Q I am a nurse and I own a home that an estate agent recently valued at £335,000. My partner and I would like to move to a new-build property costing £550,000. We have an outstanding mortgage balance of roughly £220,000 on our current home and were wondering if we can afford the £550,000 house with a normal mortgage, given our total annual income is around £70,000 including overtime.
Would it be wise to use the help-to-buy scheme to move to a bigger property or just save up more as we already have the advantage of being on the property ladder? AT
A If you sold your current home for £335,000 and so were able to pay off your current mortgage of £220,000, you would be left with £115,000 in cash to put towards the purchase of another property. However, if you were to buy a house costing £550,000, there would be a stamp duty bill of £17,500, which – if you couldn’t find the money from somewhere else – would bring down the amount of cash to put down as a deposit on the new house to £97,500. This would mean that to finance the purchase of a £550,000 property, you would need a mortgage of £452,000. Given that this figure is almost six and a half times your annual income of £70,000, it is unlikely that you would get such a large loan.
You are eligible to get assistance from the help-to-buy scheme. As you want to buy a new-build house and it is under the maximum purchase price of £600,000, you could apply for an interest-free loan worth up to 20% of the property’s price.
However, you would need a mortgage of £342,500, together with your deposit and this would not match the help-to-buy guideline that says most the mortgage can be is four and a half times your household income.
So the short answer is that you need to save up more to be able to afford to buy a property costing £550,000 and also to be entirely eligible for help to buy.
