Buying new property before selling existing one

alexlyne

any comments would be appreciated.

We have a property, could sell for around 85K. (been in nearly 4 years, FTB, bought for 89K)
Looking at buying a new property, asking price 150K.

Plan 1:
Originally we looked at keeping existing house to rent out. Problem with this is that mortgage co need 85% LTV in both properties in order to do this. They have remotely priced our property at 78K, which makes our current LTV is around 92%, therefore we would have to boost the mortgage payment in order to get to 85%, plus have a 15% deposit on new property.
so 22.5K for new property, 8K for existing property, plus fees = we can't afford it, so plan out of the window!

Plan 2:
Straightforward buy/sell at same time. The problem with this is that we have seen the property we want, and know that the seller has a house with no chain lined up. We would have to instruct an EA, get a HIP etc, and without these we wouldn't be taken seriously, and in this time, the house could go.

Plan 3:
It is possible for us to get a mortgage on the new property whilst keeping the existing mortgage. We can do this if we have a 90% LTV on both properties. This means we would have to boost the existing property by around 2.5K, and fund 10% deposit on new house, 15K max.
Include legal fees, we can move in for around 19K, which is achievable.
Then we would have to pay when we get round to selling the house (3-6 months at a guess, we'd price it to sell) the EA, HIP and legal fees(?).. we should make 14K from the sale, so we should have a net gain after fees.

The total cost of this plan would be higher, I understand this... but it could also mean putting in a lower offer on new property - we'd be cash buyers, and can complete quickly as we're not relying on a chain. So we would save money here. Any remaining cash from the sale of our house can be used to put an initial booster payment into new property, or be used to pay for our wedding next year (as current wedding fund is being raided for this house buying venture)

What do you think? I would say it's a bit risky, as we could be paying two mortgages for a while (which we can afford to do in the short-medium term), but moving would be much less stressful, and we would come out with a bit of cash at the end of it.

helfew

Hi

We were in this position last year. Found a house we loved and just couldnt sell ours.

We completed on the house we loved in January and are renting the old house out on short term new mortgage has taken into account that we are renting old house and asked old mortgage lender for their permission to rent out the house without remortgaging to a BTL mortgage.

alexlyne

Yes, the lender did say we didn't need a BTL mortgage, but would have to get a 'consent to let' mortgage. I'm not sure what the difference is, except that a BTL we would neeed to have 75% LTV, with a CtL, it would be 85%. Either way, we couldn't fund our current shortfall as well as a deposit on the new place.

helfew, Are you planning on now keeping your existing property, or are you still trying to sell?

Lady-g-

alexlyne, i am in a really similar position (even down to the getting married next year part!)
we have seen a new house which has just dropped in price by 14k, unfortunately our own place hasn’t sold yet (only been on market about a week and a half)
we are thinking about putting in an offer on the new house before we sell, therefore we would have two mortgages until our place sold.
Luckily we have some equity in our place so what im doing is taking some equity out and using this as a deposit on the new place then taking the rest on a mortgage but we are only taking our borrowing up to 80% so when our place finally does sell we have some money comming our way (to pay for weddinging things!)

the only thing i would say about doing option 3 is making sure you find a lender that is willing to lend you based on the fact that you will have (for the short term hopefully) two mortgage outgoings.

i went to a broker and she had some good advice for me on the new mortgage, maybe you should try that.
fingers crossed our properties sell soon, I cant afford 2 mortgage and the wedding, and i REALLY do not want to postpone my wedding!!

alexlyne

I know what you mean Lady-g, our wedding has already been postponed once to be able to buy a house first, the future Mrs L will not be happy to delay again... fact.

I know our lender will be happy to lend us the money, even with an existing mortgage - I phoned them this morning, and they did the calculations. It's all down to having the cash up front, and believing that we can sell our house in a reasonable time, at a price that is greater than the mortgage plus a bit.

alexlyne

Forgot to say..

Thanks so far guys, I'm glad that I'm not the only one who has been in this situation, and that I'm not crazy for considering it!

alexlyne

Quick update:
WE are going with plan 3, as we can just about afford it.
Put an offer in this morning of 142.

It was rather swiftly rejected. The EA gave some interesting info though:

The seller previously had their house on the market 18months ago for 165. They reckon that a 10% drop is the going rate for the area in this time, so will probably not go much lower than the 150 they are now asking for.

IMO, the price drop in this area hasn't been as great as in other areas, but is around 12-14% absolute tops in the 18 months (which was around the peak of market, right?).. I.e. more that the 10% they're going on. However the only prices I have to go on are the ones on RM that have been on for more than a year, and the sellers are still a tad disallusioned.

Plus, we are proceedable immediately, so no hanging around.
I'm thinking we will go a bit higher, but will not go up to the full asking price unless we tell 'em that we will insist on getting our property sold first. It's then in the hand of the gods.