully)

Buying a family home is completely different than buying an investment property as other factors come into play. And it is for this reason that homes in very good areas with gardens etc tend to fair better than others.

I agree its a good time to buy for some who are happy with the price. BUT getting yourself in to more debt , having a second property, in this unstable enviroment is very risky and the banks will make it very difficult.

Of course some people in strong financial positions will be sucessful but the number of hoops you have to jump through to get there has increased massively.

I don't see that the OP is in such a strong financial position tbh (given the information he has given) and needs to consider why he wants to rent out his current home.

I don't believe its because it a sound investment with strong captial appreciation and/or yeild i think its because thats the only hope of trading up they clings to, like many others.

The goal posts have changed......it isn't that easy any more........
 
Looking for the thoughts of the community here on trading up. Ok, here's the scenario.

We bought a 3 bed semi in 2005 for 340k and now thinking of trading up due to growing family. The house is now worth approximately 300-310k (down from a peak of 390k). We currently have an outstanding mortgage of 300k, so although we are not in any real negative equity, we'd still be worried that houses will drop further. We should have about 20k in savings when we wish to approach for a trade up mortgage. I'm in the fortunate position of having been promoted recently, in a secure job, and with my wife's part time work we would have a combined gross income of approx 105k. We would be looking to buy a four bed for between 380k - 420k. We're on a tracker of 2.15% on current mortgage and we'd have the option of converting attic if needed, but this would not be a long term fix (4 kids, 1 on the way - and delighted btw).

My question is this. Should we be approaching the banks now for trading up, is it reasonable to expect a positive outcome, should we sell or rent current house and with all the talk of property taxes and possible stamp duty scrapped is it mad to think about moving at all and live in cramped abode for a year or two. Would really love to here your opinions. Thanks.






A couple of points:
  • Talk to some banks early about you intentions, but it is likely that they will want to know your true financial postion (crucially the price you would get for your house), which leads to =>
  • You will only know what you will get for your house until it is on the market. Current visible asking prices are well above the actual prices achieved.
  • Sell your house. If anything good comes from this mess it might be the demolition of the all too widespread belief that you don't sell property, you "accumulate as you move up the ladder". "Daimonds are forever", not property. Besides, I don't think you would have much luck refinancing your current house on an investment basis and then getting another (presumably high LTV) mortgage for another PPR, unless there is 200-300k lying around that you didn't mention.
 
DT, it sold for that price. There were 3 bidders in the end.

It is good that people have to jump through hoops, things have gone back to what they were. I had to save to get this property and had to put down over 10% in a deposit at the time. It was truelly madness for a few years. It was a given at the time you had to save for a few years before buying not just walk in and ask for a 100% mortgage.

Timber, I agree it is unlikely we will be able to keep his current property based on what the OP has said of his current finances.
 
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