Buying New House Before Selling Ours

TheVanguard

Hi

We are considering buying a new house before selling ours, are there any major pitfalls to look out for?

This will enable us to decorate/alter before we move in as well as allowing us to move in at a more leisurely pace.

Our current property is mortgage free but we will require a mortgage for our new property. We are able to afford the 10% deposit and the mortgage payments on the new house and obviously once ours sells we use the funds to pay down the new mortgage to a more reasonable level.

We would probably like around a month or so to do decorating works before moving in then put our house on the market....

I think we would have to pay a higher rate of stamp duty but provided we well our original house within 36 months this could be reclaimed..are there any other pitfalls or problems with this approach?

Any advice appricated

aneary

Double council tax, double utility bills, double insurance, depending on how long your property takes to sell I would check your insurance conditions if the property is empty.

Bare in mind your property could take awhile to sell and you will be paying double all that time.

saajan_12

Not necessarily problems but make sure you've considered

1. Council tax & utility bills on both properties during the overlap. Some councils offer a discount for an empty & unfurnished property for a limited period, but some charge a higher penalty council tax rate if it remains empty for over a month/year, so check with yours and budget accordingly

2. Higher rate stamp duty payable on the purchase and can be reclaimed if you move from old main residence to new one and sell your old one within 3 years. Note there is now a grace period so if you sell before you submit the stamp duty form for the purchase, then you don't have to pay+refund. However as you're buying with a mortgage, your lender will likely demand you pay stamp duty upon completion and in any case, the deadline is 30 days after completion which will cut it tight.

3. Taking a 90% mortgage instead of a very low mortgage will mean you get the worst interest rates. Also make sure you are able to pay off large amounts penalty free.. you'd likely need no/minimal fixed term as otherwise many lenders charge ERCs if you pay off over 10% of the balance in addition to your monthly payments. You usually can't remortgage for the first 6 months atleast as well.

All in, would it be cheaper to buy/sell as normal and move with family / to a short term rental instead of keeping the house for an extra month?

Ozzuk

Have you confirmed only a 10% deposit is required? If it is a second 'primary' home then often lenders require a better LTV, I know I had to find 15% when doing something similar. And obviously get a mortgage you can change (don't lock it in).

TheVanguard

Thanks the insurance one is a good point i think we can be absent for up to 60 days on our policy..I would need to check that if I maybe spent a couple of nights there would this be enough to reset the 60 days?

Narkynewt

What if you don't sell your house.

Debtslayer

I would say it would be cheaper to sell your current home and put items into storage before moving into new home and renting something short term or stay with friends or family of possible

TheVanguard

Thanks for the advice, I am less worried about my house selling as I think it should sell pretty quick and if push comes to shove we can afford both houses (my wife plans to retire in a couple of years, if she put this off we could afford both houses, so worst case it would delay her retirement a couple of years)

Just thinking out loud I wonder if it might be better to remortgage our own house to say 80% LTV and that way we would only require a 50% LTV or so on our 'second property' then when our old house sells pay of that morgage in full (provided we could get a deal with no penalties) hmmm

hmmm but then again rented could be the way to go.

Cinders:

saajan_12 wrote: »

2. Higher rate stamp duty payable on the purchase and can be reclaimed if you move from old main residence to new one and sell your old one within 3 years. Note there is now a grace period so if you sell before you submit the stamp duty form for the purchase, then you don't have to pay+refund. However as you're buying with a mortgage, your lender will likely demand you pay stamp duty upon completion and in any case, the deadline is 30 days after completion which will cut it tight.

Could you please say where you got this information from, as I've looked at the government website and am unable to find it. We will be in the situation whereby we complete on our new purchase 3 days before we complete on our sale (so will own 2 properties for 3 days). It would be easier to pay just the normal level stamp duty, instead of paying the higher level and reclaiming. TIA

Slithery

http://forums.moneysavingexpert.com/showpost.php?p=73153801&postcount=7

[Deleted User]

I will be doing the same as the OP, no mortgage needed for me but there are no properties for sale in my chosen area, I will be sitting tight until then. No stress because I am not putting mine up for sale until the new one is prepared for me. I am in an area that sells very quickly, I am not worried and will price accordingly, to sell but where are the sellers? Chosen area is just a couple of miles away, so it will be easy to sleep at either property for insurance purposes

We did similar for our last move and it was the least streesful move ever