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Can I buy a new house before I sell mine?
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# 1
Petehod
Old 12-05-2010, 6:45 PM
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Default Can I buy a new house before I sell mine?

I realise this may have been posted before but I need some general help with this question. I currently have a mortgage on my current property of around 42,000, this is an offset mortgage and I have 21,000 in the bank, the house is worth around 185,000 so there is some equity in my current property.

We want to move downsizing and buy a new property for around 170,000, does anyone know what sort of response I will get from my current lender if I approach them to try and buy the new one before I sell the old one, whilst I fully intend to sell it and to put it on the market as soon as I can, I don't want to miss the property I have found.

Any help or advice would before I approach my current lender would be greatly appreciated,

Pete
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# 2
zzzLazyDaisy
Old 12-05-2010, 6:55 PM
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There is no absolute ban on having two mortgages, but you have to be able to service them.

Say you use the 20k as a deposit on the new house (which is only around a 10% deposit and that in itself could prove problematic) even if you get over that hurdle, that leaves you servicing 192k on mortgage debt. Do you and/or your partner earn enough to meet the income multiples?

Will you be renting out the current house to cover the mortgage? (which may assist you in getting a mortgage on the new house, but will bring with it a whole raft of landlord obligations, although the burden can be mitigated somewhat by using a good LA).

I'm not an expert, I'm just raising these points as potential issues. Hopefully someone more knowledgeable will be along soon.
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# 3
Petehod
Old 12-05-2010, 7:09 PM
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Thanks for this reply, the intention would be to sell our current house as soon as we can get a buyer, then paying off as much of any outstanding mortgage as possible (hopefully in the long term ending up with a small mortgage residue).

As for the mortgage income multiplier can anyone tell me what the lenders work on these days? (how many times per income)

We would be aiming to have two mortgages for the shortest possible time, we just don't want the lose the new house whilst waiting to sell the old one, the proposed purchase is a new build just coming on the market.

Pete
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# 4
jackomdj
Old 12-05-2010, 7:16 PM
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It used to be possible to do this, even outside the usual income multipliers, but I don't know how they feel now...I would say just go & ask, the worse they can say is no.

Back in 2000 we were relocating & having problems selling our house due to mundic. Our bank (who we also had our mortgage with) were more than happy for us to take on a second mortgage until the first sold (they knew it was going to go to auction if it did not sell by a certain date), they did not even make us go down the bridging loan route. Luckily we only ended up paying 2 months of double mortgage.
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zzzLazyDaisy
Old 12-05-2010, 7:26 PM
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Of course we are living in different times now. Houses often take a long time to sell, and we've had the credit crunch in the meantime.

OP is your house already on the market? How much interest have you had?

Are you willing to go to auction for a quick sale?

Is the new house direct from a developer? If so any chance of part exchange?

(I'm not going to comment on it being a new build, but I'm presuming you have negotiated a generous discount considering that new builds are most at risk of being valued low by the lender's surveyor)
I'm a retired employment solicitor. Hopefully some of my comments might be useful, but they are only my opinion and not intended as legal advice.

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# 6
shane42
Old 12-05-2010, 7:26 PM
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why bother downsizing from 185 to 170 ?
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# 7
Petehod
Old 12-05-2010, 7:39 PM
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Daisy, - Our house is not on the market yet but will be soon, we have not considered an auction but may do, the new property is from a small developer/builder so no chance of a part ex.

Shane - we are downsizing in size of the house rather than the value and from one end of the country to the other.
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# 8
k-hkr
Old 12-05-2010, 8:06 PM
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Hi, from my very recent experience trying to do the same, it is not that easy. They do not seem willing to bend a little for the short term and every avenue I went down had a big wall at the end.

I am trying to buy a house and then sell ours much like yourself. The one we are after is 200k and we have a 50k deposit. We would then sell our 115k house and have another 50k tp pay off the mortgage. Simple I thought.

I was after just paying the interest on both loans for a short while whilst we straddled the 2 houses but this was a non starter. Then all the deals are 2,3 years plus and you cannot pay large chunks off (once you sell your house) without large penalty.
Your best bet is to find a good SVR for the 2nd mortgage but you will struggle with less than 25% deposit as a minimum. That way you can pay down a chunk once your house is sold, or remortgage with a larger deposit and get access to the best deals.

As for lending multiples, they differ but are commonly 4 times and 4.1, 4.2 etc. Not sure on joint multiples though. A quick google should give you the answer. I suggest a whole of market Mortgage broker to be honest, unless you are very savvy with mortgage deals as you have to make sure you are not tied to an uncompetetive deal once you have the cash from your house sale through, also check fees etc as some are a complete rip off and unless you have a huge mortgage you would be worse off.
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