Using equity as a deposit help?

artfulldodger86

hello,

myself and my partner are looking to move home. we do not have any savings so will be using the very little equity we have for a deposit. my question is...how do we pay the equity back? is it added to the current mortgage? is it added to the next mortgage? do we pay it back at all?

Mortgage company - Nationwide
we will be porting the mortgage to a new property.
maximum of 5k equity in current home

thank you

Milliewilly

artfulldodger86 wrote: »

hello,

myself and my partner are looking to move home. we do not have any savings so will be using the very little equity we have for a deposit. my question is...how do we pay the equity back? is it added to the current mortgage? is it added to the next mortgage? do we pay it back at all?

Mortgage company - Nationwide
we will be porting the mortgage to a new property.
maximum of 5k equity in current home

thank you

The mortgage will be paid off by your 'buyer' when you complete the sale and any surplus will come to you as a deposit for your next house plus your new mortgage. Your solicitor and estate agent will take out what they are owed before any balance comes to you.

Raggs_2

5k of equity isn't very much, there will be various moving fee's etc, and unless you are looking towards a very cheap place, you aren't likely to have enough for a deposit left over.

artfulldodger86

we currently live in a 12month old 1 bed apartment and need to move as we now have a family. The house that we have seen is basically around the same price as what we are in now £75,950

Raggs_2

So after all the fee's you may just be able to scrap 3800 for a 5% deposit, but that's assuming cheap fees and the "maximum" equity. And a 95% mortgage that won't be on a great deal.

Could you stay where you are whilst you save up at all?

Richard_Webster

£5K is about 6.5% of £75,950. Just because you have a loan of £70K ish with Nationwide at the moment doesn't mean you can port the same amount - it will always be subject to their present criteria etc and if they will only lend 90% or even less then they will lend that maximum percentage on the place you are buying - so don't assume you can "port" the whole amount of your present loan.

And yes, you'll have to find the fees etc and any estate agents commission out the money in the present flat.

Are you buying in the same area as selling in or going to a much cheaper area? If staying in the same area then there must be something wrong with a house to be worth the same as a a flat - it's not defective concrete is it? If so you wouldn't get a mortgage on it anyway.

CLAPTON

if your selling price is 75,000
and your current mortgage is 70,000

and the new house is 75,000
and nationwide will port your current mortgage of 70,000

then it would work like this

you buyer pays 75,000
70,000 is available to nationwide for the new property
leaving 5k
your solicitors fees and estate agent fee will probably be 2,000 (?)

so if you are to pay 75k for a new property then you are 2,000 short

artfulldodger86

at the minute we currently have a sole mortgage but the new mortgage will be a joint one. we had a mortgage promise few months ago saying that we could borrow up to £113,000 from nationwide. However borrowing this much would put to much strain on our finances each month so are looking @ houses around the 75k mark. we live in stoke-on-trent so house prices are pretty low anyway.

our estate agent fees are £875+vat
Solicitors are £1000 inc vat

we just were not sure how the deposit would be paid back - as in would we physically have to hand it over to someone.

apologies as i have trouble explaining things

Richard_Webster

If you sell for £75K pay off a £70K mortgage and buy for £75K with a new (ported) £70K mortgage then your buyers send £75K to your solicitors who use £70K of it to pay off your old mortgage and (having already received the £70K for the new mortgage - yes that is how it happens) they add that to the £5K left over and use it to pay for the new house so you don't do any "paying of deposits".

There are two problems here:

1. You have to find the costs etc of the move - legal, valuation fees, removal men, etc and
2. I am yet to be convinced that your lender will now lend you £70K on a £75K property - that's 93.33%. Are Nationwide lending that high a percentage?

Vincenzo

Richard_Webster wrote: »

2. I am yet to be convinced that your lender will now lend you £70K on a £75K property - that's 93.33%. Are Nationwide lending that high a percentage?

I don't know about Nationwide but I recently enquired of HSBC about this and they told me they would honour the LTV requirements of the original loan. If I needed to borrow more, this would be based on current lending criteria.

Richard_Webster

Quote:
Originally Posted by Richard Webster
2. I am yet to be convinced that your lender will now lend you £70K on a £75K property - that's 93.33%. Are Nationwide lending that high a percentage?
I don't know about Nationwide but I recently enquired of HSBC about this and they told me they would honour the LTV requirements of the original loan. If I needed to borrow more, this would be based on current lending criteria.

OP needs to get the answer from Nationwide before he gets too involved with buying this house.