Can I get a short-term mortgage and then pay more in when I have the money?

gymguy2017

Hi there
I'm looking to buy a new property with my partner. They are going to sell the property we are cohabiting in (property 1). I also have a property (property 2) I want to sell, but it's going to take a while as have tenants - have to give 3 months notice etc. We have seen a house (property 3) we are really interested in, and hope to have money if we have a quick sale from property 1 to use towards a mortgage for property 3. Because it will take more time to sell property 2, is there a short-term mortgage we can get to buy property 3, and then once I have sold property 2, can I put a big lump sum from this sale into paying off the mortgage for property 3?
Thanks for any advice.

hippocrates1

Have you looked into bridging loans?

getmore4less

Will property 1 give you enough deposit to buy 3?

Going to be regular options that allow overpayments or stick with 2y products.

You won't avoid extra SDLT.

Thought it was still 6m notice for tenants.

gymguy2017

getmore4less said:

Will property 1 give you enough deposit to buy 3?

Going to be regular options that allow overpayments or stick with 2y products.

You won't avoid extra SDLT.

Thought it was still 6m notice for tenants.

Thank you - yes property 1 will allow us to get deposit for property 3. From what you are saying, is an option to get a 2 year mortgage initially; after the 2 years can I add a lump sum of repayment from the sale of property 2, and then reduce the amount of debt when remortgaging in 2 years time?

yes - I meant to say 6 months for tenants notice because of covid.

getmore4less

That works, 
There are other options, not limited to, like trackers and offset to look at will depend details and timings.

gymguy2017

Thanks. So if I opted for a 25 year mortgage and initially went for a fixed 2 year rate; at the end of the 2 years if I had funds (from sale of property tenants are in now) could I potentially clear all of the remaining mortgage debt at that 2 year point? Or would I need to remortgage and somehow put in a lump sum of the money from my sale?

dimbo61

Yes you can either take the 2 year fix and pay off the whole mortgage in 2 years time provided you have sold both your current properties.
However you could also consider an Offset mortgage and once you have sold both properties you can place the funds into the offset savings account.
Just something to consider.

deedee71

I have a mortgage with First Direct which allows unlimited overpayments.  

getmore4less

One thing to be careful of is letting your potential lender know all your plans.

there have been cases on here where people have been refused mortgages and the most probable reason has been they have told the lender they plan to pay it off quickly.

The advantage of the longer term plan is it keeps your options open and gives contingency should the selling not go as fast as you want.

Whats sort of LTV do you think you will be looking at for the initial purchase of 3?

with an initial 2y fix(the full terms just determines the payment)  at the end of the 2 years you become ERC free and can pay it off, or just some and take retention deal or remortgage to a new lender.

With the offset option typically offset the funds and keep the mortgage going  effectively borrowing nothing but have easy access to the funds if you want them

Another option worth considering given the potential time to get any tenants out is to incentivise  them to leave, that may be quicker than trying to push them out longer term.

The saving in interest over a couple of years might be enough to make that work if property two has a lot more equity or the incentive may be better on pricing property 1 to sell quick if you want 3 bad enough.
.

Mahsroh

Just another option, instead of waiting 6months (possibly longer if they don’t move and you have to go down the route of getting a court order) to sell property 2 you could look at trying to sell to the investor market with you tenants insitu. 

You may struggle to get quite the same offers as you would selling in the traditional way, but likewise you’ll be continuing to receive rent until such time that you complete on the property. Plus it can be an attractive proposition to investors because they start earning rent on day 1 too.