Borrowing and deposit for movers
"Moving house, how much can I borrow?" is nearly always the first thing a client asks me, usually followed by "and what does that leave me for a deposit?" The two questions are tied together. Your deposit mostly comes from the equity in the home you are selling, and the bigger that deposit, the less you need to borrow and the more lenders want your business.
This page walks through how I work it out for clients: the equity left after the sale, the loan to value bands, how lenders test affordability at the new loan size, and the things that quietly shrink the figure, like childcare and car finance. There is a calculator further down and a worked example with real numbers.
For the bigger picture on selling and buying at the same time, start with our moving home mortgages guide. This page is the money side.
Step one
Equity is simply what your home is worth minus what you owe on it. The number that matters when you move is a bit smaller than that, because selling and buying both cost money. Here is how I build it up.
Use the price you have agreed, or a realistic asking price if you have not sold yet. Online estimates are a starting point, not a property value a lender will rely on. Two or three local agents valuing it gives you a far better feel.
Ask your lender for a redemption statement. It shows the exact balance plus any early repayment charge if you are leaving a fixed rate early. Your annual statement is usually out of date by a few thousand.
Agent fees typically run at around 1% to 1.5% of the sale price plus VAT, then legal fees for the sale itself. On a £320,000 house that can easily be £5,000 to £6,000 before you have packed a box.
Stamp duty is the big one for movers, then legal fees on the purchase, a survey, removals and any mortgage fees. Our stamp duty calculator gives you the exact figure for your purchase price.
Add any savings you want to put in, and that total is the deposit for your new home. The new mortgage is the price of the new home minus that deposit. It sounds obvious, but I regularly see people plan around the gross equity and then find £15,000 or £20,000 has gone on costs. If you want to see every cost of moving laid out, our moving home calculator breaks the whole move down line by line.
Deposit and LTV
Lenders price mortgages in loan to value bands, normally in 5% steps. Your loan to value (LTV) is the mortgage as a percentage of the purchase price, so a £300,000 loan on a £400,000 home is 75%.
| Deposit | Loan to value | What it typically means |
|---|---|---|
| 5% | 95% | Possible with a smaller pool of lenders. Rates are usually at their highest and the affordability checks are tighter. |
| 10% | 90% | A much wider choice of mortgage products. A common position for movers who bought recently or in a flat market. |
| 15% | 85% | Rates often step down noticeably here, and more lenders compete for you. |
| 20% to 25% | 80% to 75% | A strong position. Many movers sit in this range once their first home has gone up in value. |
| 40% or more | 60% or less | Usually where the keenest mortgage rates sit. Going below 60% rarely improves the rate much further. |
The bands are the reason I sometimes suggest putting a little more savings in, or negotiating a little off the price. Dropping from 85.4% to 84.9% can move you into the next band, onto lower mortgage rates and smaller monthly payments. Going the other way, borrowing a few thousand extra for a kitchen can push you over a line and cost you more than it saves.
How much deposit do you need as a mover? Technically 5% with some lenders, the same as a first time buyer. Interest only is rarely available at that level, so assume a repayment mortgage. In practice most of my moving clients have 20% or more once their equity is counted, which opens up the better end of the market. Our loan to value calculator shows your band in seconds.
Affordability
This is the bit that trips people up. Having a mortgage already does not mean the lender will simply let you borrow more. If you are increasing the loan, it is a fresh affordability check on your income, outgoings and credit, at the new loan size, against today's rules.
Most lenders cap borrowing at around 4 to 4.5 times income. Some will go to 5 or 5.5 times, and a few higher, usually for higher earners or certain professions, and normally with a bigger deposit. On a joint income of £80,000, that is roughly £320,000 to £360,000 for most people, before commitments are taken off.
Basic salary is the easy part. Overtime, bonus, commission and allowances are often used at 50% to 100% depending on the lender and how regular they are. If you are self employed, lenders usually look at your last two years of accounts or tax calculations.
Lenders check you could still pay if interest rates went up, so they test your mortgage repayments at a higher rate than the one you will actually pay, even on a discounted rate or a long fix. That is why two lenders can give you very different figures from the same simple details.
A longer mortgage term lowers the monthly repayments and can lift how much you could borrow. Many lenders go to 35 or 40 years, but each lender also has a maximum age at the end of the mortgage term, so a 52 year old moving home may be limited on term. Longer also means you pay more interest overall, and how much you can borrow depends on the term as much as the income.
Your credit score and credit file matter as much as your salary. A missed payment last year or a maxed out card can change which lenders will look at you. Check your file before you apply, so nothing surprises you halfway through. Our Checkmyfile guide explains how to get all the credit reference agencies in one report. To find out how much a lender might offer, try our mortgage borrowing calculator. It is a quick borrowing calculator for a first look, then we confirm the figure against real lender criteria.
What reduces the figure
Mortgage affordability is not just income times a number. Lenders take your regular spending off first, and some costs hit harder than people expect. These are the important factors I ask about on the first call.
Car finance, personal loans and credit card balances all reduce how much you could borrow. A £350 a month car deal can take a surprisingly large chunk off the maximum, sometimes tens of thousands. If a loan has only a few months left, some lenders ignore it, which is worth knowing before you clear it early.
Nursery fees are one of the biggest factors I see for growing families moving up the ladder. Lenders ask for the monthly figure and treat it like any other bill. If your childcare costs drop soon, for example when a child starts school, tell us. Some lenders will listen.
Each child adds to the living costs a lender assumes, along with utility bills, council tax and travel to work. Bigger homes come with bigger bills, and lenders know it.
Maintenance payments, school fees, student loan repayments and ground rent or service charges on a leasehold all count. Being upfront early with your mortgage affordability figures saves an awkward conversation after a valuation has been paid for. Our guide to debt to income ratio goes into more detail.
Keeping your current deal
If you are part way through a fixed rate, porting lets you take that mortgage deal to the new house and avoid the early repayment charge. Your mortgage payments are then based on two parts rather than one. When you need a bigger loan, the extra comes from the same lender on one of their current mortgage products.
Say you port £170,000 on your existing fixed rate and borrow another £140,000. You end up with two parts: the ported £170,000 on the old rate and the £140,000 on a new rate. Your overall cost is a blend of the two. If the old rate is low, the blend can work out well. If it is higher than today's deals, porting may not be the bargain it looks.
The two parts can end on different dates, which can tie you to the lender over a longer term. The extra borrowing is fully assessed, so porting is never guaranteed. And the property has to suit the lender too. Our porting and early repayment charges guide covers this in depth.
My usual approach is to price both routes: port plus extra borrowing, or pay the early repayment charge and take a new mortgage deal elsewhere. Sometimes paying the charge is cheaper over five years. You only know by doing the maths.
Low equity
Not everyone has a big chunk of equity. If you bought near the top of the market, took a 95% mortgage, or bought a new build with a premium on it, you may find there is not much left after costs.
If your equity after costs comes to less than 5% of the next price, you will need savings, help from family or a cheaper property to make the deposit work. A 90% or 95% mortgage on the new property is possible, but the affordability checks are tighter.
If you owe more than the home is worth, you would need to cover the shortfall from savings to sell. A few lenders have had schemes that let existing customers move the negative equity across, but they are rare and criteria are strict.
Overpaying for a year or two, or waiting for values to recover, can move you into a much better position. A product transfer or remortgage in the meantime keeps your payments under control. It is not the answer anyone wants, but I would rather tell you now than after you have paid for a survey.
Family help
Gifted deposits are not just for first time buyers. Plenty of movers get help from parents to bridge the gap, especially growing families who need the extra bedroom.
Lenders want to see the money is a genuine gift, not a loan. The person giving it usually signs a gifted deposit letter confirming they will not own a share or expect it back, and your solicitor will ask for proof of where the money came from.
If the issue is income rather than deposit, a joint borrower sole proprietor mortgage lets a family member add their income without going on the deeds. Our bank of mum and dad guide covers all the options.
Buying before you sell
If you find the right home before yours has sold, a bridging loan can fund the purchase for a short period until the sale completes. It is quick, but it is expensive: interest is charged monthly, there are arrangement and exit fees, and you need a clear plan for paying it back. If your sale falls through, the costs keep running.
For most of my clients, a proper chain with an agreed sale is cheaper and less stressful. If bridging does look like the right answer for you, we can talk it through and make sure you understand the risks before going near it.
Worked example
Here is a typical case, with numbers. The figures are for illustration only, not a quote.
Sarah and Tom are selling their semi for £320,000 and buying a £450,000 detached house nearby. They owe £170,000, have £10,000 in savings and earn £78,000 between them. They pay £600 a month in nursery fees.
Gross equity: £150,000
£320,000 sale price minus the £170,000 mortgage.
Moving costs: £21,500
£12,500 stamp duty on £450,000 at the standard rates in England, plus about £9,000 for the agent, legal fees, survey and removals.
Deposit: £138,500
£128,500 of equity left after costs, plus £10,000 savings.
Loan needed: £311,500 at 69% LTV
That is about 4 times their income, so it sits within most lenders' limits on paper.
Where it gets interesting: the £600 a month childcare comes off before the lender works out the maximum. With some lenders that still leaves room, with others it gets tight. If they kept £5,000 of savings back for emergencies, the loan would be £316,500 and still under 75%. This is exactly the kind of case where picking the right lender matters.
Calculator
Put in your own figures to see the equity from your sale, the deposit you would have, the loan you would need and your loan to value. It gives you a rough idea of the numbers to plan with, not a mortgage promise.
Next steps
An agreement in principle (AIP) is a lender saying they would lend you a certain amount, subject to a full mortgage application. Agents often ask for one before they put your offer forward.
It tells you the real ceiling before you start viewing your dream home, and shows estate agents you are serious. It is usually the first step once you have decided to move. Many lenders use a soft credit search at this stage, which other lenders cannot see. Our mortgage in principle page explains more.
Lender mortgage calculators, a mortgage affordability calculator or any mortgage application online only use a few simple details. They do not know about your bonus history, your childcare or the car finance ending in March. Our mortgage advisers check your figures against real lender criteria before anything goes in. We also do not quote current rates on this page, because they change every week.
We are fee free on over 90% of cases. There is a £299 fee on mortgages under £100,000, and complex or adverse cases can carry a fee of up to £995, which we always agree with you upfront. We compare mortgages from across the market and do the full mortgage application for you.
Some of the lenders we compare for home movers
Frequently asked questions
The questions home movers ask me most about how much they could borrow and how much deposit they need.
More questions
Usually, if the lender approves the extra borrowing. The ported part keeps its rate and the extra goes on a new product, so you pay a blended rate.
You would normally need savings to cover the shortfall to sell. Waiting, overpaying or switching deals while you stay put are often better options.
Yes. Most lenders accept gifted deposits from family with a signed gift letter confirming it is not a loan.
In practice, yes. It is paid on completion, so whatever you spend on stamp duty is money that does not go towards the deposit.
Sometimes it helps, sometimes it is better to keep the cash as deposit. We run both versions before you decide.
Your home may be repossessed if you do not keep up repayments on your mortgage. Alexander Southwell Mortgage Services is authorised and regulated by the Financial Conduct Authority, firm reference 1011890.
Most home movers use the equity in their current home as the deposit on the next one. The trap is assuming all of that equity turns into deposit. It rarely does, so here is how to work out the real number.
Your deposit is what is left of your sale price after you clear your existing mortgage and pay the costs of selling. Estate agents, legal fees and any early repayment charge all come out first, so the figure that lands with your solicitor is usually smaller than people expect.
Budget for estate agent fees, often 1% to 1.5% plus VAT, conveyancing fees on both the sale and the purchase, a survey, valuation fees, removals and stamp duty land tax. In Scotland you pay Land and Buildings Transaction Tax and in Wales Land Transaction Tax instead.
Lenders price each mortgage product in loan to value bands, usually 95%, 90%, 85%, 80%, 75% and 60%. Dropping into a lower band can cut the interest rates on offer and your monthly payments, so a few thousand pounds more deposit can be worth more than it looks.
If your equity falls short, you can add savings or a gift from family. Your mortgage lender will want a gifted deposit letter and proof of where the money came from. Exchange of contracts usually needs a deposit paid to the seller's solicitor, so plan when the money moves.
Most home movers go for repayment. An interest only mortgage keeps monthly payments lower, but you have to show the lender a credible repayment plan, such as investments or the sale of another property, and many lenders want a large deposit as well.
Once you exchange on a freehold house you are usually responsible for buildings insurance on the new home, and your lender will want it in place by completion. Get your home insurance quote early so it does not hold anything up on the day.
Yes. Your estate agent will need an energy performance certificate (EPC) before your home goes on the market. It usually costs well under £150 and lasts ten years, so check whether you already have a valid one before paying for another.
Want us to work out your real deposit figure? It takes about ten minutes on the phone.
Call 03300 432 428We are fee free on over 90% of cases. Where a fee does apply, it is £299 on mortgages under £100,000 or up to £995 on more complex or adverse cases, and we always tell you before any work starts.
Your home may be repossessed if you do not keep up repayments on your mortgage.
