Complicated Buying Situation

Hanpan

Hi, I'm new here so forgive me if I don't know the etiquette!

We've just had an offer accepted on a house for £265k but I'm not sure what the best way to go about buying it is given we have some unusual circumstances (broad outline of this below):

I've just inherited £100k after the death of a grandparent. This is from the sale of a property which completes in January.
We currently live in a house worth £100k which has around £25k equity in it.

My parents are able to loan us a further £100k to bridge us for the purchase of the new house due to the sale of a second inherited property which completes in Feb.

We are unable to sell our current house until we move out because it needs work doing to it.

So:
We need a mortgage for £165k to buy the new house (I have an AIP for this (top of our borrowing on the AIP is £295,850).

Because we need to buy without selling our current home, what's the best option?

1. My parents buy my current house, then are repaid their £100k loan upon it's sale. This would mean we could port our existing £70k mortgage to the new property which would mean no early repayment charge but I'm not sure how you do this/ what solicitor fees etc would be involved?

2. My parents pay off our existing mortgage, we buy the new place and move and then my parents are paid back from the sale of the current house. This would incurr early repayment charges and would mean that for a time we owned 2 properties. I've heard there's an additional stamp duty if you buy what would effectively be a second home? Can anyone shed light on this?

3. We buy the new house without selling the old one and pay 2 mortgages/ household upkeep until the new house sells, which would mean a period of time with a £70k mortgage plus the new £165k mortgage, which would take us to a total borrow of £235k until the old house sold. When the old house sold, we'd then have £25k equity to put into the new mortgage which again I think is early repayment charge?

Our combined household income is £61k, both in full time employment ad we have no children or debt other than student loans and the current mortgage.

Can anyone help? Huge thanks in advance, I know it's complicated!

AdrianC

Hanpan wrote: »

We've just had an offer accepted on a house for £265k but I'm not sure what the best way to go about buying it is given we have some unusual circumstances (broad outline of this below):

I've just inherited £100k after the death of a grandparent. This is from the sale of a property which completes in January.
We currently live in a house worth £100k which has around £25k equity in it.

So, come January, you will have £125k of equity.

My parents are able to loan us a further £100k to bridge us for the purchase of the new house due to the sale of a second inherited property which completes in Feb.

So, come February, you will have £125k of equity and a £100k personal loan, taking you to £225k equity - against a £265k purchase. How will a lender view that loan?

We are unable to sell our current house until we move out because it needs work doing to it.

You WILL be able to sell it... just not for £100k.

How much work does it need (in £ terms), and how much would it sell for without the work being done? It's clearly habitable... How are you planning on funding the work?

So:
We need a mortgage for £165k to buy the new house (I have an AIP for this (top of our borrowing on the AIP is £295,850).

But that will assume you have got rid of your current £75k in borrowing, right?

Because we need to buy without selling our current home, what's the best option?

1. My parents buy my current house, then are repaid their £100k loan upon it's sale. This would mean we could port our existing £70k mortgage to the new property which would mean no early repayment charge but I'm not sure how you do this/ what solicitor fees etc would be involved?

They may or may not feel the need for legals, and may be willing and able to DIY the conveyancing on minimal information, so just a few hundred quid in LR fees and £3,000 of SDLT.

2. My parents pay off our existing mortgage, we buy the new place and move and then my parents are paid back from the sale of the current house. This would incurr early repayment charges and would mean that for a time we owned 2 properties. I've heard there's an additional stamp duty if you buy what would effectively be a second home? Can anyone shed light on this?

Yes, you will need to pay the +3% SDLT on the purchase, taking the SDLT payable to £11,200 - of which you'll be able to reclaim £7,950 on selling your old place within three years.

3. We buy the new house without selling the old one and pay 2 mortgages

IF you can get them.

Hanpan

Thanks so much for the above, it's really helpful.

In terms of the work that needs doing, not a lot in ££ terms but a lot of elbow grease more than anything that would be difficult to do with us in the house. It's a tiny house and we have dogs so it's a nightmare to get any proper work done on it if that makes sense.

And yes, In Jan we will have £125k equity against a £265k purchase value (less fees so probably closer to £115k equity)

I calculated the AIP to exclude our current mortgage, but did a second to include our current mortgage payments. The second came in with a borrowing limit still well within the amount we'd need.

Ok, so from the above it looks like our best option is for my parents to buy my current house, giving us £115k equity straight away, then they sell the house and recoup te £100k loan from it. We'll need to ge tit valued ahead of that so they buy it for the amount we're likely to get for it if that makes sense.

Ok, that's so helpful thank you again!

getmore4less

Important bit missing income?

Simplest seems to be

Around Feb once both inheritance happen.

£75k from parents to pay off the mortgage on your property.

You have £100k and raise a £165k mortgage on the new place being mortgage free

Port with top up existing mortgage if excessive ERC.

parents help out with any fees etc.

once you sell you pay back the parents claim the SDLT back and if any surplus save or overpay.

Hanpan

Thanks!

Income is £61k houshold

billy2shots

Don't forget the increased stamp duty ifyou buy the second home whilst still owning the first. This can be reclaimed when you sell but you still need the cash to pay this in the short term.