When to use Yellow Apricot - property ladder |
YELLOW APRICOT WORKING FOR PEOPLE STUCK ON THE PROPERTY LADDER
With house prices spiralling out of control, it appears that subsequent rungs on the property ladder are getting further and further apart. This is scaring many people away from selling their existing property in the fear that they will not be able to go onto the next rung.
But people who bought their property even as recently as a year or two ago may be able to move up the property ladder if they know what to do.
Example: Mr Sodium and Miss Magnesium are good friends and could not afford to buy a property on their own. They bought a 2 bed house in Manchester in July 2005 for £87000 with a mortgage of £80000 as co-buyers. It needed general redecoration and a new kitchen and bathroom. They spent £5000 on doing this work and in March 2007 they got a local estate agent to value the house at £130000. They wish to buy a 3 bed house which is currently being advertised in the forthcoming Yellow Apricot Auction with a guide price of £165000. In good condition this property is worth approximately £200000.
It appears that even if they can sell their property for £130000, they will be short on funds to buy the new property at £165000. They do not have £35000 in savings so it appears they are stuck on the property ladder.
After talking to Yellow Apricot, they decide to put their current property into the next Yellow Apricot Auction with a Reserve Price of £125000. They end up selling their home for £132000 and borrowing enough money from their parents for a 10% deposit on the new property which they end up buying for £162000. With £50000 left over after selling their existing property, they take out a new 80% mortgage for £129600, putting in a deposit of 20% equating to £32400. They use £16200 of this £32400 to repay their parents and the balance as the remaining deposit.
The new monthly repayments on the new property are still affordable given the two incomes. They still have some £15000 left over from the £50000 and decide to spend £10000 on home improvements. This increases the value of their new home to £200000. The remaining £5000 is split equally between them. Mr Sodium goes on holiday with his mates with his share and Miss Magnesium decides to have cosmetic surgery to enhance her looks. The situation is as follows:
Before After
£ £
Market value of property 132000 200000
Mortgage on property 80000 129600
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Equity in property 52000 70400
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After spending £5000, they are still over £18000 better off and now another rung up the property ladder.
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