Equity - What can I use it for?

Nice_Guy1989

First time posting so I do apologise if such questions have already been answered.

Here is the current situation my wife and I are in:

We accepted an offer on our flat of £385k last week and are looking at reserving a new build property priced at £542k.

We have about £90k left on the original mortgage.

That leaves £295k of equity. (Sale price - remaining mortgage)

 

Now if everything goes according to plan we will sell 8/9 months before we buy as the new build is set for completion between July and September next year and completion then happening in October. When the sale goes through and the remaining mortgage has been paid off, am I write in thinking we can use the money for the following expenses associated with buying and selling:

Selling:

£5,750 in estate agent fees (this will be reimbursed by Redrow when we complete with them).

£2k in solicitors fees

Buying:

10% deposit (£54.2k - using buyers deposit (£38.5k plus £15.7k from equity)

Solicitors fees - including stamp duty/land registry etc £17,245

That essentially leaves let's say £255k in equity and a loan to value ratio of 47%

Does this all make sense, am I missing any other big costs. Can all the above be paid using equity from the sale of our property and then purchasing the new one. Thanks in advance.

DE_612183

how are you intending to pay the £542k for the new property?

Even after your deposit of 10% that still leaves £490k

Nice_Guy1989

Buy using the remaining equity we have of £255k from the sale of our property. That was fairly obvious from my original comment.

EssexHebridean

Storage for belongings between the sale and the purchase?
Presumably you are renting between the sale and the purchase too - so will you need to cover rent from the equity as well or are you budgeting for that as part of your regular household budget?

Nice_Guy1989

We are fortunate to be in a position where we are moving in with family after completing the sale of our property so won't have rent/bills.

Rodders53

It's "equity" but not as we know it...

Deposit on Exchange is typically passed up the Chain in ever decreasing %ages via Solicitor 'promises'.  But you may be required to top that up, if the New Build is intransigent, in "Cash" paid to your Solicitor.  It's negotiable as part of the Contracts.

Many Solicitors require Searches and similar Disbursements to be paid as they occur IIRC or from a 'payment on account' you give them in advance.  Those costs occur even if the Sale/Purchase don't happen so it's not unreasonable for them to do so rather than 'lend' you that money.

Solicitor will draw down your Mortgagor's funds in order to Complete a few days before the event.

Sale of Flat money will arrive in your Solicitors on the Completion day, they'll pay off your existing Mortgage owed with some of that. The rest will be added with the drawn down new Mortgage money and (most) passed to the New Build Solicitors to complete.  Solicitors fees, Stamp Duty, LR and EA fees are usually paid from the leftover sum and an account will be sent to you with any surplus cash... 
You never see the 'equity' other than as a number on the accounts.  (NB There may be two calcs done:  One for the Sale and another for the Purchase.)

Your Solicitor may ask for more money from you if there looks to be a shortfall for some reason to Complete on the Purchase in advance of Completion.

You've missed a big potential up front cost:  Removers Fees.

Also House Insurance?  House you need Buildings (from Exchange) and Contents --- with a Flat the Buildings Insurance may be part of Service Charges.

saajan_12

Nice_Guy1989 said:

First time posting so I do apologise if such questions have already been answered.

Here is the current situation my wife and I are in:

We accepted an offer on our flat of £385k last week and are looking at reserving a new build property priced at £542k.

We have about £90k left on the original mortgage.

That leaves £295k of equity. (Sale price - remaining mortgage)

 

Now if everything goes according to plan we will sell 8/9 months before we buy as the new build is set for completion between July and September next year and completion then happening in October. When the sale goes through and the remaining mortgage has been paid off, am I write in thinking we can use the money for the following expenses associated with buying and selling:

Selling:

£5,750 in estate agent fees (this will be reimbursed by Redrow when we complete with them).

£2k in solicitors fees

Buying:

10% deposit (£54.2k - using buyers deposit (£38.5k plus £15.7k from equity)

Solicitors fees - including stamp duty/land registry etc £17,245

That essentially leaves let's say £255k in equity and a loan to value ratio of 47%

Does this all make sense, am I missing any other big costs. Can all the above be paid using equity from the sale of our property and then purchasing the new one. Thanks in advance.

The buyer's deposit isn't relevant if youre completing on the sale before the purchase as its included in the sale proceeds.
Pre sale, you'll need to cover solicitor's deposit and moving costs. 

Once your sale is completed, the total you will clear is: 
* sale price (which already includes the buyer's deposit)
* less mortgage balance
* less estate agent and solicitors fees

Then with that money you can pay for 
* purchase deposit (full 10% and whatever you don't want to borrow)
* solicitors fees
* moving costs

Bigphil1474

Once you've sold your house it's no longer equity, it's just your money. You can spend it on what you like. When we moved we had about £5k in buying costs (solicitors plus removal company), and stamp duty on top. Technically, you are paying about £290k deposit, rest is mortgage. Don't forget SDLT rates change in April.

DE_612183

Nice_Guy1989 said:

Buy using the remaining equity we have of £255k from the sale of our property. That was fairly obvious from my original comment.

Sorry, when you said "what can I use the equity for" - I presumed you meant you were looking for investments etc - so not obvious to me.

If you'd titled the thread - "what costs do I need to consider when moving house" - I would have understood exactly what you were getting at - but then that might just be me!

Anyway, back to your original question - I think you've got all the big costs - one thing I would do is try and use the same solicitor for sale and purchase - I know some builders try and make you use their "recommended" ones.

Albermarle

Be prepared for delays to completing the new build, and possible further delays if there are problems with it.