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Mortgage For New House Before Selling Current House

We're almost mortgage-free on our current home and would like to move next year. Nothing seems to be selling very quickly around here. We're also in the fortunate position of having enough saved up to cover a 15-20% deposit on the type of house we've been looking at.

If we paid off the existing mortgage and had a 15-20% cash deposit, would there be anything stopping us getting a mortgage on a new place before we sell the current house? We've no intention of getting involved in BTL or anything like that.

Some issues that concerned us:

* we would be looking at an LTV of 80-85%. Would the fact that we still owned the first house have any effect on the mortgages available to us at that LTV?
* would 80% LTV get us a significantly wider range of available mortgages than 85% LTV?
* when we sell the current house, we would look to return some of the proceeds to our savings and use the rest to pay off part of the mortgage on the new house (taking it down to 55-60% LTV.) Are there any mortgages which allow for this without penalty? If not, I presume a mortgage with a very short tie-in (e.g. 1-year fix) might be the way to go?

(I don't think it will make any difference but we're in Scotland)

Thanks :)
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Comments

  • Wh05apk
    Wh05apk Posts: 2,938 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    This will be purely down to your income, having a second property will have minimal impact.

    Rates are very dependent on ltv, so rates at 80% will be much better.

    As you expect to be have funds available, most products will allow 10% overpayments, if that is not enough, you should look for products with the ability to pay more, or even consider an offset.
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Think through the costs of having 2 houses and the potential risks of the old one not selling.

    There are a few options that allow penalty free overpayments, but as said above an offset might be a good choice.

    This gives a base for any alternative investment and good cashflow.
  • Yorkie1
    Yorkie1 Posts: 11,663 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    One of the risks re. the first property not selling promptly, is that it will probably be left unoccupied for long periods of time - which will require a different insurance product.
  • barrowc
    barrowc Posts: 42 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    Thanks to everyone for their replies :)

    There aren't too many houses for sale right now in the area we want to move to. Our concern was that we would sell our current place and have to either rent for a while (which seems like a waste of money) or have to buy the best of whatever was on the market at the time. The third option of looking in other areas is possible but wouldn't be our preference.

    Despite this, I think we may well look to sell first and then buy somewhere else. From the comments in the replies, it sounds like we should only consider buying before the current place sells if we can get to 80% LTV on the new place while having the current property ready for sale and attractively priced.

    It would be silly to hold out for an extra £2K or £3K on the selling price of the current place if we just ended up spending that much on 2x council tax/gas/electricity/insurance etc anyway. Equally we wouldn't want to appear like we needed to sell immediately and end up getting bid down to a ridiculous extent.

    I hadn't considered the insurance on an unoccupied property so would need to factor that in as well.

    So, if the right house at the right price appears before ours is sold, we could short-circuit the process a bit by buying first but only if the figures add up and we are serious about getting the current place sold very quickly thereafter. Does that sound sensible?
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    barrowc wrote: »
    Thanks to everyone for their replies :)

    There aren't too many houses for sale right now in the area we want to move to. Our concern was that we would sell our current place and have to either rent for a while (which seems like a waste of money)

    Why wasted money?

    You cover some of the cost from interest on the released equity, and no second mortgage so probably cheaper than having 2 places

    You can consider very cheap places as it is temporary,

    You can consider something querky

    You can consider something very close to work to reduce travel costs.

    Yiou get to move areas and get into or close to the prefered one.
    (starting to establish and get to know if it realy is as good as you thought)

    You are ready to move no chain(or apparent chain) once past the first 6 months on a periodic you are out in one month.

    No maintanence costs.

    Moving twice can be a pain but does mean you can have a proper clearout declutter, Helps if you have storage like garage or similar you can use.
  • barrowc
    barrowc Posts: 42 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    We haven't really researched the rental market so maybe I should spend some time doing that.

    One quick question: I assume that the amount of rent we were paying wouldn't affect the size of mortgage we would be offered? Obviously we wouldn't be paying rent once we found somewhere to move to so it would seem illogical for that to affect how much we could borrow
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    barrowc wrote: »
    So, if the right house at the right price appears before ours is sold, we could short-circuit the process a bit by buying first but only if the figures add up and we are serious about getting the current place sold very quickly thereafter. Does that sound sensible?

    There's no guarantee of a property selling very quickly.

    Once empty then buyers will know your position.

    If the property isn't sold by winter then you'll need to heat the property etc.

    Best to sell and then buy. The traditional route. Anything else is fraught with risk.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    barrowc wrote: »
    So, if the right house at the right price appears before ours is sold, we could short-circuit the process a bit by buying first but only if the figures add up and we are serious about getting the current place sold very quickly thereafter. Does that sound sensible?

    Think that through,

    What price will give a very quick sale?

    What does that give you as a buying budget?

    Are you getting viewing offers etc. at current pricing.
  • barrowc
    barrowc Posts: 42 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    We've just worked out some rough figures on the cost of renting versus the cost of buying before selling the existing property. Our initial idea that renting would be a huge waste of money turns out to be completely wrong.

    The additional cost of six months renting compared to buying first then selling later is around £1000 to £1500. This is mainly due to earning interest on the equity from the old property and on the savings we would have used for the deposit. Also buying first would entail two lots of council tax/utilities/insurance etc.

    If we bought first then I could easily imagine chopping at least £2K to £3K off the price of the old property just to speed up the sale. This would be far more than the extra we had spent on renting so buying first would look to be a total false economy :eek:
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    barrowc wrote: »

    If we bought first then I could easily imagine chopping at least £2K to £3K off the price of the old property just to speed up the sale. This would be far more than the extra we had spent on renting so buying first would look to be a total false economy :eek:

    £2-£3k for a quck sale!

    That's the sort of discount car buyers aim for.

    What price range are these houses <>£100k?

    If the place is not selling or getting offers close (<£5k) then you would be cutting the price by £10k/10% to generate interest for a quick sale.
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