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Trading up, is this how it works?

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  • 08-12-2014 6:51pm
    #1
    bmwguy
    Closed Accounts Posts: 2,006 ✭✭✭


    Short story, bought a house in 2011 so well insulated from the worst of the property crash, I.e. paid 220k where I know some of my neighbours paid 360k in 2007. Anyway, I put 20k deposit down, so mortgage was 200k.

    House now possibly worth 240-250k, I posed as a potential buyer for another down the street and enquired at the 220k mark that I paid, estate agent is still laughing I think.

    Mortgage now about 195k left owing (first few years mortgage statements are horrible the balance does not go down very much despite Mortgage payments being high). All in all think I probably have 50k equity, which should grow in the next year or 2 if prices rise and as my mortgage comes down.

    Let's say in 2 years time I have 70k in equity (for the sake of argument, don't let this descend into property price predictions!)

    I now want to sell my house and buy a more expensive house, say 350k in the area I grew up.

    I would bring 70k to the agreement (20%) and would need 290k mortgage (80%).

    AIB already deemed me fit to have a 92% mortgage of 200k, would they now see giving me an 80% mortgage for a bigger amount as more or less of a risk seeing as I know have a mortgage history behind me?


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    #2
    antoinolachtnai
    Registered Users Posts: 9,776 ✭✭✭antoinolachtnai


    It all sounds great LTV-wise. The next issue is the ratio between your salary and the mortgage you want.

    Another big practical problem is that everybody wants to trade into medium-sized houses in the area where they grew up. Houses in this category tend to be in short supply. But I guess you know that.

    Closer to the event, there is the 'chain' problem. You have to move in lock-step with your purchaser to avoid having to rent or 'bridge' (bridging is a type of loan, sometimes quietly spoken of but rarely actually seen in the wild, to allow you own two houses at the one time, in the period when you've bought your new house but haven't yet sold your old one).


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    #3
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    You've got the basics there of how it works with equity but you can only borrow 3.5x your salary (or combined salary with your partner) to a max of 80% of the value. (Based on new CBI rules coming in next year - they might make exceptions)

    Worked Example:

    You earn 37K
    Spouse Earns 33K

    = 70K time 3.5 = 245K + 20% (min deposit 49K) = 294K - anything over 294K will need to be supplied by you.

    Chains - biggest stress to moving!


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