Buying our next house

[Charlie_D]

We want to buy a bigger house but we are not sure how it works. We bought this house last year for 70,000 with a 63,000 mortgage. It is now worth about 110,000. The houses we are looking at are around 130,000 so we would like to increase our mortgage by 20,000. Question is do we need to have the required extra income to cover the increase or will the increase in capital do instead? Also is it possible to buy a house for a similar price that needs work, increase the mortgage and use the profit from this house to carry out the work and to pay the fees on the next one?

[WoWo]

You will need to the extra income. That means you need to be able to cover that extra �20,000. You can do what your suggesting but.... doing so would mean that the mortgage would have to be covered totally from your income and not the equity.

[Oneeyedvic]

However, lenders are less bothered about income multipliers when you have a larger deposit (you now have an effective deposit of �47,000 (36%) as opposed to a 10% deposit which you originally paid.

 

When I purchase our house (3 months ago) one lender said that due to the deposit they would not require proof of income.

[Oneeyedvic]

But PLEASE, PLEASE, PLEASE, make sure you can afford the repayments before you do buy it, and make sure you can also afford the repayments if interest rates were to rise.

[WoWo]

The mortgage rules have changed and are now controlled but the FSA, apart from the fact applying for a mortgage using income figures which are false is illegal you will find it more difficult to get such a loan under the new rules. As Oneeyedvic says don't push your self to the limit.

[h.jonnes]

You may contact chance4finance.co.uk. They helped me out in a similar condition. The property in my case was my godown.

[Charlie_D]

Thanks for your replies (except for the chance4finance one - stop advertising!) We will be able to cover the increase in income I was just wondering how it works really. It was more a question for the future, I was worried about how we would ever be able to afford an even bigger one but I guess the profit will help towards it and the increase in deposit will help. It is also good to know that any profit can be used towards fees and doing up the next house as that was the problem with buying the first one, no money left over.