Selling and buying - retaining some cash from equity in existing house

JohnM88

Hi all,

I’m looking at selling my current home and buying something a little larger but could do with some advice as this will be the first time that I’ve sold a property.

What I would like to do is hold back a small amount of cash from the equity that I have in the property and just wondered how normal or unusual that type of thing is?

As an example let’s say my existing house is:
Worth £200K and has £130K outstanding on my mortgage (which I’m planning on porting to the new property as it’s a long term fixed rate, is portable and has a sizeable early repayment charge)

The new property is £300K and I’ve got an offer in principle for the additional borrowing (well for a little more than we will need really)

Assuming all figures are exact sale / purchase prices, what I would like to look at doing is using £65k of the £70k equity as the down payment on the new property along with the existing (porting) mortgage and then the additional mortgage that we have the OIP for. This would allow me to keep back £5k towards moving costs etc..

I’ve checked the I would still be ok with regard to LTV etc... and I’m aware that this would lead to a slightly larger mortgage so will cost additional interest in the long run.

I would appreciate any advice / experience that you can share, I’m just looking for some informed thoughts before speaking to the mortgage advisor and looking like a bit of a twit if it’s not the done thing / a really bad idea for reasons I’ve not thought of.

Thanks in advance.

John

SG27

Yes its fine and normal to do this. As long as you can borrow the desired and amount the equity remaining is enough for the deposit.

I am doing the exact same thing to keep money to renovate the new house.

JohnM88

Thanks SG27, thats really good to know.

sal_III

JohnM88 wrote: »

I’ve checked the I would still be ok with regard to LTV etc... and I’m aware that this would lead to a slightly larger mortgage so will cost additional interest in the long run.

How did you check that? Did you ask your Lender?

Your current mortgage is 65% LTV, your future mortgage will be 21.6% LTV. Most Lenders have "breakpoints" at 75-85% LTV, so I'm a bit puzzled how yours is agreeing to port your mortgage with such a massive difference.

SG27

sal_III wrote: »

How did you check that? Did you ask your Lender?

Your current mortgage is 65% LTV, your future mortgage will be 21.6% LTV. Most Lenders have "breakpoints" at 75-85% LTV, so I'm a bit puzzled how yours is agreeing to port your mortgage with such a massive difference.

The new mortgage with £70k deposit is 80% ltv, with £65 its 78%. I would assume the original mortgage was up to 80% when the op took it out.