What happens to any equity in my house when I sell, but don't buy immediately?

[HeadFairy]

We're selling our flat and there's likely to be an 8 week time lag between selling our flat and completing on our new house. We have about £250k in equity in our flat, so what happens to that? Who sends us the balance? Our new mortgage for the new house is with the same bank, so normally they'd transfer it over, but I don't want the new mortgage to start until we've completed the sale. Do they just send me a cheque for £250k or do they put it in a bank account for me? (I intend on splitting it up in to other bank accounts so I don't go over the £50k protection limit).

You get an electronic transfer of 250k into the bank account you nominate

When you sell your house, the money is transferred to the client account of your solicitors. As much of this as necessary is used to pay off the mortgage.

Normally what happens is that the rest of the money then gets transferred to your house purchase. In your case, there is no onward purchase, so the balance will therefore be sitting in your solicitor's client account. It will be your decision where to ask your solicitor to send that money, and I agree that you would be wise to split it about a bit in this climate -although getting five different accounts set up might be a bit much - particularly since it might look odd on your credit record. If you have concerns re bank stability, it might be worth speaking to your solicitor. I don't know, but it sounds to me like there might be insurance or something you could purchase to protect yourself against bank failure for that set sum (if not, sounds like an obvious business opportunity...)

the only thing you need to watch about asking the solicitor to split it up is that they will chage you for 5 (or however many) transfers which could be costly

The flip side of course is that if you get it sent to one bank, you need to understand how you move it out - we had GBP70,000 sent to my bank and we could only pay out GBP 10,000 a day so it took ages to move

Thanks for the advice everyone... Ribenaberry, we already have 5 bank accounts what with dh and I both having seperate bank accounts and savings accounts (hang over from our pre married days)

That's irritating about the solicitor charging us for 5 transfers heavenstobetsy, I might have to swallow that though if as you say they limit the amount you can transfer out on each day.... Or we could just risk it for 5 days...

HeadFairy- even if the accounts are with different banks, do just double check that they don't share a banking licence. I think that the Moneysavingexpert site has some good guidance on this.

I would also check with your bank how much you can transfer - some banks might have higher limits than others, especially if you get it pre-agreed.

I can only presume with that much Equity you bought your flat in 1901...

lucky bugger

Same thing happened to me. Two different solicitors, one handling our sale,and another handling our purchase in another town. We got a cheque for the balance when the first mortgage was paid off which I put in a hig interest account (when such tings existed) and then used it for the deposit on the new house a few months later. A very stange feeling to have a large amount of cash so easily accesible, but I resisted the temptation to go mad with it.
We took out a new mortgage with a different building society, it might be worth shopping around for the best deal rather than sticking with your current lender, you are in a good position to get a good deal.

Riven

or have it all in £5 notes and roll about nekkid spraying a shaken up bottle of champagne around your bedroom

Riven, I could get it out in fivers and roll on my bed in the manner of bank robbers/lottery winners!

Ribena - I did call my bank, they won't tell me the limit I can transfer out "for security reasons" but I assume it's probably around the £10k mark like you say, so I think we're going to get the solicitor to transfer it to us in 5 x £50k sets.

Thanks for the tip off about banks with the same banking licence. Two of our accounts are with Abbey and Alliance and Leicester so as they're both Santander owned that applies to them... might have to start opening up some bank accounts...

Aeschylus - I bought it in 1996 so really at the start of the super boom. I'm very grateful for all those nights in with the lights off and living on baked beans (I really couldn't afford it when I bought it) because it's allowed me to upgrade from a flat to a house, I don't think that would have been possible without that much equity.

Blimey saintdobby, I didn't even see your post, I've gone blind from a day at work in front of the pc!!!

do it do it

OK then, you've persuaded me! Sod the mortage, here's to rolling on a bed with a load of fivers, popping champagne corks and behaving in the manner of a bank robber/lottery winner!

suggest you have the solicitors pay the balance into your cheque account, then write cheques and pay them into the other accounts...dont get your knickers in a twist over interest, the clearing cycle is day 2 after the cheque is deposited it is cleared for interest, day 4 cleared for withdrawal and day 6 cleared for final fate (no chance of a late return on the cheque then...) so effectively you are only missing out on one day of interest and at todays rates thats not a huge amount!!

won't tell you the limit you can transfer for security reasons!!!!!!!!!!!!!!
And they are providing you with a service, the mind boggles at the complete insanity of some things.

For security reasons?

Can you get down to a branch, explain the actual situation and demand to see a manager. I'd also explain that if they won't tell you (so presumably you have to make a transfer, see if it fails and incur fees?), you will be moving your custom elsewhere. Also highlight that you'll be taking out a new mortgage in due course and wouldn't even consider them as the provider...

It will go into the bank account that you nominate. Make sure you transfer the money into a high interest account, not that there are many of those around now. You will be taxed on the interest.