Looking for short term finance to buy house before selling current one

Biggly63

Hello all,

My first post, so please be kind :-)

I am 61, wife is 51.

We have inherited £220,000 and want to spend it buying a larger house (in Scotland), and to be mortgage free fairly quickly.

The house we live in has a small mortgage and is worth about £220,000 for a quick sale. 

 

Due to family circumstances we want to buy a house first and move before selling this one - which means it becomes a second home  - this will add 6% to anything we pay (which we will claim back in due course, but we need to pay it).

We do not have enough to pay cash outright so we need to borrow something in the short term.  A bridging loan is probably TOO short term as this house is not in sale condition at the moment. 

My own bank offered me £14K on top of my mortgage - which is useless. They think I am a bad risk as they will only look at my wage and my age and will not take into account the cash or our home. 

We have not paid our mortgage off as we thought having more cash on hand would make us more attractive to sellers, but we are paying hundreds in interest monthly so is this the wrong decision?

We do not want to risk a 'dodgy mortgage' at my age, but surely there is a legal option in-between staying in a tiny terrace and robbing a bank?  :-)

TIA

grumpy_codger

"Cash in hand" means something only if there are no big debts. How "small" is the remaining mortgage balance and how much do you want to borrow?

Despite being older, in a similar situation, but with a fully-owned house we took a new £80K mortgage (very low LTV).

user1977

Also note the additional dwelling supplement on LBTT is now 8%, not 6%.

https://revenue.scot/taxes/land-buildings-transaction-tax/additional-dwelling-supplement-ads

p00hsticks

Biggly63 said:

  A bridging loan is probably TOO short term as this house is not in sale condition at the moment. 

But you are living in it at the moment ....
What do you think needs to be done between you moving out and putting it on the market ? 

TroubledTarts

Don't rush to buy get yours for sale ready if you feel it needs it and will be worth the investment before leaving and the right house will come along.

Herzlos

How long are you proposing between buying the new one and selling the old one?

It'll be a lot easier to sell the old one before or at the same time as buying the new one, then you'll have the money on hand and won't need to find money for the 2nd home tax.  Especially since you're presumably not going to be allowed much additional mortgage borrowing due to age/salary.

bobster2

Even factoring in the early repayment charge (ERC) it may be cheaper to just get a standard interest only mortgage on the new property than specialist bridging finance. Some ERCs drop after 12 months - so even if you sell your current place within say 6-9 months if could be worth hanging on until 12 months before repaying. Need to run the numbers in a spreadsheet and see.

Albermarle

p00hsticks said:

Biggly63 said:

  A bridging loan is probably TOO short term as this house is not in sale condition at the moment. 

But you are living in it at the moment ....
What do you think needs to be done between you moving out and putting it on the market ? 

This is a key point . What does 'not in sale condition' actually mean in practice?

Does it mean something pretty serious, like cracks in the walls, roof leaking badly etc
Or does it mean it just need some serious tlc ?

Biggly63

Albermarle said:

p00hsticks said:

Biggly63 said:

  A bridging loan is probably TOO short term as this house is not in sale condition at the moment. 

But you are living in it at the moment ....
What do you think needs to be done between you moving out and putting it on the market ? 

This is a key point . What does 'not in sale condition' actually mean in practice?

Does it mean something pretty serious, like cracks in the walls, roof leaking badly etc
Or does it mean it just need some serious tlc ?

Mostly tlc, but with a couple of ceiling repair (and possible roof) jobs that would be easier to have done with the house empty.

Biggly63

grumpy_codger said:

"Cash in hand" means something only if there are no big debts. How "small" is the remaining mortgage balance and how much do you want to borrow?

Despite being older, in a similar situation, but with a fully-owned house we took a new £80K mortgage (very low LTV).

Still have £37k mortgage.

Biggly63

TroubledTarts said:

Don't rush to buy get yours for sale ready if you feel it needs it and will be worth the investment before leaving and the right house will come along.

Yes, after some discussion here, we have come to the same conclusion 😊