Options to purchase property whilst existing property still on market

Lucky1974

Good Morning,

I'm hoping someone out there may have been in the same predicament.

We moved into our current property in March of this year and I instantly knew it was a mistake; for reasons I won't elaborate.

As it was a project, we basically transformed the place within 3 weeks and sold right away 15K above what we paid. Fast Forward 3 months and the bottom of the chain pulled out hence the domino affect on my sale.

In the past 10 days we have seen over 10 viewings taken place and apart from a ridiculous offer of way  below what we paid for it, nothing! 

We have seen  few properties we would like to view but at the moment we are really worried the house might not sell within a reasonable timeframe; therefore have stated to look at other options e.g. is it possible to revert current mortgage to interest only until it sells and if so would the mortgage lender focus more on our surplus income to buy another rather than the situation?

We currently owe £160k on a property being marketed at £240k reduced by £10k recently. Our DIP offered circa  £330k and the property we are interested in is circa £270k - we would need the equity to  modernise and reconfigure layout etc so ideally reducing further is not an option at the moment.

We have also considered looking into buy to let on an interest only but again, we are not experienced in either options mentioned and would welcome any advice from those who have had similar experiences.

Many thanks in advance.

movilogo

Typically you can't use income from your rental property to get you larger mortgage in your main residential property. Although you can turn your current mortgage to BTL interest only which would mean your monthly mortgage payment affordability go up.

If you don't have any other source of money for the deposit, you can't move without selling current property.

Typically if you sell house within such a short period, there is a good chance you will be selling at a loss after consider cost of moving, purchase/sale, stamp duty etc.

K_S

Lucky1974 said:

Good Morning,

I'm hoping someone out there may have been in the same predicament.

We moved into our current property in March of this year and I instantly knew it was a mistake; for reasons I won't elaborate.

As it was a project, we basically transformed the place within 3 weeks and sold right away 15K above what we paid. Fast Forward 3 months and the bottom of the chain pulled out hence the domino affect on my sale.

In the past 10 days we have seen over 10 viewings taken place and apart from a ridiculous offer of way  below what we paid for it, nothing! 

We have seen  few properties we would like to view but at the moment we are really worried the house might not sell within a reasonable timeframe; therefore have stated to look at other options e.g. is it possible to revert current mortgage to interest only until it sells and if so would the mortgage lender focus more on our surplus income to buy another rather than the situation?

We currently owe £160k on a property being marketed at £240k reduced by £10k recently. Our DIP offered circa  £330k and the property we are interested in is circa £270k - we would need the equity to  modernise and reconfigure layout etc so ideally reducing further is not an option at the moment.

We have also considered looking into buy to let on an interest only but again, we are not experienced in either options mentioned and would welcome any advice from those who have had similar experiences.

Many thanks in advance.

@lucky1974 You may have a few options depending on your intentions and the numbers involved -

1. If your income is large enough (as per lender calculators) to support both properties, and you have sufficient cash to put down as deposit on the new house, then you can potentially buy the new house and sell this one later on.

2. If you intend to let this property, you can potentially do a let to buy on it (remortgage to an interest only BTL product) and with a compatible residential mortgage for the new house, that should take out the background BTL property as a commitment and (with a couple of residential lenders) even potentially allow for the prospective rental income to boost your borrowing power for the purchase of the new house.

3. If neither of the above apply, then the options you are looking at likely limited to bridging-loans (plenty of choice, high-cost, limited criteria to meet, usually limited to 12 months) and similar short/medium-term lending solutions from a couple of smaller building societies (less-choice, cheaper than bridging, more criteria to meet, can go up to 24 months). The options (if any) will primarily depend on the overall LTV across the two properties.

Assuming you're in England, in all 3 of the above options, you will need to pay a 3% stamp duty surcharge which you can get refunded if you sell the old property within 3 years.

diystarter7

A bridging loan, but expensive.

You can always sell a property quickly at the right price or via auction.
In nice areas and if more than one party is interested a property can go for at least the min value if not higher.

If you cant really live there or dont want to - to reduce stress, rent a bed-sit or something that meets you min requirements.

MaiTai

If you only completed in March this year options regarding mortgages are very limited for both yourself and any prospective purchaser as most mainstream lenders will not lend due to the CML 6 month rule.

You may have to sit tight a little longer unless a buyer not requiring a mortgage comes along.

user1977

Lucky1974 said:

at the moment we are really worried the house might not sell within a reasonable timeframe

Do you mean there is some objective reason why the marketability of the property is poor, or do you just mean you're in a hurry to sell quickly?

K_S

MaiTai said:

If you only completed in March this year options regarding mortgages are very limited for both yourself and any prospective purchaser as most mainstream lenders will not lend due to the CML 6 month rule.

You may have to sit tight a little longer unless a buyer not requiring a mortgage comes along.

For the benefit of other who may come across this thread - off of the top of my head, Barclays, Leeds, Santander, HSBC, Accord, Nationwide, Virgin, etc. will all consider the scenario outlined in the OP within 6 months of purchase.

Afaik, there's no rule as such prohibiting such transactions. Solicitors will have to confirm to the lender that it isn't being sold due to xyz reasons, which will differ across lenders but generally include sub-sale transactions, distressed sales, etc. Based on the very limited info in the post, I don't see any of that applying to the scenario outlined.

user1977

K_S said:

MaiTai said:

If you only completed in March this year options regarding mortgages are very limited for both yourself and any prospective purchaser as most mainstream lenders will not lend due to the CML 6 month rule.

You may have to sit tight a little longer unless a buyer not requiring a mortgage comes along.

Afaik, there's no rule as such prohibiting such transactions. Solicitors will have to confirm to the lender that it isn't being sold due to xyz reasons, which will differ across lenders but generally include sub-sale transactions, distressed sales, etc.

No, not a strict show-stopper, but a "rule" in the sense that the CML Handbook does require solicitors to report it to the lender. Some of them have their policies listed here:

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1813/

simon_or

MaiTai said:

If you only completed in March this year options regarding mortgages are very limited for both yourself and any prospective purchaser as most mainstream lenders will not lend due to the CML 6 month rule.

You may have to sit tight a little longer unless a buyer not requiring a mortgage comes along.

Somewhat limited, not very limited. I bought using Virgin from a do-it-up seller and had other banks willing to lend as well. You just need a half decent broker who's knows what they're doing. There's no blanket rule or anything like that.

alelly

Is the reason it was a mistake specific to you or is there something objectively wrong with the house? Do you think you overpaid? Are you looking to recover the money you’ve spent or are you happy to sell at a loss?

K_S

user1977 said:

K_S said:

MaiTai said:

If you only completed in March this year options regarding mortgages are very limited for both yourself and any prospective purchaser as most mainstream lenders will not lend due to the CML 6 month rule.

You may have to sit tight a little longer unless a buyer not requiring a mortgage comes along.

Afaik, there's no rule as such prohibiting such transactions. Solicitors will have to confirm to the lender that it isn't being sold due to xyz reasons, which will differ across lenders but generally include sub-sale transactions, distressed sales, etc.

No, not a strict show-stopper, but a "rule" in the sense that the CML Handbook does require solicitors to report it to the lender. Some of them have their policies listed here:

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1813/

@user1977 Absolutely.

A lot of lenders do take the easy route of outright refusing any mortgages inside the 6 month period but as I mentioned above plenty of mainstream lenders have no issues as long as there isn't anything significantly non-standard going on such as sub-sales, distressed sales, etc.

Personally, except for once (where the client was on a visa and hence lender-limited to start with), the < 6m issue has never stopped me from placing a client's case which then went on to complete as expected.