Mortgage when Part Exchanging on New Build

JarJar123

Can anyone explain to me the process of getting a mortgage when you're part exchanging on a new build? E.g. how much do we need to apply for on the mortgage? The deposit for the bank would be coming from the sale of our current property so how do we access that if the developer is buying our property? Does the developer want a deposit as well on top of the deposit for the bank? What happens to any remaining equity in our current house? 

If anyone could provide an overview of the process, and if possible a worked example, that would be really helpful as I've read so many different things now I've become really confused.

Thanks!

MWT

JarJar123 said:

What happens to any remaining equity in our current house?

Generally speaking there won't be any remaining equity as it is a 'part-exchange' so the developer will usually only buy houses up to a certain percentage of the value of the new-build.

Aside from that the process is just like a normal sale to a cash buyer and should prgress as a separate transaction to your new purchase.

Do look closely at the details of your developers scheme though as there are many places where they can reduce the valuation of your current home and where they can deduct fees, so it is likely, but not guaranteed, that you will end up with a lower sales value than you might otherwise achieve.

tinytiddles

We have recently part exchanged; basically you apply for the amount of mortgage you need as normal but when it comes to paying at the end it works slightly differently - but the amount at the end works out the same.

Upon exchange of contracts the developer pays your deposit on your new build with the money they are buying yours with. The difference here is that the deposit is 10% of the difference in price between your old home and your new build purchase price, not 10% of the purchase price flat out. 

At the end when it is completion time, they use the remainder of the money they  are paying for yours towards your new one and your new mortgage pays the rest plus whatever is outstanding on your old mortgage. So if you’re buying for £300k and have a £60k deposit (for example) you still apply for the £240k mortgage and let the solicitors shuffle the money around once the offer is through.
We found it to be a very smooth process and hit the market at a perfect time so we lost very little (if anything) on our old house because the developer was desperate for a sale. Good luck!