I fear I may have been a doofus with my mortgage and miscalculated - help!

[Whoopsscotties]

Maths used to be a strength of mine but I am worried I have made a massive and idiotic mistake. So:

we live in a house which we are selling for 350k. There is a 140k mortgage on it.

We are purchasing a house for 520k, but porting the 140k mortgage and have applied for an additional mortgage of 130k, because I thought that we would be putting down 210k (bearing in mind that that is the equity), plus the 270k mortgage total, plus 40k of our life savings.

But the thing is, the 350k for the house will be 350k not 210k, as we are taking the 140k debt and putting it on the new house.

Am I going totally bonkers?? Sorry Please someone, tell me how it is.

I think you've got it right. Have you allowed for stamp duty etc?

Right. Treat them as separate transactions.

You are selling a house for 350k on which you owe 140k, meaning you have 210k profit.

The new house will cost you 520k, of which you already have 210k, so you need 310k. You already have a mortgage agreement for 140k of this 310k, so you need an additional 170k. Which will be made up of an additional mortgage of 130k and then 40 savings.

So the payment of 520k for the new house consists of 210k profit from the old house, 40k savings, then 270k in mortgages.

You're buying for 520. You're selling for 350. So you need 170k extra. The 140k mortgage is irrelevant.

170k comes in part from the 40k savings. 170-40 = 130k still to pay. So you need a further mortgage of 130k.

So you were right the first time.

You're fine
Equity = £210k
Old mortgage = £140k
New mortgage = £130k
Savings = £40k

210 + 140 + 130 + 40 = £520k

Like another guilty mum said - the only other thing will be to consider how you're covering fees, stamp duty etc.

You are buying for £520k which is being funded by:

• £350k from sale of existing house (as mortgage not being repaid)
• £130k new mortgage
• £40k savings

As the PP says, you will need to pay, on top of the £520k:

• estate agent fees on your sale
• stamp duty on your purchase
• legal fees for your sale and your purchase
• moving costs
• fees for new mortgage
• any porting fees on your existing mortgage

Do you have sufficient cash on top of your £40k to fund all of those? If not then I would get a bigger new mortgage.

Can I just say though, I'm glad I don't have a mortgage like that!

Another - yes, it's about 15k, cleaning out the remainder of our savings along with the estate agent commission.

Patricia - I think I have got confused by the idea of taking the 140k mortgage with us, so it won't need to paid off when the house goes through, giving us 350k instead of 210k to put down on the new house.

Thank you.

lougle - so are you saying that we do need to borrow 140 + 130, or we don't?

My brain has turned into rice pudding.

I keep thinking we are paying back the 140k twice - once when we sell the current house, and then again on the new house!

You ARE paying off the £140k on your current house. That loan is secured against your house so it HAS to be paid off. However as you have effectively promised your bank that you'll stick with them they are treating your NEW £140k mortgage as if it was the same as the old one even though it isn't. You are then extending your borrowing to make up the shortfall.

You are only paying off the £140k once. You're not paying anything off your new house other than the equity you have at the moment.

Ok, thank you, I am clear now I have had a morning of madness.

Yes. It might make it easier to break it down step by step:

You will sell the house for £350k, but it has a mortgage of £140k. Equity: 350-140= 210k.

You have a new house that is £520k. The mortgage company has agreed to loan you the £140k that your current mortgage is worth. £520k- £140k = £380k left to find.

You have £210k equity. £380k - £210k = £170k to find.

You have savings of £40k. £170k - £40k = £130k.

You have used up the first mortgage, equity and savings, but still have £130k to find. So you need a 2nd mortgage of £130k, which is what you originally planned.