Part Exchange help please!!!

KMM2010

Hi All
After some help and clarification please! Or if I am completely on the wrong track so please do let me know if I am! 
I am part exchanging my home (value £500k). Developer is offering £490k plus £10k incentives. New house price is £820k. 
Equity in our home is £243k
Financial advise via developers selected agent is that we need a £577k mortgage, which I thought is incorrect.
My thoughts were that we use full equity of £243k as deposit. Then the remaining mortgage of £247k is redeemed with the £490k from developer. Therefore we would just need a mortgage for £330k.
The adviser is stating we need a mortgage of £577k as £247k will be ported over in addition to the balance of £330k. Is he correct?
Would really appreciate some clarification on this to help me make sense of it!
Thanks in advance

silvercar

I’m guessing the £10k incentives is carpet/ garden etc so over and above your prices quoted.

your selling for 490k, so this gives you the 243k equity. (If your equity is based on the 500k valuation then you only have 233k equity, please confirm.

so you put the 243k equity towards the 820 price of the new place, leaving you to find 577k plus buying costs.

another way of looking at it is that your are increasing the property you own by 820-490= 330k, so you need to add that to your mortgage (or fund the increase from savings), so will need to increase your mortgage by 330k ie 330+247=577k.

user1977

If your equity is £243k and your new mortgage was only £330k, that's £573k in total. Which doesn't add up to a £820k house...

RedFraggle

You need a total of your existing mortgage plus another loan of £330 so the total he says is correct.
Do they understand you are porting and existing mortgage? Sounds like they think you need the full balance. 
They'll obviously need to use the full amount of £577k when doing affordability checks. 

Silvertabby

You are counting your equity twice.  

eddddy

I think your confusion might relate to "porting a mortgage" - as follows...

You have two broad options

You need a total mortgage of £577k


Option 1 

• You will stay with your current lender and...
• - port across your existing mortgage terms for £247k 
• - ask your current lender to increase your lending by £330k (The extra £330k will be on new terms)

Your current lender will still treat this as an application for a £577k mortgage...
- But £247k will be on the "old terms" - e.g. the old interest rate, old lock-in period, etc
- And £330k will be on "new terms" - e.g. a new interest rate, new lock-in period etc


(Realistically, you probably can't port your £247k mortgage keeping the current lender, and borrow the £330k from a different lender.)



Option 2

• You forget about staying with your existing lender and porting across your old terms. i.e. You pay off your current mortgage

• Instead, you apply for a new mortgage for £577k with a new lender

This could be a better option, if your "old terms" with your current mortgage lender aren't very good, so it's not worth porting those terms - because you could get better terms from a new lender.

But you also need to check for "early repayment penalties" if you pay off your current mortgage, instead of porting it.




I suspect that the financial advisor is suggesting that you should go with option 2.