Using equity to move house

NineDeuce

I would like to sell my flat and move to a house. I have some savings but think I will fall short of the total costs of moving house that I will estimate to be in the range of £5-6k taking into account potential stamp duty amounts.

Is it recommended to therefore use the equity that I may gain from sale of my property to make up the short fall? I might be able to make this up in savings within a year but then I appreciate that house prices may go up and I would end up paying more this way.

Thanks.

hazyjo

What were you planning to do with the equity? Bank it? Invest it? Most people use the equity as you're usually talking tens/hundreds of thousands if upsizing.


Wouldn't say 'recommended' is really the right word, it's more expected.


Don't forget other moving costs. Impossible to estimate without knowing how much you're selling/buying for. Moving has just cost me around £20k.

NineDeuce

hazyjo wrote: »

What were you planning to do with the equity? Bank it? Invest it? Most people use the equity as you're usually talking tens/hundreds of thousands if upsizing.


Wouldn't say 'recommended' is really the right word, it's more expected.


Don't forget other moving costs. Impossible to estimate without knowing how much you're selling/buying for. Moving has just cost me around £20k.

I want to use the equity as a deposit while taking out a bigger mortgage. I am guessing my property will be valued at around £150k where as I am looking at a house valued at around £200,000. A £200k property purchase would incur £1.5k stamp duty.

What has cost you £20k?

eddddy

NineDeuce wrote: »

I want to use the equity as a deposit while taking out a bigger mortgage. I am guessing my property will be valued at around £150k where as I am looking at a house valued at around £200,000. A £200k property purchase would incur £1.5k stamp duty.

What has cost you £20k?

There are estate agent's fees, solicitor's fees, surveyor's fees, mortgage application fees, removal fees etc.

If you're saying that you have no savings at all, that may be a bit risky. Sales/purchases can often fall through.

You might run up a thousand pounds in fees - then lose it all because your buyer backs out, meaning you have to back out from your purchase.

Also, a mortgage lender might be worried about you affording a larger mortgage, if you've been unable to save anything with your current mortgage.

kingstreet

Yes. It's completely normal to use savings and equity to cover your deposit and fees for moving.

NineDeuce

eddddy wrote: »

There are estate agent's fees, solicitor's fees, surveyor's fees, mortgage application fees, removal fees etc.

If you're saying that you have no savings at all, that may be a bit risky. Sales/purchases can often fall through.

You might run up a thousand pounds in fees - then lose it all because your buyer backs out, meaning you have to back out from your purchase.

Also, a mortgage lender might be worried about you affording a larger mortgage, if you've been unable to save anything with your current mortgage.

I have been able to make some savings although I am probably about £2k short of where I want to be, so if I was to use equity, I would still have a good amount to secure a 10% deposit on a target house. It is just a matter of trying to get a deal done early to avoid house price rises.

In my favour on the expenses side, I currently have to pay a service charge as I am in a leasehold property which will no longer be the case if I move. This is also another incentive for wanting to move now.

eddddy

NineDeuce wrote: »

In my favour on the expenses side, I currently have to pay a service charge as I am in a leasehold property which will no longer be the case if I move. This is also another incentive for wanting to move now.

A service charge covers the cost of repairs, maintenance, insurance etc for the building your flat is part of.

If you buy a house, you will still have to pay for repairs, maintenance, insurance etc for the building. It could work out cheaper, but it might not.

NineDeuce

eddddy wrote: »

A service charge covers the cost of repairs, maintenance, insurance etc for the building your flat is part of.

If you buy a house, you will still have to pay for repairs, maintenance, insurance etc for the building. It could work out cheaper, but it might not.

That's a good point although the repairs covered under the service charge do not include anything inside the property. They only extend to the building and its communal areas. It does also include building insurance so I will have to think about a policy for that.

hazyjo

NineDeuce wrote: »

What has cost you £20k?

eddddy wrote: »

There are estate agent's fees, solicitor's fees, surveyor's fees, mortgage application fees, removal fees etc.

What eddddy said. Mostly stamp duty and EA's fees. It soon adds up. (Mine was a pricier house which adds a lot more.)