To ask how moving works if you're in debt but buying a cheaper house?

[moneyisthecauseofmisery]

Current situation is that we are homeowners with a mortgage, we live in a small two bedroom house that has no scope for expanding. We both have awful credit ratings.
Looking at the not too distant future we are going to need to move house to a three bedroom as DD and DS won't want to share a room and it's not very practical. We know we won't get approved for a bigger mortgage given our credit ratings and I'm also earning less than I did when we got our first mortgage.

However we've found a house that is perfect but less than what ours is probably worth (only marginally). So to give an idea of rough figures I think we could sell ours for about £180, the house we have seen is £170. We currently have about £110 left on our mortgage. Do we stand no chance because of our credit ratings or are banks more likely to approve a mortgage is it's less than we are on now?

Any help greatly appreciated!

I think your first step should be to see if you can port your current mortgage

https://www.moneysavingexpert.com/mortgages/porting-your-mortgage/

So you've potentially got £70K in equity right now. You'd need to port the whole mortgage amount because the extra £10K would be needed to cover selling costs, moving, whatever stamp duty is. You'd have £110K mortgage, £60K equity, plus potentially £10K to cover everything else. The mortgage amount won't reduce much unless you have other savings to cover costs. Depends than if your bank will reapply approval criteria before approving you to port the mortgage.

As suggested, you don't need a new mortgage and may be able to simply port it to the new house, contact your mortgage lender and enquire...

all that's left then is the selling/offering on the new house and associated costs which may all be covered with the equity.

House buyer offers 180k
new house you offer 170k
contracts agreed & exchanged
your solicitor receives 180k for house sale
Your solicitor sends 170k for new house
you receive 10k minus any fees

Don't forget to incorporate any stamp duty fees etc. into your reckoning.

Least that's how I think it'd work from when we sold mum's house and bought a flat although no mortgage