Buying new house before old house has sold?

conradmum

We're renting at the moment after returning to the UK from living abroad. We have tenants in our old house whose rental contract finishes in February 2020, but ideally we would like to buy a house before then. After speaking to the Nationwide about bridging loans, they said no high street bank or building society has offered them since the glabal financial crisis.
Is there a way we can leverage the equity in our old house (which is fully owned) to buy a new house or do we have to sit tight and wait until we actually sell it?

Mutton_Geoff

You can mortgage/remortgage your BTL property to release equity. But your plan would be too risky for me. What if the tenants don't leave? What if it takes a long time to sell the old property?


Bridging loans are available and I would speak to a broker rather than directly with a single (conservative) lender. But carefully do the sums on what the downside of this could look like. It would be too scary for me and I would sit tight in rented until the old house has exchanged contracts then go out house hunting in a very strong buying position.

Doozergirl

You'll change your mind straight away when you see the rates on bridging loans. They are also time bound and you don't have any idea of how long this will all take.

Only the courts or tenants can end a tenancy. If your tenants don't play ball and leave when you want them to, it could be approaching the end of next year by the time they go. The housing market also isn't great right now with Brexit uncertainty and our now imminent GE.

It's a huge risk and not worth it. You will simply replace one small stress with a much larger one.

You're better off moving back to your old house and doing things the traditional way.

tom9980

My former neighbour bought their dream retirement property in France a few years ago but needed to use a bridging loan. They asked £305k on a property worth £260k and got so desperate with rising costs of their bridging loan they accepted £240k in the end. If they had been realistic from the start they wouldn't have dug themselves into such a hole and likely would have got £260k.

Your first job should be to talk to your tenants and tell them that you plan to sell when their fixed term contract ends because you wont be selling it until they leave and they wont be leaving until they do so willingly or a court enforces their eviction so everything else is pointless speculation until you get this sorted out. It can take 6-12 months to evict.

It would be much more sensible to wait until you are in the process of selling rather than risk taking a bridging loan or extra mortgage commitments.

AdrianC

Don't forget the +3% SDLT hike. How long since you last lived in your tenanted house?

Honestly, though - it's November tomorrow, so it's not exactly odds-on that you'd be moving before February even if you put an offer in today and finance was in place. Do you think the tenants are likely to play ball with notice, and your house will be ready to move back into immediately?

conradmum

Thanks for all your replies. We currently live in a different town, so moving back into the old house isn't an option. We don't have any reason to suspect the tenants may not vacate as they've been model tenants up to this point, though of course anything is possible. As the house is fully owned, what we may do is simply take out a mortgage to buy the new property and eat the early repayment fees. That way we won't be under pressure to sell the old house. I appreciate all the warnings on bridging loans.

G_M

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

pinkteapot

If you own the house that's rented out outright then you don't need a bridging loan. You can just get a BTL mortgage on it? If it's possible to get one without an early repayment charge... (Though you'd probably still be better off paying an early repayment charge than the interest rate on a bridging loan).

Mutton_Geoff

conradmum wrote: »

what we may do is simply take out a mortgage to buy the new property and eat the early repayment fees

If you are capable of financing the new house outright (ie you have the deposit and borrowing capability), then why worry about ERCs? A two year fix that allows overpayments, you could possibly sell your old house within the first year of the term, pay off 10% of your loan, then pay another 10% on the first day of the second year, then just settle the mortgage in full at the end of the second year from proceeds of your sale which has been sitting in one year term savings accounts earning about the same interest as you will be paying on a two year fix so net cost zero.


I'm a big fan of using OPM (other people's money) to finance my projects, it just takes a bit of lateral thinking on what's available to you.

seven-day-weekend

conradmum wrote: »

Thanks for all your replies. We currently live in a different town, so moving back into the old house isn't an option. We don't have any reason to suspect the tenants may not vacate as they've been model tenants up to this point, though of course anything is possible. As the house is fully owned, what we may do is simply take out a mortgage to buy the new property and eat the early repayment fees. That way we won't be under pressure to sell the old house. I appreciate all the warnings on bridging loans.

We did this, as the bungalow that we were buying needed loads of work doing. So we got a mortgage on it, which was paid off when we had done the work and sold our exisiting mortgage-free house a few months later. We just took a hit on the repayment fees.

NB, we were 65 and 66 at the time, with income entirely from Pensions. But a mortgage broker got us a ten-year i/o mortgage with Midshires.

Slinky

Have you asked the tenants if they are interested in buying the house?