Simply Put: First Time Buyer Selling Up and the Buying a New Property.

Adamc

Hi all 

We bought a house almost two years ago and would like to move in the near future but are a little confused at how it all works:

If we have a mortgage on a house for 200K and have already paid off £46K, what would happen if we sold it for 210K and bought a house for 250K?
Would the sale cover our mortgage (154K) and we just take out a new loan for the property or does the debt transfer to new properties? I imagine the former would incur penalties for early repayment etc so I'm assuming that's not the case. Apologies if this is a very basic question but we are slightly confused as mentioned.  

Thanks in advance!

greatcrested

There's no 'transfer' of debt. The existing mortgage must generally be paid off, and a new one taken out. In a few cases, a lender will agree to 'port' your existing mortgage to the new property - ask your lender.

You say "already paid off £46K" do you mean that's the total of payments you've made (most of which will be interest so the loan will not have reduced by that much), or your mortgage has genuinely reduced by 46K? Ask your lender for a 'redemption statement'. This will show exactly how much you need to pay to remove the debt (including any 'Early Redemption' fee if you are tied into a special deal)

But assuming the redemption statement shows £200K - £46K = £154, and you sell for £210, you will have equity of £56K.

Chances are you'll have estate agent selling fees of £3K-ish + legal fees etc so your equity will actually be around £50K.

Then you want to buy for £250K.So you'll need a new mortgage for £200K,