Buying Second Home

Hi,


Just looking for some advice on how the process works when you are buying your second home.
I'm 29 and have my apartment with partner for 5 years, and we'd like to start thinking about upgrading to a house now in next couple of years.

Unfortunately, we're not having much luck getting a decent downpayment together, and are seriously stressed about the amount of Stamp Duty we will have to pay. Considering that we're talking in or around 30-40 K for stamp and deposit, how do people manage to upgrade these days?

Can these amounts be included in the total of the new mortgage that we will be applying for? Or there people out there who are actually capable of saving this amount of money.
As we're both without bonuses and pay raises during the current climate, we're finding it harder than ever to put money aside.

Sorry to sound so naive, in the five years that have passed since the last mortgage approval, I've blocked it all out due to it being a seriously stressful time! and that was without Stamp.


Please help...many thanks

If you buy a new property then you don't have to pay stamp duty.

And be sure to sell your existing property BEFORE you sign contracts for the second property.

Thanks Howitzer. Unfortunately it looks like there is a good chance that we will be buying a second hand property- the areas we are looking in seem to have very few new developments.

So back to my original Q of- how do people finance a move such as this? When I terminate the contract on my present mortgage, and owe the bank outstanding balance, can this sum and the stamp duty/downpayment be re-financed into the second mortgage? Or something....
thanks

If you're lucky enough to owe less on your mortgage than you get when you sell it, then that'll give you a nice lump sum to put towards deposit/stamp duty.

In ths current climate, banks are not lending anything like they were - getting more than 92% of the purchase price is rare. And banks will not lend you money for stamp duty.

It's bad for lots of people I know.....I'd love to move but in same position re. lack of money for stamp duty. Also cat in hell's chance of selling my apartment!

kittykat1980 said:

Thanks Howitzer. Unfortunately it looks like there is a good chance that we will be buying a second hand property- the areas we are looking in seem to have very few new developments.

So back to my original Q of- how do people finance a move such as this? When I terminate the contract on my present mortgage, and owe the bank outstanding balance, can this sum and the stamp duty/downpayment be re-financed into the second mortgage? Or something....
thanks

Click to expand...

That's pretty much it. You typically reapply for a new mortgage, which will use savings and equity to guage how much you can borrow. The balance of the previous mortgage is cleared with proceeds of the sale. You then draw down the new mortgage, buy your house and start making payments on it. In the days before a property crash, bridging loans were often used. I'm guessing this practice has stopped now.

With regards to financing the move itself, you have three different methods of getting the cash together.

1. Equity in your home - Have a look at what other similar houses on the market are looking for. With nothing shifting in the present market, you'd probably need to take 10% off that value (pure finger in the air calculation). Take another 1.5% off that for selling costs and finally subtract the outstanding mortgage from that. The remainder is the equity in the home you can carry forward for the new house purchase.

2. Savings - Self-explanatory.

3. Borrowing - It's probably not advised, but you could seek to cover the deposit/stamp duty cost with credit from family/friends/non-ICB affiliated credit unions/etc.

After taking the above into account, you should have an idea of the kind of deposit/stamp duty fund you have. You won't get more than an 92% LTV loan as well.

Oh, and one more thing. To be paying €30k stamp duty, you'd need to be paying €550k for your house. With a buyers market, maybe it's not necessary to pay that amount of money for a family home, therefore you'd lower your stamp duty bill?

Simple, if you have no equity in yr house you will need to save for a deposit and stamp. If you have equity then that can be used towards yr new purchase.

How do you know if you have equity? This is guess work because you don't know what your property will sell for until you sell it.(and the fact there is no publically available information on actually selling price makes these even worst).

If you are serious about moving on up then have a good look at what yr place would realistically sell for. Compare simular properties asking price, knock 30% off, compare this to your remaining mortgage and see how much equity you would have.

I also thinks its worth benchmarking your estimate of value by asking the question how much would a buyer need to earn to buy my place? Work on a 3.5-4 times salary and add on stamp and assume they will only get a 92% mortgage.

So for example if overall they would need to borrow 300k, they would need to earn 75-85K. Is this realistic? Would yr place attrack people who earn these amount?

moneyhoney said:

It's bad for lots of people I know.....I'd love to move but in same position re. lack of money for stamp duty. Also cat in hell's chance of selling my apartment!

Click to expand...

I disagree with this. You could sell your apartment I am sure BUT what you are implying is not at a price that would enable you to move on?

Anything will sell at a price which is acceptable to the buyer and bank. It might not be a price that the seller wants to accept.

Mr DT said:

I disagree with this. You could sell your apartment I am sure BUT what you are implying is not at a price that would enable you to move on?

Anything will sell at a price which is acceptable to the buyer and bank. It might not be a price that the seller wants to accept.

Click to expand...

Well you have a point there. I don't have 20 - 30k saved for stamp duty - I am trying but in common with everyone it's hard to save with pay cuts etc. going on. I'm not looking to make a massive profit on selling my current home. I bought in 2001 when prices were a lot lower but the value hasn't increased by much (about 30k going on current values on property websites) so a deposit on a new place would swallow that up.

I was just making the point to the OP that trading up, in the current market, is difficult.

If you are planning on trading up, you should be able to save something.

When you trade up, you're mortgage repayments will be much higher. So if you are able to afford the higher repayments, then you should be able to save the difference between these future repayments and your current repayments. If you cant, then you cannot afford to trade up.

e.g Person is currently paying €1,000 per month in repayments. They wish to trade up to a property where the repayments will be €1,600 per month. So they should be able to save at least €600 per month now. Wont cover all your trade up expenses, but its a good start and you can accumulate a few grand quickly.