How does a second mortgage work?

[Mummytobe85]

Something DH and i have been discussing of our future plans is to move to a bigger place hopefully in 2 years time...

We have owned our property three years this coming March and took out a mortgage... just wondering how a second mortgage works? we would love to own a three bed with a garden for the kids.

We also got savings and DH is hoping to get a better paid job next year so we can save up abit more, so just wondering do you need a bigger deposit? where does the money go when selling your house? is there solicitors fee's etc still involved??

 

[lovehearts]

Are you planning on selling your current property? If so then when you do the money will pay off the mortgage you have and anything extra will be yours which you can use towards your next purchase as a deposit. You can get 90% mortgages now which means a 10% deposit but I will say that if you can save 15% deposit or more you will be in a better position as the rates are better. You then go and get a whole new mortgage for your new house.

You will have solicitors fees for the sale of your current house and the purchase of the new house.

HTH x

 

[Mummy Bean]

Hey,

Ok so you need to work a few things first to determine roughly how much you can spend:
- What is your current house market value - Say £100,000
- How much Mortgage is left - £80,000
- your equity - £20,000
- + Savings - £10,000
- Total money £30,000
- then new mortgage is normally 3-4 x your joint salary, so again assuming your joint income per year before tax is £25,000 you can borrow roughly £100,000- so new mortgage with your money = £130,000

but there lots of things to consider when arriving at that final figure:
- the market changing a lot, so your current house cud be worth something completly diff in a few years!
- How much more of your mortgage wud you have paid of in the next two years?
- How much more can you save up in the next few years?

so fast forward to two years, firstly you have to find a buyer for your house, using an estate agent (so there will be fees for them to sell your house) then when you have a buyer, you have to find your house you want to buy.

when this is all in place and you come to complete on contracts the person buying your home will transfer the money to your solicitor, they will then pay off your current mortgage and hold on to anything left, then similanously you will pay any of your savings to them, and draw down your new mortgage...all of this money will sit in an account with your solicitor who will then transfer it all to who ever you are buying your new house off.

so you personally never see any of the cash.

i believe for a selling and buying a property you are looking at around £1000 estate agent fees, and somewhere (complete guess ) of around £3000 solicitors fees. then finally you have to take into consideration stamp duty which is 1% for properties between £150-£249k or 3% for properties over £250k.

i think that the main principle of it all. any questions feel free to ask. (i live in london so it may be
stuff here is ALOT more expensive then else where.)

 

[suzib76]

A second mortgage is a loan against the existing property in addition to the mortgage you already have.

 

[Mummytobe85]

Thank you everyone, we will be looking to sell this house in order to move... we would love to rent it out but dont think it'll be possible.

Im hoping that that we can pay more of our mortgage off when we're more financially settled... our goal is to pay another 15k off within the next 2 years. I know we can never afford London prices as its so expensive and we were lucky to get our property when house markets were down. It'll be good if we can sell it on for abit more but as Mummy Bean says just gotta see how the market is doing

 

[RachA]

When we moved we didn't pay off our 1st mortgage as if we had of done we'd of had to of paid an early redemption fee which was a stupid amount. What they did was to transfer the mortgage over to our new property and then we took out a second mortgage for the rest of the property value.

One of the good things about having two mortgages is that if you can then you can overpay both lol.