Break the chain - offset mortgage?

somnus

Hello,

I'm not quite ready to go ahead with moving house yet but I'd like to ask some opinions on a possible approach to moving house that could allow me to move chain-free. I've heard so many tales of woe with chains for housing sales that I'm interested to see if I can avoid it.

Currently I live in a house that is owned outright without any mortgage. This will form about 40% of a deposit on a house in the price range I'm looking at. I also have enough cash available to put down a 10% deposit on a house in my price range.

So the possible plan is this:

1. Buy the new house with an offset mortgage using 10% cash deposit
2. Move in
3. Sell the old house and put the equity value from the sale into the offset account (unlimited overpayments)

I've not been able to find any information on others doing this, so I'm not sure if it's a no-go or just uncommon.

My considerations:

• I will be the owner of 2 houses for a (hopefully) short time, so I will pay increased SDLT (which will be refunded on sale of 1st house)
• I could potentially be left with an unsold house for a time.
• The rate on the new mortgage with 90% LTV will be worse than I could get than if it were 50%

Is there anything that I'm missing here? Do you think I'd be approved for a mortgage in this situation? Has anyone done anything similar?

I hold absolutely no other debts and have no blemishes on my credit record etc. Obviously I could speak to a broker or lender but I think I'm realistically 6-12 months away from moving - I'd rather not open myself up to the calls and e-mails etc. if I don't need to.

I'd be glad of any information and opinions that others may have (including just bite the bullet and enter a chain! This will be my first house move).

juniordoc

Can you afford to service the payments on 2 mortgages? Would a lender agree that you could afford repayments on both? You could always look for a buyer for your current place who is chain free?
It may be simpler to go into short term rented accommodation if you are so keen to not be in a chain.

somnus

I wouldn't need to service two mortgages because my current home isn't mortgaged. That's really what I thought made the whole thing into a potential option. I can afford the council tax and other payments. The mortgage payments on the new house would be less than 30% of total net income @ the 90% LTV rate, so affordability should be fine.

Short term rental would be an option but then I'd need to move home twice. One of the main aims for this would be to reduce the hassle of it all, so I'd probably enter a chain before renting.

Having a chain-free buyer and a chain-free home to buy would be the ideal world, but I'm assuming that wouldn't be too easy to find. For the extra expense I'd be going to for a 90% LTV mortgage it may be an option though (by discounting my sale and overpaying the purchase, in the extreme).

silvercar

We did something in a similar vein, but even more complex. I can't see any problem as long as:

a) your new 90% mortgage is affordable in the lenders view
b) you can afford the upkeep (maintenance, insurance, utility bills etc) on two properties.
c) bear in mind that should you not sell your current home in the next couple of years you may have a CGT liability on it. (last 18 months of ownership are exempt, then you have allowances, so it won't kick in for a while)