Buying before selling

gnash101

Mortgage free on my current home and house is on the market(valued £165000). House I am interested in is valued at £45000 more than mine and I would like to purchase it before waiting to sell.
Is it possible to use my current house as deposit so as to benefit from lower LTV deal and pay off all bar £45000 once current house sells. If I have to take out new mortgage against new house it would be around 90 LTV, and as you know rates not very attractive.
Would like to buy before sell,and would appreciate any info on the most cost effective way(if any) to do this.

Richard_Webster

Quite apart from finding a lender that will allow you to have two residential mortgages at once, you will have to find the 10% (£21,000) - the seller will want 100% of his price, so 90% from lender, 10% from you.

vegasvisitor

We are in same situation.

Seen house around £200k. Current house £110k, not mortgaged. Not on market yet, we need to buy first then sell due to lack of suitable houses in area we like.

We are thinking if we made an offer we would need to allow a good 4 months to try to sell our own. If we can't sell, we would consider BTL to release adequate deposit (£180k is way over 2 1/2 x joint earnings, so we'd need to release money to get us to the amount we think they might let us borrow)

How do banks calculate what you can borrow, and what effect does the BTL have on this?

kinglewis

You could possibly mortgage your current home for 75% of its current value providing you with £82500 deposit on the home you are going to buy.. (plus you will need stamp duty / sol fees etc. so its a question of whether your income would support a mortgage of 127500 (3.5 x income will not be a million miles away).

Your problem is that the new btl mortgage is very likely to tie you into a 2/3 year period and will have quite large set uo fees. Not ideal.

jennifernil

'Tis a weird system you have "down south"!

Up here (Scotland) it is pretty normal to buy before you sell, and no deposits are required. If necessary you get a bridging loan. Once you have agreed to buy, that's it, you are pretty much committed.

I really do not know how you can stand the way you buy/sell properties in England!

vegasvisitor

Thanks for that so far. Sorry forgot to say, have a deposit too to put down. Takes it down to under £100k mortgage on the residential then.

It's something like 2 or 2.1x joint salary. If we did the buy to let mortgage, would they entertain a 2xsalary mortgage too? I know this would have been no problem a few years ago, but times have changed and I wonder if this is still seen as low enough risk. Do they 'ignore' the buy to let amount on what they will lend, since theoretically there would be more income in the form of rent to cover that?

Yes, I'm in Scotland and for many years it has been more normal to buy first and bridge if necessary. Usually the idea is that you are prepared to sell low enough to avoid bridging, or the market has been more buoyant and a sale will happen. We had our current house on the market this time last year - put it on in October, had a few viewers who had theirs on market so couldn't proceed, then in February we got 2 offers. In the end we turned them down because our purchase fell through. This is another reason to make sure a purchase is going through first - as we don't NEED to move, it's just a desire.

Do you still get bridging loans? Wondering if we did a long entry date and maybe we got a sale maybe a month too late it could still be do-able? The house we are looking at is empty, so entry date is flexible just now.

kinglewis

The buy to let mortgage is usuall y not related to income (really)

If your income is above 25k you will be accepted if you meet certain criteria.

The criteria usually includes 25 - 40% deposit and then it relates to the rental income being sufficient to cover the mortgage payment by 125% (or sometimes less) This relates to interest only payments so you would need to spk to a mortgage advisor to do the sums for you.

(sorry this is based on English rules!! Ignore me!!)

gnash101

Thanks for advice. I am also in Scotland. Always thought bridging loans were astronomical rates, but read in the paper that some banks offering 2% above base rate for open-loan. Going to see a mortgage advisor wednesday. Thanks again.

Richard_Webster

Plea to those in control - another example of a thread that would have been better on a separate Scottish Property Board - my post did contain the get out about assuming the property is in England/Wales but had I known OP was in Scotland I would not have got involved at all.

vegasvisitor

Hi Richard

Not sure what you're asking here...are you wanting the post moved, or do you want a separate board? I'm now wondering if there is a separate board that I've maybe missed?

Although I agree with you as it was not clear at all that OP was in Scotland, I'm worried that a Scotland board would be less visited, and there may be some people in other areas of the UK that could still give input on Scottish posts.

The laws are strangely very different. Sometimes in a good way, sometimes bad. I was quite surprised to read in the paper that the boiler scrappage scheme is not going to be available up here