Wanting to buy first, then sell, will I get mortgage?

shazchip

Hello,

I’m after a bit of advice to see what’s feasible before I start down a long road. Apologies in advance for the very long post but I feel the more detail the better….

The background :

I currently live in my own flat, which I bought ~2 years ago, and am perfectly happy there and have no real need to move. I rent spare rooms to two friends. Recently I’ve been thinking that more space would be nice, but again not NEEDED. I like my street, the location, and my flatmates. All in all, it’s all pretty good right now.

Except, I saw a house go up for sale on my street, had an idle look online at it, thought it looked pretty nice and decent sized, thought a bit about financials, did some calculations, realised I could actually afford to upgrade, realised it could make sense and be really really good (more expensive than my flat but nearly double the floor space), so I arranged and attended a viewing, and have now madly fallen in love with the house.

So : I am thinking of selling my flat to buy the house. My flat was last valued at £135k by mortgage provider, and I have ~£85k left on the mortgage. So by selling it, I would release ~£50k (assuming I get around asking price, of course). I would then put this as the deposit for the house which is ~£240k (though I would hope to get it for slightly less) - I have done some research and am quite confident a lender would lend me ~£190k under normal conditions (e.g. taking into account salary, zero debts other than mortgage, etc).

If I were to go about it the normal way, I would have to put my flat up for sale before/at the same time as I put an offer on the house.

The problem is, I don’t want to do this, as I don’t want to sell my flat UNLESS I buy THIS PARTICULAR house. Imagine I put my flat up for sale and then my offer on the house wasn’t accepted, then I’d have to retract the flat from sale and still pay fees etc. Or, offer on house was accepted and I found a buyer for the flat too but then a few weeks down the line, the house vendor changes mind or the chain breaks higher up or something, then I’d have to let down my buyer too as I then would not want to sell.

So, to avoid getting stuck in chain problems / having to put flat up for sale until/unless it’s necessary, I asked my parents if they will lend me the £50k to put down on the new house, and if/when that purchase has completed, THEN I can my flat up for sale and pay them back when it’s sold. I think that’s an ok plan; I know that I would then be paying two mortgages for a little while whilst the flat sells, but I am happy to do that if it means everything else goes smoothly.

The only problem now is with getting that mortgage on the house without selling my flat first. Will lenders accept my explanation of “yes I currently have another mortgage but I am going to sell my flat in a couple of months” …? Will they even entertain this idea? I am assuming that I HAVE to disclose all the info - or could I go to a different lender to my current one and not even tell them of the existing mortgage?! I am unsure how to start conversations with lenders to whom I want to apply for the new mortgage ….

Thanks in advance for any advice!!

jhs14

I doubt it, what guarantee would you have that you'd be able to sell your flat? The lender will want to know that you can afford both mortgages long term.

Don't try to hide the existing mortgage - it's fraud and you won't be able to hide it anyway.

If you're parents have the £50k and presumably are in a better financial position than you, is there any way they could buy the house themselves, then sell it to you once you've sold your flat? I can't see any other way to do it.

pinkteapot

What people get if they buy then sell is a special sort of mortgage called a bridging loan. It's designed for the short-term and the rate is higher than on a mortgage.

You probably wouldn't get bridging finance if the money is tight and it's hugely risky if your flat then takes longer to sell than you thought.

If your parents buy then sell the house to you they'd incur thousands in buying and selling fees which I expect they'd want you to pay.

Put your flat on the market and offer. When selling you don't pay any fees up front. If you pull out then you'd only lose a bit of solicitor's time on costs. When EAs come to value, check their contract terms for whether their fee is due if they find a buyer but you pull out. Morally, when viewers ask your position, be honest that you're only selling if you can have this house. Then they can decide whether to take the risk. When we moved - a big sell and buy that cost us £22k in stamp duty and fees - our vendor was buying a unique property and would have pulled out if that had fallen through. We still bought as the house was perfect for us.

Pixie5740

Free tin of :spam: with every consultation.

shazchip

Thanks jhs14. Yep wasn't wanting to 'hide' existing mortgage as such, dunno why just thought I'd ask the question

pinkteapot - thanks also for the advice. I didn't realise you couldn't have two residential mortgages. I read about bridging loans and their high interest rates and that's why I thought of asking my parents for the same kind of money instead.


I suppose the best (only) way forward is to just go for it and put my flat up for sale and then offer on the house and like you say just be completely open with everyone. I suppose potentially losing the time and fees if it doesn't go ahead is going to be worth the risk for this house.


p.s. kianmellin - I'm based in the U.K. as signified by all the ££££ signs :-)

Ozzuk

You can have two residential mortgages, I have in the past, but you won't get a very good rate on the second and you'll need a good LTV (80-85% usually minimum but does depend on existing mortgage level).

However, from description of your situation I'd be amazed if anyone will lend the kind of money you are asking for. Also, don't forget to factor in fees, mortgage arrangement, stamp duty, EA - there is 5k just there. Bridging (if you can get it) is highly risky - what if your flat doesn't sell? I've also had bridging finance in the past, but I like high risk

Something else worth considering, if you are taking their maximum (190k) I bet they'll also want you to clear any existing debt like credit cards, loans - with the exception of car loans usually.

penguingirl

As you already have lodgers, have you considered whether you'd be able to change your current mortgage to a BTL mortgage for your current property and then get a residential mortgage for the second? You'd be best speaking to an independent mortgage advisor about this. If you do become a LL you'd have to read about your obligations to protect deposits, have a gas safety cert, give proper notice etc. so it is more complicated than just having lodgers.

Also banks don't like deposits that are loans (from family or elsewhere), and your parents would probably be asked as a condition of the mortgage that they declare it as a gift. If it's a loan they could have claim over your house and the bank wouldn't agree to that.

kingstreet

Ozzuk wrote: »

You can have two residential mortgages

You can have as many mortgages as you can afford, residential/second property/holiday home whatever.

Some lender choose not to provide more than one residential mortgage, so you have to plan carefully to avoid the lenders who wouldn't lend.

shazchip

Ozzuk wrote: »

You can have two residential mortgages, I have in the past, but you won't get a very good rate on the second and you'll need a good LTV (80-85% usually minimum but does depend on existing mortgage level).

However, from description of your situation I'd be amazed if anyone will lend the kind of money you are asking for. Also, don't forget to factor in fees, mortgage arrangement, stamp duty, EA - there is 5k just there. Bridging (if you can get it) is highly risky - what if your flat doesn't sell? I've also had bridging finance in the past, but I like high risk

Something else worth considering, if you are taking their maximum (190k) I bet they'll also want you to clear any existing debt like credit cards, loans - with the exception of car loans usually.

Hmm Ozzuk thankyou very much for the reply but just to point out it's almost like you didn't read my (admittedly long) post.

- £50k deposit on a £240k house is indeed less than 80% LTV.
- I have done enough research to be confident that lenders will lend me £190k under normal circumstances. The question that arose would whether they would do that if I have another another mortgage at the same time, if they would accept that it was for a short period of time.
- I don't have any other debt / loans / outstanding credit card balance, etc.

shazchip

penguingirl - yep I had thought about BTL, but since I'd want to move my current flatmates with me (checked, they said yes), I think it would be more trouble than it's worth for a short period.
Thanks

calydon

I did exactly this - was confident the 'old' property would sell but wanted to be in a strong buying position (i.e. chain free). We had both mortgages running in parallel for about 4 months between the purchase of the new house and the sale of the old house.

We didn't even need to use a broker - just applied direct to the new mortgage company.

Perfectly possible if your income etc will cover it.

Oh and... the first property was at about 85% LTV when we sold it and the new property was 90% LTV on purchase, perfectly decent interest rate (well, as good as a 90% mortgage can be!). This was 2 years ago.