Part Exchange advice

Soldierearth54

Hi,

Myself and girlfriend were hoping for some advice...

We own a 2 bed, ground floor flat in a development of new builds (now 3 years old)

Our mortgage is made up of a 75% mortgage from nationwide and 20% shared equity from a developer.

We understand we will struggle to sell and also know we WONT make any money or break even on a sale.

Could someone explain how a part exchange would work and how it could benefit us in our situation?

Please ask if any other info will help.

Thanks in advance,:)

kingstreet

It wouldn't work if you don't have a separate deposit saved.

Soldierearth54

kingstreet wrote: »

It wouldn't work if you don't have a separate deposit saved.

Thanks for your reply. I wasn't aware I would need a new deposit. Why is this?

My understanding is that the house I am currently in/selling acts as a deposit.

Thrugelmir

You'll need to raise a deposit (normally 10%) to put down on the new property when you exchange contracts for the purchase.

Though your solicitor may well use the deposit received on your existing property sale towards this.

littlesparkles

Your deposit would be the difference between your outstanding mortgage & equity loan and the amount a developer would give you as part-exchange value for your flat. When you part-exchange you are basically just selling your flat to the builder who will then sell it on. So if you still owe £50000 and the builder will buy your flat for £60000 then you will have £10000 to put down as a deposit on the new home. There are some 95% mortgages available on the new buy schemes for new builds but most lenders require you to have more than a 5% deposit for a new build.

Soldierearth54

Thanks, for the few replies.

Does anyone have experience of part exchange?

littlesparkles

I tried to part exchange earlier this year. The builder made a very low offer on my flat. 16k less than I have now sold it for. Nearly 20k less than the estate agent valuations. I'm doing an assisted move instead. In return for selling for slightly less than I would have liked, the builder is paying certain fees for me (stamp duty, 5% deposit, removals, legal fees, agent fees). The low part ex offer was based on some estate agent valuations for a quick sale within 4 weeks. These were very different from the valuations some of the very same agents gave when I asked them for normal valuations!

Also some builders do not do part ex on flats. Taylor Wimpey and Barratt do but Bellway and Persimmon don't. Those are the ones that I spoke to about possible part ex.

Good luck!

DiscoCat54

Part Ex will only work if you have either a deposit saved or adequate equity in your current property to use as a deposit. You also need to be trading up so that your current property is typically worth no more than 70% of the one that you are buying. My developer carried out three valuations and then made an offer 7% below my asking price which I felt was very reasonable. They subsequently sold it for a 33k loss (shows how much margin they make on the new builds!).

kingstreet

mickp67 wrote: »

We understand we will struggle to sell and also know we WONT make any money or break even on a sale

As has been explained to you, you have no equity and you cannot part exchange without equity unless you have a separate cash deposit.

Stop thinking about what the builder will or won't do, you won't get a new mortgage.

In addition, if you can't cover the debt secured on your current property you may not be allowed to sell at the price you agree. Those with a charge over your property can stop you selling.

Soldierearth54

littlesparkles wrote: »

I tried to part exchange earlier this year. The builder made a very low offer on my flat. 16k less than I have now sold it for. Nearly 20k less than the estate agent valuations. I'm doing an assisted move instead. In return for selling for slightly less than I would have liked, the builder is paying certain fees for me (stamp duty, 5% deposit, removals, legal fees, agent fees). The low part ex offer was based on some estate agent valuations for a quick sale within 4 weeks. These were very different from the valuations some of the very same agents gave when I asked them for normal valuations!

Also some builders do not do part ex on flats. Taylor Wimpey and Barratt do but Bellway and Persimmon don't. Those are the ones that I spoke to about possible part ex.

Good luck!

Thanks for your info. Is the term 'assisted move' an official one or is it known by something else as I have seen the term 'MI Move' which I wonder if it is similiar?

I find it shocking that estate agents would give you 2 seperate valuations based on a part ex or straight sell. We have two agents coming out soon to value but won't be telling them about the possibility of part exhange.

Soldierearth54

kingstreet wrote: »

As has been explained to you, you have no equity and you cannot part exchange without equity unless you have a separate cash deposit.

Stop thinking about what the builder will or won't do, you won't get a new mortgage.

In addition, if you can't cover the debt secured on your current property you may not be allowed to sell at the price you agree. Those with a charge over your property can stop you selling.

You haven't actually provided me with any useful advice - don't reply or get involved and make statements without any evidence, such as "you won't get".

Utterly useless!