We're hoping to trade up and we have a query on the contract deposit. We're hoping to use the equity in our house for the mortgage deposit and fees, as we do not have enough savings to pay the typical contract deposit of 10% of purchase price, and wouldn't be able to save it for a few years. We are not in a position to live with anyone else between and selling and buying, and do not want to have to find rental accommodation in between, so we want to sell/buy on the same day and move directly. We're in no rush to move, so if the conveyancing gets delayed then there's no issue as long as we can stay in our current house while the conveyancing happens.
The questions in short:
1. Can our solicitor ask the vendor's solicitor to have a small contract deposit, e.g. €10,000 instead of €38,000, due to my funds being tied up in equity? Is this common and mundane, highly irregular or somewhere in the middle?
2. If we definitely need the 10% in cash, would it be rational to use a top-up mortgage to free up cash for this? Is that using a very complex system just to make some cash appear, or a smart move?
DETAILS
Current house value: €280,000 (valued about 2 years ago), Galway suburbs
Current morgage balance: €170,000
Therefore there's equity of €110,000
Savings: €14,000
Combined gross income: €100,000
Desired house: €350,000-€380,000, Kinvara / Athenry / similar town near Galway
We want to buy for up to €380,000 with a €300,000 mortgage, with the balance of €80,000 coming from the equity and the remaining €30,000 going towards fees - solicitor (buy & sell), estate agent, stamp duty, surveyor, valuation etc. Overall we have enough available via the equity but I'm trying to understand the timing of when various things are due.
I know we'll need to pay the booking deposit, probably a flat fee of €5,000, so that can come out of savings, but do we need to have the balance of 10% (€38,000 total) for the contract depoit, or can our solicitor ask the seller's solicitor to use a lower contract deposit as our funds are tied up in equity that will become part of the sale? Would that be a normal thing to do or would it be very unusual?
TOP-UP MORTGAGE TO RELEASE EQUITY
If we do absolutely need to have the contract deposit available at the time of signing the contract, would it make sense to get a top-up mortgage of the existing house, which would release equity that could be used for the contract deposit? I figure I could top up the mortgage to exactly 80% LTV, so I'd take out a mortgage of 224,000 with my existing mortgage provider, then I would have €54,000 (difference between new mortgage value and existing mortgage value), and that becomes the cash available to me to pay the contract deposit. This isn't "bridging finance" as it's not tied to the sale or purchase in any way - if neither proceeded, then I've just changed my mortgage and will pay it back. The only complexity/cost is this would require engaging a solicitor. I would imagine it would be relatively cheap for the solicitor as there's no conveyancing happening, so less than €1,000, but would the process of arranging the top-up mortgage eat a few months in admin time, during which I'm not able to sell? Would the banks be concerned that I've just taken out a "new" mortgage and am immediately looking to take out another again immediately afterwards?
The questions in short:
1. Can our solicitor ask the vendor's solicitor to have a small contract deposit, e.g. €10,000 instead of €38,000, due to my funds being tied up in equity? Is this common and mundane, highly irregular or somewhere in the middle?
2. If we definitely need the 10% in cash, would it be rational to use a top-up mortgage to free up cash for this? Is that using a very complex system just to make some cash appear, or a smart move?
DETAILS
Current house value: €280,000 (valued about 2 years ago), Galway suburbs
Current morgage balance: €170,000
Therefore there's equity of €110,000
Savings: €14,000
Combined gross income: €100,000
Desired house: €350,000-€380,000, Kinvara / Athenry / similar town near Galway
We want to buy for up to €380,000 with a €300,000 mortgage, with the balance of €80,000 coming from the equity and the remaining €30,000 going towards fees - solicitor (buy & sell), estate agent, stamp duty, surveyor, valuation etc. Overall we have enough available via the equity but I'm trying to understand the timing of when various things are due.
I know we'll need to pay the booking deposit, probably a flat fee of €5,000, so that can come out of savings, but do we need to have the balance of 10% (€38,000 total) for the contract depoit, or can our solicitor ask the seller's solicitor to use a lower contract deposit as our funds are tied up in equity that will become part of the sale? Would that be a normal thing to do or would it be very unusual?
TOP-UP MORTGAGE TO RELEASE EQUITY
If we do absolutely need to have the contract deposit available at the time of signing the contract, would it make sense to get a top-up mortgage of the existing house, which would release equity that could be used for the contract deposit? I figure I could top up the mortgage to exactly 80% LTV, so I'd take out a mortgage of 224,000 with my existing mortgage provider, then I would have €54,000 (difference between new mortgage value and existing mortgage value), and that becomes the cash available to me to pay the contract deposit. This isn't "bridging finance" as it's not tied to the sale or purchase in any way - if neither proceeded, then I've just changed my mortgage and will pay it back. The only complexity/cost is this would require engaging a solicitor. I would imagine it would be relatively cheap for the solicitor as there's no conveyancing happening, so less than €1,000, but would the process of arranging the top-up mortgage eat a few months in admin time, during which I'm not able to sell? Would the banks be concerned that I've just taken out a "new" mortgage and am immediately looking to take out another again immediately afterwards?