I don't fully understand mortgages, deposits and moving home

[MagicalTrevor]

Knowledgeable types of PH, please can you help explain how this all works.

I don't really want to broadcast my own personal circumstances so I'll use example figures.

We bought our house at the peak of the market. Oh well, there was no way of knowing really but hey ho. Fortunately, we put down a decent deposit and have paid off some of it so we're not in negative equity... but we've lost the deposit and contributions. Again, no worries really as the housing prices should eventually go back up again... some time!

For example, house was £100k with £10k deposit (£90k mortgage). Since paid £5k off that figure so now owe £85k. We don't need to move but maybe in the next year we'd like to but the new house is £130k.

My questions is; do we need to find £13k to have the 10% deposit required to but the new house or does the mortage just get increased from £85k to £130k? (our combined salaries easily cover this mortgage btw)

Is the process of 'moving house' (in my example) seen as 'sell the house with no equity and then buy a new house using requiring a new 10% deposit'.

I'm really confused by all this

Cheers

[Diablos-666]

If your current house is worth £85k and you have a mortgage of £85k then yes you'd have to find £13k to buy the new £130k house. You might be able to buy the house with £7k (95% LTV) but the rates are not very good.

[Sarnie]

If your looking to port your current mortgage, then you will still need to stay within the criteria of that product. Eg if the max lending was 90% when you took it out, then the same would be applied to your new property.

Therefore if the new property is £130k, you will need a £13k deposit. Whatever you were able to sell your property for, above your £85k mortgage can be taken off the deposit you'll need. Eg if you sold your house for £90k, thats £5k 'profit' which can be taken off the £13k you need for the deposit, meaning you would need to find £8k from your own funds.

Hope that helps?

[MagicalTrevor]

Thanks both. That's a great help, although not what I particularly wanted to hear.

Fortunately, I don't need to move and we're pretty happy where we are but moving house would be nice.

Best get saving ... as those figures were made up!