Mortgage calculation help!

[PurpleWalls]

Can you help me please? I'm going round in circles trying to work this out and I know that it should be simple! DH and I are disagreeing about how the transfer of the mortgage works and the sums.

Using example numbers...

We have £50k left on our mortgage at bank A and want to move this mortgage to bank B, we wish to borrow £150k in total from bank B.

Our house will sell for £250k.

We have £100k in the bank available to use.

What value property can we afford please?

You have £200k equity from sale?

Plus £100k in bank?

Then you want a mortgage too- that will be based on your income and debt so not as simple as how much deposit and mortgage you want.

You need a broker.

There’s more to affordability than what you “wish” to borrow. You have to look at monthly income, monthly outgoings, interest rates, etc.

But assuming you are approved to have a mortgage for £150k, then you can afford a house of £350k.

400k 100k in the bank. 150k when you move your mortgage to bank B and 200k.profit from your house when you sell for 250k and take the 50k mortgage off. Maybe a bit less if you need to pay stamp duty and sold fees out of the profit.

Thanks everyone.

Assuming affordability and not including stamp duty, fees, etc.

I thought that it would be £450k.

Bank B pay bank A £50k for the mortgage, then I borrow £150k from bank B. I thought that £50k would go towards paying off original mortgage and then £100k would be available to spend on new house.

Therefore, the above £100k plus £250k sale proceeds plus £100k in bank equals £450k. Is this incorrect? (Sorry, I do feel dim here).

You sell the house for 250k, 50k mortgage paid off, 200k equity, you have 100k in the bank and secure a new mortgage of 150k. I make it 450k!

£450k.

£100k in bank
£250k equity
£150k from bank B

= £500K

Pay back the £50k you owe bank A

= £450k to spend

£450,000 as long as you have monies available for solicitors fees and disbursements, stamp duty, survey fees, removal fees and agents commission

I agree, £450k minus all the fees mentioned by @pilates. Plus don't forget to account for any work you might want to do on the new property, and higher running costs if its bigger.

That should be regarded as your absolute top end but is probably too high due to fees.

But saying 'we want to borrow £150k' is a strange way to look at it, unless you mean 'a maximum of £150k'.

But if your DH thinks differently, what's his thought process?

450k.
200 from sale of house after paying of mortgage.
150 borrowed
100 in bank.

Don't forget fees and stuff - it adds up!

Thanks everyone, that’s so helpful.

The confusion surrounds the £50k
owed to bank A. Bank B said that they would amalgamate this into the £150k so he’s thinking that we have the whole £150k to spend on the new house rather than just £100k. Therefore, he’s thinking that the amount available to spend is £500k.

He's counting the £50k twice.

The way it works, and it might be helpful to think about is:

Selling price of old property minus existing mortgage, so in your case £250k - £50k = £200k. You also have savings of £100k so your deposit on your new property is £300k

So then you have the purchase price of the new property, plus all the fees, minus the deposit = the amount of your new mortgage.

So if you buy a £450k property and the fees are £10k (I don't know how much these actually are) that's £460k - £300k = £160k mortgage.

Or, as you've said you want a maximum £150k mortgage(?) then the maximum price you can pay is £440k, ie £300k - £10k + £150k = £440k.

That would involve bank B ‘paying’ the £50k back to bank A, then making £150k available to you to spend, so them essentially lending you £200k but you only having to pay back £150k, which obviously wouldn’t happen.

Thanks everyone, you've been so helpful. I was going round in circles thinking about this.

I might as well ask one more question whilst I'm here...

How does this work in practical terms please? It's mainly the paying off of the £50k original mortgage that I'm concerned about.

Would I receive the whole £250k sales proceeds into my bank account and at the same time bank B pays bank A back the £50k behind the scenes?

No, bank B doesn't get involved in the £50k, all the money is sent to the solicitors and they distribute it, starting at the bottom of the chain.

Your buyers solicitor sends the money they pay for your house to your solicitor.

They pay off your mortgage, take money for their fees, receive the money from your new lender, and you if you're adding to the pot, and send the money to your seller's solicitor so they can do the same with their mortgage and purchase if there is one. And so on up the chain.

It may be wise to move fast. Some are saying housing is to take a 20 percent minimum haircut. This is not an insignificant figure at the current valuations. This is not advice

Good thing it's not advice. It makes no sense whatsoever!

If (massive if) there is a 20% fall in property prices then why would a person rush to secure one at a higher price than they could get if they just waited 6 months?!

OP, personally I think that provided you can afford it and are planning to stay out for some years, you should not worry too much about market fluctuations and get a house that suits you and doesn't over-strain the family finances. This isn't advice either but at least it is rational!

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