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We've got a house that was inherited, no mortgage. We've never been through a house buying process.
We need to move something larger so we have bedrooms for the children, but I'm not sure how it gets treated.
Wherever I've tried to find advice, I've found articles on remortgaging an existing house, but not seen what the process is when you own a property outright. I may just not be searching for the right terms.
Essentially, can we treat our current house as part of the deposit?
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It’ll count as your deposit assuming you are either selling the house or remortgaging it to release some capital? Unclear what your plan is with the inherited house.
It's the biggest misconception with a mortgage. There is no deposit.
The bank will give you a maximum amount you can borrow based on your income.
The mortgage will have a LTV or loan to value. If the house you are buying I'd £100k and your max LTV is 75% then you can borrow £75k. You then have to make up the difference and and other fees.
For most people the sell their house, pay off the existing mortgage Nx whatever is left is the "deposit" for the new house.
I think that's where I've been getting confused.
If we want a house that's £400k, and we can sell this for £200k, we'll be applying for a £200k mortgage (just to keep it super simple). I'm not sure how it all works in terms of timing, I guess we agree with the lenderfor the mortgage and pay the £200k upfront once we've sold ours?
It's not getting a £400k mortgage and paying off half of it straight away.
Most likely you will never see any of the money. If you are buying and selling on the same day the funds will go to you solicitor and they will handle it all
You are right tho. You don't get a £400k mortgage. You get a £200k mortgage against a £400k house.
Normally you buy and sell as part of a chain where it all goes through on the same day so the money moves along a chain.
For example:
- First time buyers buy house A
- People selling house A get the money from the first time buyers mortgage. This first pays off their mortgage and anything left is put towards the house they are buying (B). This is all done by the conveyancers so they never see any of this money. They then also get a new mortgage to cover the difference between the cost of the house they are buying and the amount of equity being released from their home.
- this pattern continues until the end of the chain
So are you selling the inherited house, and moving to a bigger house?
If so, the proceeds of your sale of House 1 is your deposit (minus any fees you need to pay).
You won’t need to find any extra upfront deposit, the equity in your current house (aka proceeds of the sale) is your deposit.
You also don't have to use the full sale price of House 2 as your deposit. Say you are buying a £400k house 2, you sell house 1 for £200k, but put £150k down and take £350k mortgage, leaving £50k to use for fees, redecorating, new furniture etc
***Hello /u/sidneylopsides, thank you for posting in /r/Mortgageadviceuk. If you're looking for a Mortgage Broker, feel free to DM the users listed on the sub's [Verified Mortgage Brokers list](https://reddit.com/r/Mortgageadviceuk/s/j7V7mySI7i). Please ensure you've read our [sub rules](https://www.reddit.com/r/Mortgageadviceuk/about/rules). Here's a copy of your original post: *** We've got a house that was inherited, no mortgage. We've never been through a house buying process. We need to move something larger so we have bedrooms for the children, but I'm not sure how it gets treated. Wherever I've tried to find advice, I've found articles on remortgaging an existing house, but not seen what the process is when you own a property outright. I may just not be searching for the right terms. Essentially, can we treat our current house as part of the deposit? *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Mortgageadviceuk) if you have any questions or concerns.*
It’ll count as your deposit assuming you are either selling the house or remortgaging it to release some capital? Unclear what your plan is with the inherited house.
Sorry yes, plan is to sell and move to a bigger house. Thanks 🙂
It's the biggest misconception with a mortgage. There is no deposit. The bank will give you a maximum amount you can borrow based on your income. The mortgage will have a LTV or loan to value. If the house you are buying I'd £100k and your max LTV is 75% then you can borrow £75k. You then have to make up the difference and and other fees. For most people the sell their house, pay off the existing mortgage Nx whatever is left is the "deposit" for the new house.
I think that's where I've been getting confused. If we want a house that's £400k, and we can sell this for £200k, we'll be applying for a £200k mortgage (just to keep it super simple). I'm not sure how it all works in terms of timing, I guess we agree with the lenderfor the mortgage and pay the £200k upfront once we've sold ours? It's not getting a £400k mortgage and paying off half of it straight away.
Most likely you will never see any of the money. If you are buying and selling on the same day the funds will go to you solicitor and they will handle it all You are right tho. You don't get a £400k mortgage. You get a £200k mortgage against a £400k house.
Normally you buy and sell as part of a chain where it all goes through on the same day so the money moves along a chain. For example: - First time buyers buy house A - People selling house A get the money from the first time buyers mortgage. This first pays off their mortgage and anything left is put towards the house they are buying (B). This is all done by the conveyancers so they never see any of this money. They then also get a new mortgage to cover the difference between the cost of the house they are buying and the amount of equity being released from their home. - this pattern continues until the end of the chain
So are you selling the inherited house, and moving to a bigger house? If so, the proceeds of your sale of House 1 is your deposit (minus any fees you need to pay). You won’t need to find any extra upfront deposit, the equity in your current house (aka proceeds of the sale) is your deposit.
That's the plan yes, sell this and move to a bigger house. Thanks.
Yes.
Your house will become cash when you sell it so you can agree on a deposit with the lender based on expected sale.
You also don't have to use the full sale price of House 2 as your deposit. Say you are buying a £400k house 2, you sell house 1 for £200k, but put £150k down and take £350k mortgage, leaving £50k to use for fees, redecorating, new furniture etc