Using Equity to buy new property? How does it work?

LiveOnce

Hi there,

Can anyone please explain or point me to something that explains how you can use equity to buy a new property?

I don't really understand so I ask.

kingstreet

When you sell your current home, your solicitor gets the funds in and repays your mortgage.

He adds the new mortgage funds and anything else you wish to add to that and that makes the purchase funds for the new property.

LiveOnce

Hi kingstreet,

Thank you. Could you give me a worked example of what you mean please? I still don't understand

kingstreet

I sell my £300,000 property.

My solicitor gets the money from the purchaser's solicitor. He repays my £100,000 mortgage.

He has my £200,000 in hand.

I am buying for £400,000.

I have arranged a new £200,000 mortgage. He draws down the mortgage funds from the lender, so he has my £200,000 equity and my £200,000 mortgage funds.

He sends the £400,000 to the vendor's solicitor to complete the purchase of my new home.

Obviously you have fees and stamp duty etc to account for, but in its purest sense, that's what happens.

If easier, I sell my car, I repay the finance. I have the difference in my hand. I buy another car using new finance and the money I have left from the sale of the previous vehicle to make up the purchase price.

minimike2

Does OP mean buying a *second* property?

kingstreet

God knows.

If in doubt, answer the most obvious question and see what comes back.