Down sizing

Stiletto

Please help!!!!
We have house to put on market for 190.000 and have no mortgage, we own outright.
We have found a property for 100,000 we would love to put offer in on. We need to borrow 100,000 until our property is sold and we then want to pay the whole debt off and be totally mortgage free again.
What is the best way to do this without it costing silly money.
Can anyone help.

TrickyDicky101

What savings do you have available?

What is your income?

An offset mortgage on the place you want to buy could be a possibility (but availability of that will depend on the above).

Stiletto

We have about 10,000 in savingsCurrently 25.000 pa nett income
We really want to pay debt off ASAP when our property sold
We really need to do as cheaply as possible

tim123456789

Stiletto wrote: »

We have about 10,000 in savingsCurrently 25.000 pa nett income
We really want to pay debt off ASAP when our property sold
We really need to do as cheaply as possible

There is no cheap way to "bridge".

You either have to link the purchase with the sale or sell first and move into rented (/hotel/caravan/family etc)

tim

moneyistooshorttomention

I wondered about doing the same as you would like - and came to the conclusion that there indeed "no cheap way to bridge". In fact, I wasn't at all convinced I'd be able to "bridge" at all - never mind cheaply.

There would also be the downside that current house was obviously sitting there empty and that could lead prospective purchasers to think "Desperate = that means I can make a lower offer on it".

So I decided I had no option but to "link" as previous poster calls it - darn it.

lessonlearned

I spoke to my broker about this recently.

I had already enquired at my bank about bridging finance (HSBC) and was advised that most high street banks no longer offered this facility.

My broker could offer me a deal which came in at 10% interest per annum, plus an arrangement fee of £1500. I didn't think that was too bad for short term lending.

I have not had to use this option because I have not yet found my next property. However it was reassuring to know that it was an option available to me just in case I found "the one".

However, my circumstances are somewhat different. I am currently in rented accommodation and waiting for some investments to mature.

Therefore any bridging requirements would have been finite, just a few months.

If you have not sold your property it could be more risky for obvious reasons. It could be more open ended.

There is bridging finance out there, although technically it will be called something else.

Generally you will have to pay commercial lending rates rather than normal residential mortgage rates and of course arrangement fees.

ValHaller

tim123456789 wrote: »

There is no cheap way to "bridge".

It does not need bridging. It needs a straightforward mortgage with no early redemption penalties. And redemption on sale of the other property.

With £25000 income and £10,000 savings for a £100000 property, it does look a bit tight, but taking the mortgage out on the existing property may be easier because the LTV will look better.

martinsurrey

Stiletto wrote: »

Please help!!!!
We have house to put on market for 190.000 and have no mortgage, we own outright.
We have found a property for 100,000 we would love to put offer in on. We need to borrow 100,000 until our property is sold and we then want to pay the whole debt off and be totally mortgage free again.
What is the best way to do this without it costing silly money.
Can anyone help.

How old are you and your other half?

With an income of £25,000 pa you should be able to get a mortgage on your current home of £90k, (50% LTV), depending on your ages.

Get a variable rate with no tie in and no product fee and then just repay in full upon sale.

Should be fairly cheap in the grand scheme of things.

Edit

Valhaller just beat me too it!

tim123456789

ValHaller wrote: »

It does not need bridging. It needs a straightforward mortgage with no early redemption penalties. And redemption on sale of the other property.

With £25000 income and £10,000 savings for a £100000 property, it does look a bit tight, but taking the mortgage out on the existing property may be easier because the LTV will look better.

This might look OK in theory but in practice is going to be difficult.

The mortgage company will ask why you are taking out a mortgage on a property that you already own, mortgage free.

If you try and "make up" a reason, they will not lend to you at "standard" rates if the answer is "to pay for a round the world cruise", and if you are honest about it being for a second property they will want to know what your intention is for owing two properties. Again, if you are honest they won't be impressed with the idea of you coming to them for a "long term" loan that you intend to pay back in six months - this isn't what mortgage lending is for and they won't be interested.

And there is also the risk that they will think that you are trying to get a domestic mortgage for a BTL (believe me they do think this, BTDTGTTS) and bounce you out of the door for that reason.

It's far from as simple as you make out.

ValHaller

tim123456789 wrote: »

If you try and "make up" a reason

You are so unimaginative. OP has already given a reason - it is to buy another property.

Why invent a porky if the truth will do?

tim123456789

ValHaller wrote: »

You are so unimaginative. OP has already given a reason - it is to buy another property.

Why invent a porky if the truth will do?

because they will say "and why do you want this other property?" (as I explained in the rest of my post, this is not a simple option either).

tim