Buying Before Selling

drlabman

My wife and I are considering moving house to somewhere a little larger.  I realise most people our age (early sixties) tend to downsize but we seriously need a bit more space - and ideally a garage.  So, we have a dilemma.  We've always felt that we would need to buy our next house first before selling our existing one - mainly because we have so much stuff that the photos would look awful, and would basically highlight how small the house is and how little storage it has.  It was empty when we bought it and it lulled us into a false sense of spaciousness.  There's the added attraction of not being in a chain - or at most half a chain.  On the downside, I think there's extra stamp duty (?) to pay in Wales on a second property - although my understanding is that you can claim that back when you sell the first.  But still, it needs to be paid.  We are fairly fortunate that we have plenty of savings - enough to buy the size house we'd want outright - but of course only a fraction of it is in easy access accounts.  And besides, I don't know that I'd be comfortable using most of our savings - even if some of it would be replenished on the sale of the first house.  I doubt we want, or need, a mortgage (even if someone would lend to us at our age).  I know people, many years ago, who got a bridging loan to cover such circumstances.  So what do we do?  Any advice or bright ideas gratefully received.

pphillips

Putting your stuff into storage could be a better solution.

K_S

@drlabman A chain-break bridging loan is not uncommon at all and in principle there's nothing in your post that indicates that it won't be an option available to you. However, the cost (fees, interest rate, etc) may be much higher than you expect. Just google chain break bridge or bridging and you can get an idea of the costs. You can then assess if that is palatable and compare with your other options.

AdrianC

drlabman said:

We've always felt that we would need to buy our next house first before selling our existing one - mainly because we have so much stuff that the photos would look awful, and would basically highlight how small the house is and how little storage it has.

Declutter. Do you want to move all of that stuff?
Put some of it in a storage unit. That may actually help you think about what you do and don't want to keep long term.

There's the added attraction of not being in a chain - or at most half a chain.

This is an actual benefit, yes. But so would the other alternative be - breaking the chain by renting between the two.

On the downside, I think there's extra stamp duty (?) to pay in Wales on a second property - although my understanding is that you can claim that back when you sell the first.

+4% LTT on purchases in Wales, yes. Reclaimable by selling within three years.

We are fairly fortunate that we have plenty of savings - enough to buy the size house we'd want outright - but of course only a fraction of it is in easy access accounts.  And besides, I don't know that I'd be comfortable using most of our savings - even if some of it would be replenished on the sale of the first house.  I doubt we want, or need, a mortgage (even if someone would lend to us at our age).  I know people, many years ago, who got a bridging loan to cover such circumstances.

If you have £10 but owe somebody £7 for something you bought, how much do you have...? Not £10... You have £3.
Just the same as if you'd paid for the £7 thing straight-up out of the £10 in your pocket...

That applies just as much to savings versus mortgage borrowings, of course...

A "mortgage" is just a loan secured against a property. Nothing more, nothing less.
A bridging loan is a very short-term mortgage... but with a much higher interest rate.

AnotherJoe

If the only/main reason is you have so much stuff, why dont you declutter, then pack away and put into storage stuff you dont need immediately, and then just do a normal chain purchase?

You will surely want to declutter before the move anyway (why move junk), and you'll have to pack stuff up when you move anyway.

OTOH, when i looked at bridging loans recently IIRC they were roughly 1% a month. So if the house you are buying is say £300k and the time difference is 6 months, that would cost you getting on for £10k. So, not too bad, and seems you could afford the £1500 a month (presumably out of some of those savings ?) but it seems a lot just to avoid sorting out your stuff. Although it might make the move less stressful so there is that.

I moved from a  3 bed to a 4 bed but still got rid of a LOT of stuff in the 6 months between starting the move process and moving. And I'm very glad I did. Loft and garage 25 years of stuff I used to put off decisions on getting rid or keeping. 

Scotbot

K_S said:

@drlabman A chain-break bridging loan is not uncommon at all and in principle there's nothing in your post that indicates that it won't be an option available to you. However, the cost (fees, interest rate, etc) may be much higher than you expect. Just google chain break bridge or bridging and you can get an idea of the costs. You can then assess if that is palatable and compare with your other options.

Assuming you have the cash flow to pay the  extra SDLT there is no need.  Yes you can claim it back. The likelihood is there will be 6 months where you have 2 properties but budget for 12. Calculate the cost of running 2 houses vs the cost of a bridging loan.

The advantage is you move at leisure and do any refurbishing to the new property before you move, this is why most people do it.  Living in a house while it ie rewired/decorated/refitted with new kichen and/or bathroom isn't fun. If your only reason is a storage issue then I agree pay for storage and declutter

Nebulous2

We bought a holiday home three years ago, and moved into it full time in February. We had been in our old house for almost 30 years, spent a bit of the lockdown clearing the attic, then were able to declutter the house and present it for sale at our leisure. We still had furniture in it, but as you said it looked much better than when full of 'stuff.' 

We achieved a price over valuation, in an area which isn't doing as well as most of the country, so decluttering and presenting it well would appear to have had an impact on the price we achieved. 

Don't even consider bridging if you can afford to do without it. I suppose one consideration might be if you don't want to lose a tax wrapper, such as an ISA, for your savings, but there are very few other advantages of bridging and quite a few downsides. 

AdrianC

Nebulous2 said:

I suppose one consideration might be if you don't want to lose a tax wrapper, such as an ISA, for your savings,

Even then, you would have to be earning one heck of an income from those savings for the loss of tax-freedom to even approach the costs of a bridging loan...

A mortgage, deliberately chosen with low ERCs, would be far more sensible, if your income supports it.

drlabman

Thanks everyone.  Lots of food for thought here.

drlabman

I've done a bit more calculation, and although our total savings would cover the purchase of our intended price range property, only about two thirds of those savings is, what you might call, easy access.  And that would include cashing in premium bonds and stocks and shares ISAs.  The rest is in one or two year fixed savings.  Hmmmmm.