We are trying to move house.Bank agrees to lend us £170,000 (based on salary)providing 10% deposit.We may make £10,000 from existing house and we have £40,000 savings.My understanding is we can buy a house worth 170,000+10,000+40,000=220,000.But sb said we actually need to deduct 17,000 which is the 10% of 170,000.Sb else said we need to deduct 22000 which is 10% of house price.I am well confused. Please anybody can explain to me how it works or simply tell me how much house we can afford. Thanks a lot.
The bank is saying if you borrow £170000 you must put at least £19,000 into your new house.
How much money can you put into your new house. Profit from selling your old house after paying off the old mortgage £10,000 plus savings £40,000. So you are well within the minimum requirements of the bank. In theory you could buy a house costing £220,000.
There are however costs to consider, estate agent, legal fees buying and selling, surveyors charges, mortgage application charges, removal van. There may be others but I cant think what they are.
Next remember mortgage interest rates are low at the moment, so expect your mortgage repayments to go up over the next few years. Could you afford an 8 to 10% mortgage rate?
Just because the bank will lend you the money does not mean you can afford it.