Put *ALL* of my savings into buying a second property, to become a main home? HELP!!

kapitan

Dear all,

I am fast approaching the point of no return. I currently cannot sell the flat that I own, because of the cladding crisis. This ties up equity and increases stamp duty for additional purchases. Thankfully, I have been fortunate enough to be on high income (in what some would describe a risky job), so I have managed to get a mortgage offer for a second house. After a long period of trying and failing, I have finally found the right house to move my new family (wife+tiny baby). Offer has been accepted and we are well down the way approaching exchange of contracts in the next four weeks.

It all sounds great, right? ... except that, in order to complete that purchase, I would need to deploy effectively 95+% of my savings (currently in cash, formerly in shares+cash). This would leave me with no savings of my own - but two properties (yay?).  All we would have left is some savings in my wife's ISA (~£40k). I would be able to rent out the flat and thus cover the mortgage service + other costs, however I have no clue when I may be able to sell it.

So, I am in desperate need of some impartial advice. I understand fully that this sounds like a privileged position to be in, and it really is - I realise I am more fortunate than most. However I still humbly need advice. I am used to having savings for rainy days and thankfully I've never had any such days. But with a baby on board now, a global crisis looming (and everything associated with it - house price crashes, job losses), and with not very much left in the bank...I wonder if I have bitten off more than I can chew?

Thank you for your kindness in advance!

Brie

sounds like this is the rainy day you've been saving for.  and you've also got that £40k ISA cushion, or at least your wife does!!

so say you raid your savings and you get the new place and a couple of months go by and the boiler/car/something blows up.  What would you do?  It's a couple of months along so maybe you've started to build up more savings again.  Or maybe you've got a couple of credit cards you can slap on the blown up whatever.

put everything down on a spreadsheet - mortgage payments, increased gas/electric, all the basic budgeting against your salaries.  How soon will things begin to look rosy again?  And what's you emergency emergency plan?  Once you see things are going to tick along ok (even if just ok ish) then you will be able to relax and enjoy your good life.

Slithery

kapitan said:

I currently cannot sell the flat that I own, because of the cladding crisis.

Yes you can, you just need to find a cash buyer.

Bluebell1000

As long as you could access the ISA then that sounds fine. Could you look at an offset mortgage to help with cash availability if needed?

housebuyer143

Currently feeling the same. Couldn't sell my house at the right time due to broken chain so went ahead and bought without selling it. 
Used every penny we owned.

I still have the other house as I have the slowest buyer know the man and soon will have to pay council tax. 

I have now managed to save a few thousand as a buffer and feel a little better but it still hangs over me and makes me uneasy. 
As long as the figures stack up and you can afford it I would press ahead. You won't feel safe though unfortunately until you have sold it or are renting it - the extra stamp duty will mean you want to sell it. 

ProDave

This sounds like a perfectly normal situation for all my generation buying houses in the 80's / 90's. so spend every penny of your savings and some, get the largest mortgage you can, and just about afford to buy the house, and there is NOTHING left for a rainy day and it is some months or years before you can start spending again.  Yes I genuinely don't know what I would have done if my old banger of a car had broken down as there was no money to fix it or replace it.

diystarter7

Op, you can always sell any property at the right price.
Be aware that property prices could crash and then very slow to recover especially where there is a lack of employment/opportunities.

Doozergirl

It sounds like the rainy day to me.  

It's illiquid, but the flat remains an asset and if a monsoon did arrive, that even sucked up that £40k, it would sell to the right person at the right price.  

You will be okay.  

movilogo

Nothing unusual in this. Many people sleep on floor for few months after buying houses because they had no money left to buy furniture. So very much doable and not a reckless decision. 

diystarter7

movilogo said:

Nothing unusual in this. Many people sleep on floor for few months after buying houses because they had no money left to buy furniture. So very much doable and not a reckless decision. 

No offence intended whatsoever. I strongly disagree with you.  what if they lost their job, became ill, especially with covid around and gas/elec shot up by another 100% and food is shooting up and boiler needed replacing

People need at least 10k in cash/bank not shares etc when buying a property for rainy day

NB: if you are saying have the money for the rainy day like i said but put off buying furniture etc that is different and something I agree with but you did not say that may have meant that

Have a nice day and again, no offence.

ProDave

diystarter7 said:

movilogo said:

Nothing unusual in this. Many people sleep on floor for few months after buying houses because they had no money left to buy furniture. So very much doable and not a reckless decision. 

No offence intended whatsoever. I strongly disagree with you.  what if they lost their job, became ill, especially with covid around and gas/elec shot up by another 100% and food is shooting up and boiler needed replacing

People need at least 10k in cash/bank not shares etc when buying a property for rainy day

NB: if you are saying have the money for the rainy day like i said but put off buying furniture etc that is different and something I agree with but you did not say that may have meant that

Have a nice day and again, no offence.

If I had waited until I had £10K spare I would never have managed to buy my first house and who knows when if ever I would have been able to do that.  Sometimes you have to take risks.  I did buy an insurance policy that was supposed to pay the mortgage in the event of redundancy but never needed to claim on it.