Selling to trade down - advice...

[mike79]

My partner and I are looking to sell our current home (30-40k equity) and trade down.

We would be looking to get our 2nd mortgage on a place around 250k.

As I understand it, without much by way of deposit, our home would have to go sale agreed before we could put an offer in on another place - or we would have to pass stress tests to prove we could afford to maintain the current mortgage and the 250k mortgage at the same time for a period of time?

 

[Palerider]

Recommend you do not sign a contract on your new home until you have a contract for sale signed by all parties in place and 10% deposit paid.

A new place entails costs such as estate agents fees on your sale, getting your current house sale ready, painting etc,

Your new place will have stamp duty payable of 1%, cost to register a charge of €700 on house values from €200k - 400k, ( it is on a scale ), solicitors fees, vat, searches, moving costs and then a cost to get your new place the way you want it, maybe furniture etc, not sure if freeing up €30k ish is a good enough reason to trade down, I don't think you are freeing up as much as you think.

 

[mike79]

Thanks, Palerider.
Do I understand you correctly that stamp duty will be 700?

Could you elaborate on why you recommend what you do? We are essentially looking to move on the basis of the equity currently in the home?

 

[Leo]

Do I understand you correctly that stamp duty will be 700?

No, stamp duty is 1% of the purchase price, the €700 is for Land Registry transfer fees on the purchase. Additional fees payable to your solicitors including professional fees, searches, etc will be in the range of €1,500-2,000, maybe less maybe more depending on location and complexity of the purchase.

Then add another €1,500-2,000+ for solicitors fees/ outlays on the property you're selling plus something in the region of €450 advertising costs +1-2% of the sale price for estate agent fees.

Could you elaborate on why you recommend what you do? We are essentially looking to move on the basis of the equity currently in the home?

Not sure I understand that last point. Are you looking to move just so you can bank the current equity. The more typical motivation is moving to an easier to manage space with smaller mortgage and lower running costs.

 

[mike79]

Thanks, Leo.
We have talked to some EAs so have a ballpark as to some costs - 350 for marketing; 1% (6k ish) fee. Hadn't considered the Registry fee tbh.

We are looking to move to lower costs in the immediate term - with a view to renovating down the line.
As we could achieve 30k or so from the sale of the current property - we would effectively like to use that equity as most or all of our deposit on the new property.

 

[RedOnion]

Hi Mike,

If I understand it correctly, you'd be reducing mortgage from c. 550k to 250k, so this is about more than releasing a bit of equity?

As others have pointed out, don't underestimate the costs of moving. Or the stress! I'm in temporary accommodation at the moment between houses, and it's been a longer and more stressful process than I ever imagined at the start.

Back to your original question. It's possible to make an offer earlier, but your offer will be 'subject to sale' of your current house. That makes your offer less attractive than cash buyers, or someone mortgage approved. So, it's going to depend on the sellers circumstances. Say for example, you're selling in a very attractive area with lots of demand, and buying in slower market, it might not be an issue. But generally in the current environment, unless there's something about the house there'll be other offers there.

In my own experience, when I was starting out looking for a house, agents would only take me seriously once my property was listed for sale, but they really only took notice once I was sale agreed.

 

[Palerider]

The post isn't very clear but it appears you are trading down from a property worth around €600k and purchasing one for around €250k, it is not all about the equity so and more about release of repayment capacity currently tied up in the existing larger mortgage, that makes more sense as a motivation assuming you get an area that you like and that meets your needs.

May I suggest you do a spreadsheet outlining all costs as a starting point to understanding where the value lies for yourselves personally.

 

[mike79]

Hi Mike,

If I understand it correctly, you'd be reducing mortgage from c. 550k to 250k, so this is about more than releasing a bit of equity?

As others have pointed out, don't underestimate the costs of moving. Or the stress! I'm in temporary accommodation at the moment between houses, and it's been a longer and more stressful process than I ever imagined at the start.

Back to your original question. It's possible to make an offer earlier, but your offer will be 'subject to sale' of your current house. That makes your offer less attractive than cash buyers, or someone mortgage approved. So, it's going to depend on the sellers circumstances. Say for example, you're selling in a very attractive area with lots of demand, and buying in slower market, it might not be an issue. But generally in the current environment, unless there's something about the house there'll be other offers there.

In my own experience, when I was starting out looking for a house, agents would only take me seriously once my property was listed for sale, but they really only took notice once I was sale agreed.

Apologies, but no - I mustn't have worded my original post very well.
My current home would expect to get 330k (maybe 345k in a bidding war) - by the time we're selling, if the market largely remains as it is today, out principal would be approx €295k.

We would be selling in a fairly attractive commuter area. EA would expect a pretty quick sale. We'd be moving further out to a fixer-upper with the intention of renovating over time.
I had originally considered selling - then renting for a period - in order to not be in a chain. Might have to resurrect that consideration....