Selling house - Explain to me like I’m 5!

[bells987]

Hi all,

currently looking to move but to be honest the costs associated are messing with my brain!
we will be selling as well as buying which feels like twice the stress than when we were just buying haha.
my main question is: how do deposits work? We will make a profit of around £5-10k on this property. Obviously we’ve paid off part of our mortgage (around 15k) so how does this all work? Please explain to me like I’m 5 as I have extreme case of baby brain! 😂

thank you

How much is your mortgage? How much will you sell for?

Your equity will be what the house sells for minus what you still owe to the mortgage provider. There will be conveyancing costs in selling. You say you will make a profit, but how do you know that unless you have already exchanged?

Your deposit will then be any equity, plus any additional savings you have to put towards the next place. You will have conveyancing, survey and moving your stuff costs, so if you don't have savings, these will need to come out of the deposit.

Add stamp duty to those moving costs. You need quite a bit of equity or savings these days to make a move worthwhile.

It's worth using ChatGPT to find out more about the moving process and costs etc. It's very good at explaining things in simple terms. I've just been using it to help with some tax processes and it was more helpful than the accountant 😜.

As we're currently in the the thick of it, I'll explain how it has all been for us:

• You need to know how much your house will sell for. You won't know the REAL value until someone makes an offer and you accept it, but getting some estate agents round to give you a valuation will help with that.
• If you're expecting to make a profit, then that means you will buy a house for less than your current house is worth. If what you mean by 'profit' is just that you have paid off some of your mortgage, that is different.
• (I hope this isn't overly patronising, but it took me ages to get my head around it, so figured it might help!) Essentially If your current house sells for £200k, you have a £150k mortgage, and you want to buy a house for £250k - all that means is that you need to find an extra £50k, as the £150k mortgage just moves over to the new house, you have £50k 'profit' and then you need another £50k.
• If you have a mortgage, you can port your existing one to your new purchase - you will need to apply for this with your bank, and then once approved, your solicitor will handle things. Alternatively you can choose to redeem your current mortgage completely (watch out for early redemption fees) and then buy your new house with no mortgage or with a new one.
• If you're both selling and buying, you won't need a desposit (or at least, I assume our situation is how it works!) - on exchange of contracts, your buyer will pay 'you' a deposit and you will then pay that same deposit to the house you're buying (in reality it will go through your solicitor and you won't see it). I don't think the amount actually matters - its a nominal amount to make the contract legally binding, and enough to make it unappealing for people to breach the contract!
• Costs you will need to take into account are: conveyancing - get some quotes, but expect to pay £3k for this; estate agent - usually a %age of your house sale; stamp duty - rightmove or gov.uk both have calculators; removals. Also expect to have some put aside to cover unexpected things that crop up (for us it has been indemnity insurance for something on our house; the purchase of some things on the fixtures/fittings list; estate management fees.

To give you a rough idea, we've just recieved our completion statement from our solicitors and will be paying £15k on top of the purchase price for stamp duty, estate agent and other extras. Removals will then be on top of that.

If you're expecting to make a profit, then that means you will buy a house for less than your current house is worth

I assume by profit, OP means her current house will hopefully sell for more than she paid for it. She will then put this into her next house but she's still profited all the same!

If your bought your house for £100k, but your outstanding mortgage balance is £80k, you have £20k equity that you’ll be due back if you sell your house. If your house sells for more than you bought it for, you can add the difference on to your equity - so say it sold for £110k, you’d expect £30k back from your sale.

if you want to then buy a property for £300k, you can use that £30k as a deposit on the new property. If you also have savings, you can top up to a higher deposit by adding savings to that £30k figure.

However, you will also need to factor in costs for Estate Agents to market and sell your property, Lawyers fees to manage your sale and also your purchase, stamp duty costs, and removal company costs if you need one. As a pp has said, there may also be an early redemption fee to pay on your mortgage if you’ve “fixed” for a number of years and want to take out a new mortgage with a different lender.

We’ve recently gone through it and legal fees were circa £4k. You can use a stamp duty calculator online to check the stamp duty you’d pay (the amount due changes depending on value of your purchase,) and estate agents fees for us were 0.9% of selling price of house, plus a marketing fee (Rightmove etc) of £400 plus a home report fee (Scotland) of circa £400.