Morgage Advice - Home Move

Amatheya81

Hi,
I'm looking at moving home in the next year or two but while I've gone through the buying process as a first time buyer a couple of times (long story) I've never moved from one house where I was the mortgage holder to another where I am getting a mortgage.

I was wondering in particular how deposits work when you already have a mortgage that may have positive equity to release? (I say may as I have a shared ownership property so the selling price is not under my control )

If you do have equity in your current mortgage is that taken into account as part of the deposit on your next mortgage. If you are counting on the equity to provide part of your deposit how does it work when you apply for a mortgage in principle? Do you need to have a buyer lined up and the process started? If you don't already have a buyer how do you prove that you have that equity available to you?

Thanks in advance

Thrugelmir

Normally a 10% deposit will be required on the property you are purchasing upon exchange of contracts. The deposit paid by your buyer can be put towards the deposit, the remainder you will need to find the cash for.

Amatheya81

Thanks,

Sorry, I should have been a little clearer. It's the logistics that I don't understand.

If I go to get a mortgage in principle without a buyer fully in place how do I prove that I have the deposit available?
If I am exchanging contracts with my buyer and the person I am buying from on the same day how does the money side of things work out, would I have to exchange with my buyer before the person I'm buying from? Is there a set amount of time you need to leave for the transfers?

I'm sure I'm being a bit thick but I like to completely understand the ins and outs of these things before I go through them.

pinkteapot

For an agreement in principle, if the lender wants to see proof of deposit you can show them how much the house is on the market for and a mortgage statement showing how much you owe. One minus the other = equity!

You won't do your full mortgage application until you do have a buyer (and have found somewhere to buy). At that point, you'll tell the lender how much you're selling for and again show them a mortgage statement to prove your equity amount.

Everyone in the chain will exchange on the same day. Your buyer will pay a 10% deposit for your house, which will arrive in your solicitor's account. You then have to pay a 10% deposit for whatever you're buying, so prior to exchange you have to send any extra required to your solicitor.

For example, suppose you're selling for £150k and buying for £200k. You need to pay a £20k deposit. Your solicitor will get £15k from your buyer (deposit for your house). You give your solicitor £5k. They send the whole £20k to the solicitor for the house you're buying.

That solicitor then sends that money up the chain, and so on. I don't know exactly what payment option they use, but somehow it all happens on the same day!

If you have no cash savings to contribute to a deposit, the person you're buying from may agree to accept a smaller deposit (i.e. just the amount your buyer pays), but that's up to them.

kingstreet

It is very unusual for any buyer in a chain, other than the first, to put cash in to the equation.

Usually, the first buyer's cash is passed up the chain, with the percentage becoming smaller as the purchase prices increase.

The solicitor's undertakings are usually enough for one solicitor to accept the other's word there is equity on completion.

Amatheya81

Thanks, very helpful :-)

pjread

[QUOTE=kingstreet;[URL="tel:63862081"]63862081[/URL]]It is very unusual for any buyer in a chain, other than the first, to put cash in to the equation.

Usually, the first buyer's cash is passed up the chain, with the percentage becoming smaller as the purchase prices increase.

The solicitor's undertakings are usually enough for one solicitor to accept the other's word there is equity on completion.[/QUOTE]
+1, absolutely. I suppose it's worth saying "unless someone is self-conveyancing" but that's relatively rare and again should only really impact them.

kingstreet

If there are mortgages involved, the lenders won't accept no solicitor cases, so the likelihood is pretty slim that you'll have an all-cash chain.