Moving Home Without Savings: How to Use the Equity in Your Current Home to Raise a Deposit

Moving home can be a stressful and expensive process, and one of the biggest challenges is often coming up with a deposit for your new home. If you don't have any savings and you're struggling to find the funds you need, you may be wondering if there are any options available to you. One option to consider is using the equity in your current home towards the deposit on your new home.

Equity is the difference between the value of your home and the amount you still owe on your mortgage. If your home has increased in value over the years and you've made regular mortgage payments, you may have built up a significant amount of equity. This equity can be used as a deposit on your new home, either by selling your current home and using the proceeds towards the deposit, or by using a "let-to-buy" arrangement.

Option 1: Selling your current home and using the equity towards the deposit

If you decide to sell your current home and use the equity towards the deposit on your new home, you'll need to consider a number of factors. Firstly, you'll need to determine the value of your home. This can be done by getting a professional appraisal or by comparing your home to similar properties in your area that have recently sold. You'll then need to subtract the amount you still owe on your mortgage from the value of your home to determine the amount of equity you have available.

Once you know the amount of equity you have, you'll need to decide how much of it you want to use towards your new home. Keep in mind that you'll need to pay fees and taxes when you sell your home, so you'll need to factor these costs into your calculations. You'll also need to consider any other debts or expenses you may have, such as credit card balances or car loans.

If you decide to use all of your equity towards your new home, you'll need to find a lender who is willing to give you a mortgage for the remaining balance. This can be difficult if you don't have a deposit or if you have a low credit score, so it's important to shop around and compare mortgage offers from different lenders. You may also need to consider alternative financing options, such as a guarantor mortgage or a government-backed Help to Buy scheme.

Option 2: Using a "let-to-buy" arrangement

Another option to consider is a "let-to-buy" arrangement. This involves keeping your current home and renting it out while you move into a new home. The rent you receive from your tenants can then be used towards the mortgage on your new home, effectively turning your current home into a rental property.

There are a few things to consider if you're thinking about a let-to-buy arrangement. Firstly, you'll need to consider the expenses associated with being a landlord, such as maintenance, repairs, and insurance. You'll also need to factor in the cost of a mortgage on your new home and any fees or taxes associated with the sale of your current home. It's important to do your research and carefully consider the costs and risks involved before making a decision.

A let-to-buy arrangement can be a good option if you're unable to sell your current home or if you're unable to secure a mortgage on a new home without a deposit. It can also be a good way to generate additional income if you have the financial resources to manage the expenses of being a landlord. However, it's important to bear in mind that being a landlord can be time-consuming and stressful, and you need to make sure you understand the pro's and con's before doing this.

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