house deposit

mickyp110472

We are looking to do a buy/sell arrangement with my sister in law i.e. my wife & I buy my sister in laws house & she in turn buys ours...we are paying £85k for her house of which she owes £23k & she is paying £75k for our house of which we owe £64k. we are planning on using the £11k difference as our deposit as we currently have very little in the way of savings. Similarly my sister in law is planning on still borrowing £23k & using the balance of £62k from her house to pay for our & leave herself in the region of £10k remaining for some diy projects..how will the money transfers work & will we have to take out some kind of bridging loan to cover the deposit until funds clear etc
sorry if it sounds long winded or complicated but can't get my head round it & despite asking the question to the mortgage advisor numerous times I still didn't get a clear answer

Evilm

So as far as I understand it you have:

Your House: 75k
Your mortgage : 64k
Equity: £11k

Her House: 85k
Her mortgage : 23k
Her equity: 62k.

The new situation will be:

Her buying your house for £75k, keeping £23k mortgaged and having £10k (less the conveyancing fees) for DIY.

Your situation is: pay 85k, port over/new mortgage for £64k and have to find £10k extra (plus fees) in order to complete.

Why do you think you need a bridging loan? Bridging loans are for when you are buying a property and due to sell yours after the purchase completes. In that situation you would take out a bridging loan to cover the part of the funds that are still tied up in the house you are due to sell. These would normally last maybe a month or so and then be cleared.

As far as I can see you need to redeem your £64k mortgage and get a new one for £74k. If you can then perhaps you could port your £64k mortgage and then take out additional lending with your current lender for £10k but I don't know if they would let you do this. Either way you end up with an 87% mortgage (slightly higher than the 85% you have now).

If you have extra funds above the fees available to put in to the move then this will reduce the amount of extra funds you will have to borrow.