How to know how much to borrow

Avro1995

Hi there, I am just looking for some advice as to find out how muhc we need to borrow, forgive me if this sounds silly. 

Lets say we own a property worth £350,000 sale price, and have a mortgage of £121,000 outstanding. It has 1 year left of a fixed rate deal with an ERC of 1%. If we are then looking to purchase a property for £500,000 using the equity in our current house for the deposit (£229k equity), and also want to make sure the stamp duty is paid by the new mortgage. 

My query is because it wont go through for a few months most likely so the amount owed will change and also how to incorporate the stamp duty and ERC - what is the best way to do it. i know we can go to broker and probably will but just want to know how the figures are likely worked out if people could break it down that would be amazing!!  

Flugelhorn

I presume that you just decide how much of the equity you may want to put into the new house and how much you need for conveyancing / estate agents / removals / stamp duty for the new house etc etc 

Say new house is £500K - 
costs of buying this are stamp duty 12500
conveyancing (sale and purchase) - say 2000
estate agent for old house - say 1% - 3500 + Vat = 4200
removals - ?
redemption of old mortgage - approx 1200

so minimum costs for buying and selling are:
approx 520,000

you get 350000 from the old house and have to give 121000 back to the mortgage company leaving you with 22900 as you stated

520000-22900 = 291000 needed in mortgage 

Avro1995

Flugelhorn said:

I presume that you just decide how much of the equity you may want to put into the new house and how much you need for conveyancing / estate agents / removals / stamp duty for the new house etc etc 

Say new house is £500K - 
costs of buying this are stamp duty 12500
conveyancing (sale and purchase) - say 2000
estate agent for old house - say 1% - 3500 + Vat = 4200
removals - ?
redemption of old mortgage - approx 1200

so minimum costs for buying and selling are:
approx 520,000

you get 350000 from the old house and have to give 121000 back to the mortgage company leaving you with 22900 as you stated

520000-22900 = 291000 needed in mortgage 

Hi there thanks a lot for your response

Avro1995

Avro1995 said:

Flugelhorn said:

I presume that you just decide how much of the equity you may want to put into the new house and how much you need for conveyancing / estate agents / removals / stamp duty for the new house etc etc 

Say new house is £500K - 
costs of buying this are stamp duty 12500
conveyancing (sale and purchase) - say 2000
estate agent for old house - say 1% - 3500 + Vat = 4200
removals - ?
redemption of old mortgage - approx 1200

so minimum costs for buying and selling are:
approx 520,000

you get 350000 from the old house and have to give 121000 back to the mortgage company leaving you with 22900 as you stated

520000-22900 = 291000 needed in mortgage 

Hi there thanks a lot for your response

Hi thanks for your response! 

The way I worked it out was kind of the same but

New purchase of £500,000

COSTS 
Stamp duty = £12,500
Solicitor costs £2500
Estate agent fees £4200
ERC fee - £1210

Total cost are £500,000 + £12500 + £2500 + £4200 + £1210 = £520,410

Sale of old property 
Funds in £350,000
Repay mortgage of £121,000
Leaves with £229,000 equity. 

£520,410 - £229,000 = £291,410 mortgage required.  Removal costs to be paid separately.

I think that all makes sense and adds up. I just want to clarify however:

Stamp duty and solicitor fees can be added to the mortgage amount no problem? 
If from offer to completion is 6 months, my mortgage will have decreased in that time - is it just a case that we will be refunded anything left over?
Can removal fees be added if necessary also? 

Flugelhorn

You can add whatever you like, new car, holiday in the Caribbean.... etc. Basically you are redeeming a mortgage and applying for a new one, you don't have to put all the equity money into the property - you can keep some for fees, furniture, decorating. The mortgage application asks how much you want to borrow and how much you will be putting into the property, it won't ask you to put every bean from the old house 

On completion of the sale / purchase you will get a statement which shows all the costs and the new borrowing and the redeeming of the old mortgage and the fees etc and there will be a balance payable to you   - say you borrowed £300K (if you can afford it) then at the end the solicitor will send you the excess back. 

re removals - my old solicitor used to say "is there anything you want me to pay?" (she didn't mean personally ha ha ) - eg removals, estate agent, etc etc - she would then pay them on the day and you never had to have the money up front. Not sure that removals will do that these days ie not get paid until after the event but it is standard for estate agents