Clear mortgage or use as deposit?

kelly_loves_a_bargain

Hello everyone! 

Our mortgage deal finishes at the end of this year. It’s very possible we could be in a position to pay it off and not have to move to a new deal, which would be much more given we are currently on a really low fixed rate. 

We are actually looking to move house and to a new build. I know a lot of builders part exchange or help to sell but we’re looking at developments that haven’t even started yet so these options are limited at the early stages of the development. 

The dilemma is whether we would be better to pay off the mortgage if we can or save the money as a cash deposit on a new build so we can secure the house we really want in case there’s any delays in selling ours? That’s even if this is possible!? 

Anyone had something like this before? 

Thank you in advance ☺️

eddddy

kelly_loves_a_bargain said:

The dilemma is whether we would be better to pay off the mortgage if we can or save the money as a cash deposit on a new build so we can secure the house we really want in case there’s any delays in selling ours? 

I guess you mean you want to be able to exchange contracts to buy a new build, before you've exchanged contracts to sell your current property. 

(Or maybe you mean you want to be able to exchange contracts to buy a new build, before you've even accepted an offer on your current property.)


If so, it's possible, but it's very high risk.

The risk is that your current property doesn't sell in time. i.e. It's time to complete on the new build, and no buyer is ready to complete the purchase of your current property.

For example, because...

• Your buyer pulls out, or the chain below you falls apart. And maybe the next buyer pulls out as well

• A problem with your current property comes to light during conveyancing which is going to take months to fix - maybe a legal problem, a problem with the searches, a problem with the survey

• The property market tumbles after you've exchanged contracts on the new build, meaning that you have to sell your current property for much less than expected

Would you have enough finance to complete on the new build, if your current property hadn't completed?

Bear in mind that your new mortgage lender probably wouldn't allow you to have 2 mortgages at the same time - i.e. a mortgage on the new build, plus your mortgage on the current house.

Flugelhorn

You shouldn't really exchange and pay the full deposit without selling your house - not quite sure what you are planning to do ?

kelly_loves_a_bargain

Thank you for your prompt replies! Yes it’s all in the timing with this one! Probably just trying to pull off the impossible, and yes I’d forgotten that we probably can’t have two mortgages! Appreciate the comments 🙂

Albermarle

In addition you could have a problem the other way around. You sell your house and there are then delays in the new property being completed ( happens all the time)

If the new development has hardly started you maybe able to just pre register an interest for a modest fee.
Then exchange contracts once the build has progressed significantly and your house sale is moving forward to exchange as well. 
Different developers will have different ideas on what is possible.