Lending criteria - would this help me sidestep 28 day exchange hassle?

aaryal

Hi All,

I'm trying to buy a new build. I need to sell existing property.
Banks lend up to 5x salary I hear. 

Let's take an example:

• Debt remaining on current house: £130K
• New house price: £300K
• Salary: £60K

Question 1: In this scenario, max I can borrow is £60x5=£300K. But because I already have borrowed £130K, does that mean bank will only lend me £300-£130=£170K? Or will they still lend me 5x my salary despite me already having a loan of £130K?

Question 2: The reason why I am asking the above is because I originally thought banks will only lend me £170K instead of the full £300K (since I have already got £130 mortgage). That would mean I need to sell my current property in order to release equity to buy the new house. But if I do sell my property, the new build people want to see an offer in place and they need to exchange contracts within 28 days which puts a lot of pressure on me to sell my house immediately and find a buyer.

If the bank will lend me the full £300K, then I can take a bigger loan and am no longer dependent on selling my existing property. I could instead just tell the new build developer that I am not dependent on a property sale and instead just put 10% deposit down and proceed with the new build property while selling my existing property in my own time over the next 12 months at my own pace.


Hope I've made sense here. Does that seem like a logical solution to you guys? Or am I missing something?

Thanks

eddddy

It sounds like there could be some problems.

The first problem seems to be that you want to borrow £300k to buy a £300k house. Nobody offers 100% mortgages.

And 5x salary assumes that you will only have one mortgage (and reasonable other outgoings).



Also, it seems that you have no savings (or perhaps you just haven't mentioned them)  - and you're only paying off a £130k mortgage.

If you're really unable to save with a £130k mortgage - you might find it a challenge to afford a bigger mortgage.

Slithery

Sell your current place first and then move into rented. That way you will have all of your current equity available and also be in a much more flexible position to move at the builders pace.

csgohan4

how much equity do you have in your current house?
x5 multiplier is not commonly applied and usually for high net worth individuals/ circumstances

AdrianC

You could remortgage your existing place, taking some equity out, to avoid needing a 100% mortgage on the new-build...

So instead of...
£200k (assumed) house with £130k debt (65%) + £300k house with £300k debt (100%)
...you would have...
£200k (assumed) house with £170k debt (85%) + £300k house with £260k debt (87%)

But both situations quite simply require you to have a total debt of £430k. And nobody will lend you £430k, because it's 7.2x income.

And that's even before you consider that it's two residential mortgages, which may require higher income multiples anyway, because two houses are simply more expensive to run than one.

thegreenone

Don't forget to factor in stamp duty, which will be in the region of £14k.  Although you will be able to reclaim the difference when you sell your original home.

AFF8879

FWIW I thought 4.5x was the maximum cap for single borrowers, not 5x. Though I know Darlington BS have a 6x mortgage available to professionals only…