Moving house - buy first, sell old house later.

diamondplus

Hi all,

Me and my partner wish to buy a bigger house and have had an offer accepted (approx. £320K). We have a large deposit putting us in the 60% LTV mortgage category. The plan is to buy the new house, then sell the existing house ASAP afterwards (approx. £70K), thus breaking the chain.

We’ve set aside additional funding for the following:

• Stamp duty – this is an unknown as it depends on if the sale beats any of the stamp duty amnesties, but I’ve budgeted for the full amount.
• Second home stamp duty tax (refundable) – since we’re technically buying a second home, we’ll be charged 3% of the new house value. This is refundable if we sell the existing home within 3 years.
• Misc fees – approx. £5k to cover solicitors, surveying, removal firms, searches etc.
• Plus, we’ve got extra money saved for any unknown surprises.

After buying the new home, we’ll have two homes for a short while. This means we’ll be paying additional monthly costs (approx. £500 -- primarily the mortgage and BAND A council tax). We could cover this indefinitely but, obviously, we want to sell the old home ASAP.

Like I said, we did it this way to break the chain and to be in a better buying position, even if it means taking a short-term financial hit in paying for an empty house (some of that money we’ll effectively get back as the eventual mortgage redemption figure will be lower).

Has anybody else done something similar to all of the above? Any pitfalls to look out for?

I’m assuming it’s a case of applying for new-home mortgage. Are there any additional hoops to jump though when applying?

Ideally, we’ll need a mortgage we can overpay on for when the sale of the old house goes through. At a glance, a lot of mortgages seems to have a limit of 10% per year of the debt, meaning we may need to sit on the “old house money” and dip into it every year.

Thanks in advance for any advice.

K_S

@diamondplus In principle, there's nothing stopping you from getting a mortgage to buy the new house while keeping the current one in the background.

The issue usually is that the affordability numbers (as per lender calculations) don't add up due to insufficient income to support both properties. If that isn't an issue, then you should be fine to get a mortgage for the onward purchase at 60% LTV.

With regard to overpayment allowances, you do have tracker, discount products that allow fee-free overpayments.

karie

We did a version of this but ended up renting the old house out.

Couple of additional things to consider would be - insurance for old house if left empty (you may choose not to tell the insurance company but normally shouldn’t be left empty over a defined allowable period). Also at one point I looked at an offset mortgage for property 2 in order to offset the funds from property 1 against it. It seemed like a good option although the rates can sometimes be a good bit higher.

getmore4less

There are lenders that have more generous overpayments as long as you don't pay it all off.

First direct comes to mind.

Also some lenders have products that have no limits.

A track(no limits) then  fix might be worth a look.

Redwino222

One word of caution, if the market dips and you plan to sell quickly you could have bought one house at market peak then dole another during a dip.