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I bought my house a year ago for £160,000. This was cheap because it was repossessed and the house is valued now at least £200,000.

I have £50,000 equity in the house, so obviously if I sold this house at 200,000 then I’d have £90,000 cash to buy another house. It is possible to get a 3 bed semi in excellent condition for around £110,000 – therefore an approximate £20,000 mortgage. My current house is a 4 bed detached in the country, therefore it is perfect for a family in years to come.

My option is either to do that or to mortgage my current house. It would be a £110,000 mortgage over 30 years – which would cost me £700 a month. I currently take home £1650 per month after tax and national insurance.

What should I do? Is it best to sell and save the extra money I’ll have each month – or to stay and rely on further future equity raise in the house?

1 Thought on Should I sell my house and buy cheaper to save mortgage costs?
  1. Reply
    Simpson G
    September 28, 2012 at 3:33 pm

    Problem 1: I’m not sure if you can even get a mortgage for £20,000. Many banks have minimums of closer to £40,000-£50,000.

    Problem 2: You won’t be coming out of closing with £90,000. You need to figure in the interest you’ve closing costs and estate agent fees, which will be coming out of that £90k. Then you also need to look at interest you’ve paid, moving costs, and all other potential expenses.

    If it’s worth it financially to make the move, especially since such a large part of your income is going towards mortgage, then go for it. But, there is no guarantee that the new house you buy is going to increase in value or even maintain value over the next 10 years, so whatever you buy is going to have to be long term.

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