'Temporary' Mortgage to Buy House Whilst Waiting for House to Sell

adzy77

Morning all,

Our property is on the market but has not yet sold, however we have seen a house we would like to buy and are now looking into whether we can buy it without the need to sell ours first.

We are currently mortgage free so it would be a new and our only mortgage.

The plan would be to scrape together as much deposit as possible and get a variable mortgage for 30 odd years just to get the monthly cost s low as possible so that we can proceed with the new house purchase.

Then once the current house sells, use the funds to off the mortgage and then move onto a fixed like we would in normal circumstances.

Does this sound plausible?

Is there any other way to do it or any risks with this (other than the rates going up)

Thanks

jlfrs01

I don't see why it wouldn't be possible but you'll have to factor in early redemption fees if you settle the 1st mortgage earliy which are usually on a sliding scale over a set period of years and these would probably still apply if you sought to change mortgage products with the same lender. You'll end up paying 2 lots of fees but they'll be nothing like as high as the early redemption fee. The other option is a bridging loan which will mean a higher interest rate but no redemption fees so for a short-term loan it might be the best option

housebuyer143

Yes, entirely plausible. I did the exact same thing last year when our chain collapsed, we were mortgage free also.
We luckily had £125k in the bank to use as a deposit and literally maxed out our borrowing and then borrowed stamp duty from my mum to make it happen though. Things to consider:

1. Do you have enough deposit to cover at least 10%?
2. Do you have enough affordability to cover the new house. Some lenders, lend up to 5x your salary so look around if you are short.
3. You will need to pay additional stamp duty, which in our case was £25k 😱 you can claim it back, but if you are scrapping money together for a deposit you might find it's all taken on this.
4. Can you afford the bills etc on the other house as well as the larger mortgage cost (which may increase on variable) while the other house sells? Our house sat empty for 6 months as we lost 3 buyers. It was very stressful tbh esp as we maxed out our borrowing on variable on a loan that started at 2% and ended up at 4% in that time. 
5. You can get a variable mortgage with no ERCs, so I would do that.

If you can cover all these things, then I say go for it. It was much less stressful moving house without having to move out and in on the same day  and I guess most importantly is we got the house we wanted which was guaranteed to not happened had we waited.

adzy77

housebuyer143 said:

Yes, entirely plausible. I did the exact same thing last year when our chain collapsed, we were mortgage free also.
We luckily had £125k in the bank to use as a deposit and literally maxed out our borrowing and then borrowed stamp duty from my mum to make it happen though. Things to consider:

1. Do you have enough deposit to cover at least 10%?
2. Do you have enough affordability to cover the new house. Some lenders, lend up to 5x your salary so look around if you are short.
3. You will need to pay additional stamp duty, which in our case was £25k 😱 you can claim it back, but if you are scrapping money together for a deposit you might find it's all taken on this.
4. Can you afford the bills etc on the other house as well as the larger mortgage cost (which may increase on variable) while the other house sells? Our house sat empty for 6 months as we lost 3 buyers. It was very stressful tbh esp as we maxed out our borrowing on variable on a loan that started at 2% and ended up at 4% in that time. 
5. You can get a variable mortgage with no ERCs, so I would do that.

If you can cover all these things, then I say go for it. It was much less stressful moving house without having to move out and in on the same day  and I guess most importantly is we got the house we wanted which was guaranteed to not happened had we waited.

EDIT - sorry for my laziness! A quick google answers my question!

 Thanks for the response.

We should be ok on all those points but can you just expand on the point regarding stamp duty please?

Is it not just a case of paying the new stamp duty cost on the new house as per normal or does this scenario we are talking about change things?

Thanks

housebuyer143

adzy77 said:

housebuyer143 said:

Yes, entirely plausible. I did the exact same thing last year when our chain collapsed, we were mortgage free also.
We luckily had £125k in the bank to use as a deposit and literally maxed out our borrowing and then borrowed stamp duty from my mum to make it happen though. Things to consider:

1. Do you have enough deposit to cover at least 10%?
2. Do you have enough affordability to cover the new house. Some lenders, lend up to 5x your salary so look around if you are short.
3. You will need to pay additional stamp duty, which in our case was £25k 😱 you can claim it back, but if you are scrapping money together for a deposit you might find it's all taken on this.
4. Can you afford the bills etc on the other house as well as the larger mortgage cost (which may increase on variable) while the other house sells? Our house sat empty for 6 months as we lost 3 buyers. It was very stressful tbh esp as we maxed out our borrowing on variable on a loan that started at 2% and ended up at 4% in that time. 
5. You can get a variable mortgage with no ERCs, so I would do that.

If you can cover all these things, then I say go for it. It was much less stressful moving house without having to move out and in on the same day  and I guess most importantly is we got the house we wanted which was guaranteed to not happened had we waited.

EDIT - sorry for my laziness! A quick google answers my question!

 Thanks for the response.

We should be ok on all those points but can you just expand on the point regarding stamp duty please?

Is it not just a case of paying the new stamp duty cost on the new house as per normal or does this scenario we are talking about change things?

Thanks

Unfortunately not. If you acquire another house you are required to pay an additional 3% stamp duty (assuming you are buying in England, it's more in Wales and Scotland) on the entire purchase price. You can claim it back providing you sell your main residence within 3 years, but it will have to be paid in the interim unfortunately. 
So calculate the normal stamp duty, and then 3% on the entire house value and add them together. I'm sure there is a calculator on gov.uk if needed.