Home movers – Moving on up the property ladder just got a little less painful: Demand for first homes and better loan rates make second step easier

The future is looking good for home movers moving up the property ladder, as increased demand for first homes makes it a little easier to hop from the first to the second step of the property ladder.

Five years ago Lloyds Banking Group started tracking the difficulties those looking to move up the property ladder faced.

It says for a lot of this time the gap has been too wide and many buyers were trapped in their first homes. This year it expects a record number of owners finally being able to move.

Second-steppers (home movers) will still face challenges, but with property values starting to rise this should mean many will be able to afford to move to a bigger home.

Here are the main reasons to be cheerful – and the key challenges hopeful home movers will face.

THE GOOD NEWS

On average, the first-time buyer is ready to move up the property ladder six years after buying their first home.

So, many home movers this year will have bought in 2009 when property prices were much lower. This means they should now have plenty of equity in their property.

It should also be fairly easy to find a buyer for their existing property. First-time buyers are out in force, with numbers reaching a seven-year high, and property investors are also on the lookout for typical ‘starter homes’ that could potentially make great buy-to-lets.

Because of this, home movers could also save expensive estate agent fees by trying to sell direct using an online agent.

Another benefit is the recent changes to stamp duty that will reduce their costs when they buy a more expensive property. Prior to these changes, a buyer would pay one rate of tax on the full property price. Now you only pay the lowest rate on the first part of your property value, a higher rate on the next part and so on. It is complicated but it can produce big savings.

Finally, if you take out a larger mortgage for a bigger home you should be able to find some very attractive mortgage rates. Low fixed rates are seen as a good choice as they will shield you from potential rate rises in the near future.

THE CHALLENGES

Watching the value of your first home soar is no consolation if the price of the home you were hoping to move to has climbed even more. Therefore, home movers could find it hard to raise money for a bigger home.

Today, getting a big mortgage approved may be much harder than it was years ago when most home movers first bought.

This is due to the tougher ‘affordability tests’ which were introduced last year with the aim of reining back so-called irresponsible lending. It is worthwhile reading up on these tests before contacting your lender – and try to cut your outgoings where possible several months before you apply for a new loan. The more money you have in your bank account at the end of each month, the better.

Couples applying for bigger mortgages are more likely to be offered more while both are in work than those where one partner is on maternity leave.

And while you should not be dishonest to lenders’ questions if you are already pregnant, you do not need to volunteer information about any future family plans you may have.

Be prepared to be quizzed about all of your spending 

Home movers need to be prepared to answer the new affordability questions, so make sure you are familiar with the questions the lender will most likely ask.

Home movers should figure out how much they spend on commuting, utilities and other bills before their interview so they can answer any questions accurately.

You should also make sure the property you are hoping to buy is the right one for you.  The cost of moving can be expensive and the application process can be time consuming, so you may want to avoid going through it all again in a few years time.

Post courtesy of This is Money.