Part exchanging to buy a new built with a builder

Davina_Hart

Hello Forum Members,

I am looking for a bit of advice.
We are in a process of part exchanging our existing house to a builder. The new built property is worth £480,000 and we have agreed to part ex our house for £300,000. We have roughly £260,000 oustanding on our current mortgage.

We are going to bring 10% deposit for the new built house which is £48,000. The major portion of 10% deposite will come from sale of current house to builder as part ex and remaining balance from our savings.

My question is how are we going to be bring 10% depoite on the date of exchange? I mean does builder solcitor pay my solcitor a sum of money (£40,000) for part ex property and my solcitor will in turn pay their solcitor 10% deposit (£40,000 from part ex plus £8,000 from savings) for new built.

The other thing is that new built house is not going to be ready until August 2018 so we will continue to live and pay mortgage on our exisiting property. This will reduce our mortgage outstanding balance even further, which will mean that we would end up bringing more than £40,000 as equity from current house. How would that be taken into consideration?

Sorry for my lack of knowledge on this matter. Please can you help answer my queries from your existing experience.

Cheers, Davina

Ray_Singh-Blue

Will you be staying with same lender? If so they offer a further advance which will be around 172k.

On completion date, builder gets your old house plus that.

You get the new house, but you now owe 260K + 172k = 432k

Your solicitor also gives you a bill for the missing 8k plus stamp duty and conveyancing fees.

Davina_Hart

Thank you for your response to my queries,

I still don’t understand if we pay 10% deposit at the of exchange or not?

Builder has included a few incentives and stamp duty is one that they will for us.

Thanks

Ray_Singh-Blue

You don't pay anything at exchange. Before completion your solicitor collects the balance of funds from you. which is the missing £8k plus their fees. Then they make one single transaction, as above, on the day you buy.

Your builder may also ask for a deposit right now. To tie you in to the deal. If so, this would be deducted from the final sum.

I bought a new build this way. My figures were all slightly bigger. It was very easy, but having such a big mortgage (465k) changed my outlook in the ways I had not anticipated.

Good luck with your move

SDLT_Geek

I understand market practice on contractual deposits for part exchanges varies. Some builders do not ask for a deposit at all. Others require a 10% deposit, but only 10% of the difference in price between the new build they are selling and the old home they are taking in part exchange.

You will still pay SDLT on the gross price of the new property you are buying. There is a special part exchange relief which is usually available to the developer on its acquisition of the old property from you. This relief depends on you intending to live in the new property, so expect clauses in the contract confirming this.