Mortgage deposit problem

Thrugelmir

Radiatormannw wrote: »

Maybe I am not explaining this clearly, but I have a house I want to sell and its worth approx 100k, its all paid off and mortgage free.

I have seen a house I want to buy and its 230k, therefore I want to borrow 130k

However the building societies (and I spoke to a few believe me) all want a deposit equal too 10% minimum of the purchase price of the new house ie £23,000. I dont have £23,000 in cash to hand or ever will have, but I have £100,000 in a house I own outright. Yet I still cant move without this 10% deposit that the lenders (all lenders want the same) require and is a requirement that was brought in to play in April this year

I am looking for answers of how to get around this some way.

This deposit is nothing to do with the vendor or solicitor its what the building societies are saying you need.

Is it any wonder the housing market is in a mess

The process of buying a house hasn't changed in many many years. So I believe that you've misunderstood the process.

Post up what the Building Society have said\written.

mrginge

Radiatormannw wrote: »

Maybe I am not explaining this clearly....

Too right you're not.

Are you saying that the sale of your current house and purchase of the new one are to be done separately?

If so, then of course you need a separate deposit for the new one. That's the way mortgages have worked for years...

If not, then what is the problem. You have 100k deposit and don't need any more.

My brain is hurting.

Sarahspangles

This blog explains it well

http://fidler.co.uk/blogs/legalmove/category/conveyancing-deposit/

The banks don't want you to put down a 10% deposit. They want assurance that they won't be funding more than 90% of the value of a property. Another way they express this is as the "Loan To Value" - e.g. a deposit of £20k on a £200k house would give a 90% LTV.

The vendor wants a 10% deposit in actual money so that if you don't complete after exchange he can claim against it.

It's just customary for both those to be 10% so it's easiest to refer to the 10% as the deposit.

The deposit at the bottom of the chain is what passes up the chain. If 10% of the price of the property at the bottom of the chain by first-time buyers, it may be even less than 5% of the value of the most expensive property, but as most of the non-first-time buyers' deposits will be coming from their equity, it's the only way to get the chain to move. The rest of the deposit is available on completion and nowadays that is usually very quickly after exchange.

If the chain is broken part way up and less than 10% has been paid over on exchange, the buyer can be sued by the vendor for the difference.

bouicca21

There is only a problem if you want to complete these transactions separately. Most of us form a chain and do it simultaneously. Ergo your £100k from the sale of your house, is used as the deposit towards your new house. The banks do not want you to turn up with £23K in used fivers, they just want to know that you have it.

Corvinus

As has been stated before unless you are trying to buy the new property and sell your current property at separate times then there is nothing unusual or very difficult about your situation.

Assuming you are selling at the same time as buying then everything will need to happen simultaneously. In other words the completion of the sale of your current home will happen at the same time as the completion of the purchase of your new home.

The solicitors of the vendors may get uneasy about you being unable to put down a 10% deposit on exchange of contracts however given your situation this usually can be negotiated to nil or you elect to exchange and complete on the same day.

From the mortgage lenders perspective you require a mortgage of £130k on a property of £230k which equates to around 56% loan-to-value which should make you eligible for some their very best rates.

kingstreet

I suspect due to affordability, the mortgage requested is not considered affordable and therefore the equity in current home is insufficient on its own.

Therefore the OP is being asked to borrow less, ergo he needs more "deposit" on top of the equity.

Could be wrong, but I doubt it...