Are you itching to move up the property ladder? Desperate for more space, or fed up with where you live? This week’s blog is for you.
Here are three ‘dos and don’ts’ if you’re looking to upsize your home within 5 years.
DO – Build cash savings to upsize
When looking to move, cash savings are useful to give you a bigger deposit and also meet stamp duty, legal and survey costs.
Having extra cash will make you a more attractive buyer and could help you get a reduced price on your new home. Remember, the larger your deposit as a % of the house value, the better the mortgage rate will be on your new purchase.
DON’T – Invest in equities
Investing in equities should only be considered over the long-term (5 years plus).
If you choose to invest in equities, you may get back less than you originally invested 5 years from now. This could actively work against you increasing your house budget.
Cash savings beat equities for short-term objectives.
DO – Overpay your mortgage to upsize
Increasing equity in your current home will give you a bigger deposit when you move.
As you repay the capital balance of your mortgage, you’ll save on interest. Overpayments are an effective way to receive a tax free return, especially if you’re a higher or additional rate taxpayer.
Make sure you remain within the limits for overpayment allowed in your current mortgage deal to avoid early repayment charges.
DON’T – Commit to a long-term fixed rate mortgage
While many mortgages can be transferred to a new property, fixing your mortgage rate for a period where you may be looking to move ties you into remaining with your current lender, unless you’re willing to pay early repayment charges.
Simply, it limits your mortgage options when you come to buy your next home.
It’s always good to seek independent mortgage advice early in the process to understand the implications of choosing certain mortgage deals on your current home.
DO – Increase your income to upsize
Having a clear plan to increase your income is essential. Evidence of increased earnings will increase the amount you can borrow towards your new home and increase your overall budget.
When you come to buying your new home, the new mortgage payments might feel like a stretch, but an upward trend of earnings can ensure repayments become more manageable over time.
DON’T – Take on personal debt
Personal debt and monthly commitments will reduce your mortgage affordability. Taking out personal debt also increases the risk you miss payments and could affect your credit score.
Car finance, credit cards and payday loans can all work against you when looking for a mortgage if not managed correctly. It’s best to avoid them if possible.
If you’re looking to move home within the next 5 years, reducing personal debt, not increasing it, will have a positive impact.
Summary
If you’re looking to move home within 5 years, the financial decisions you make now can have a big impact on whether you can afford your dream home.
The best time to start planning was yesterday, the next best is now.
If you’d like someone on your side to help navigate the financial decisions leading up to a house move, we’re happy to help.
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