Buy new house now, sell old house later.... how?

caprimad

Hi,

I'm looking to move house this year. I've found a house which would be ideal for my needs, but I'm not quite ready to sell my current house yet (need to do some tidying up/minor renovations). I need to use the old house as collateral against a mortgage on the new house…

Some numbers, approx:

• Current house value ~£200k, no mortgage or other charges
• New house value ~375-400k
  • It will benefit from some renovation/modernisation work, maybe another £50k-75k

My maximum mortgage, based on Rightmove's rough-and-ready calculation, is just under £500k so I'm well within my means on repayments etc. (expected final mortgage being £175k-250k, if I can get some leeway for renovation work).

So… ideally I'd love to buy the new house, using my current house as collateral. I can then spend a month or so finishing up the clean-up/renovations at my current house before selling it. So long as it sells within 6 months, I believe I can reclaim the extra stamp duty I'll have paid for buying a 2nd house. Is that even possible?

Or will I need to re-mortgage this house, buy the new house on a 2nd mortgage using the cash from the 1st mortgage as a deposit, then pay 2 mortgages until I can shift the original house?

Or… would bridging finance work here? [or is that essentially the same as the option above]

Is this something I should be speaking to a financial advisor about?

Thanks in advance!

Brie

Isn't this much like your previous post? Weren't there any good ideas there?

Using existing home equity to buy a new home? — MoneySavingExpert Forum

caprimad

https://forums.moneysavingexpert.com/discussion/comment/81927190#Comment_81927190

Oh my, you're right, I completely forgot I'd posted that!!

I'll delete this post shortly (once you've hopefully had a chance to read this reply!) (assuming I can)

Brie

https://forums.moneysavingexpert.com/discussion/comment/81927201#Comment_81927201

I can't remember the number of times I've done similar!! Would you like the two posts merged??

caprimad

OK, there are some differences…

• I have no intention of doing BTL, unless it's a means to an end that works financially. I wouldn't let the house, I'd sell it.
• The target house is a bit cheaper this time :D
• I hadn't heard of (and no-one on the other thread) mentioned bridging finance - so I would be interested in opinions on that option

Bigphil1474

You need a specialist mortgage broker I reckon. Yes you can use your first house as collateral but you might struggle to find a bank that is gonna lend you hundreds of thousands for 6 months or so without it costing. Bridging loans are an option, but an expensive one - as in very expensive.

You have 3 years to sell house 1 to reclaim your additional stamp duty (England and Wales). On a £400k purchase, it'll cost you £30k up front, and you can claim back £20k. Bear in mind you will also have 2 lots of bills to pay while you have 2 houses. 6 months is optimistic to sell a house as well these days, even a vacant one. Can be done obviously, but you never know.

The cheapest and probably easiest solution is still to sell your house first. Once you've done that, look for a new house. It's how most people do it for a reason.

daveyjp

Bridging can be very expensive, as it is for a short term. The problem arises when short term becomes long term and you are saddled with a large debt attracting interest at 2-3 times a typical mortgage rate.

caprimad

The cheapest and probably easiest solution is still to sell your house first. Once you've done that, look for a new house. It's how most people do it for a reason.

It's been 30 years since I last bought a house… tbf I think things have changed a bit since then! And that time, I was moving from rented into purchased, so a different circumstance again.

I did wonder about selling, moving into short-term rented & then buying; but rents have gone bananas - even here - so whilst I haven't yet done the calculation on running 2 mortgages in parallel, I think I'd struggle to justify renting for more than 2-3 months; I can't recall if a normal renting contract (is it still Assured Shorthold?) would allow me to exit early.

Selling first & then looking for a place to buy would, as you say, obviate the problem… trouble is, the property I've got my eye on has already been on the market for several months, but it ticks every box… I'd be a bit annoyed if I missed it.

caprimad

https://forums.moneysavingexpert.com/discussion/comment/81927805#Comment_81927805

Good to know, thanks. I've not yet had any quotes from anyone (figured I'd ask here first), but by the sounds of it, avoiding it if at all possible seems like a sensible move 👌

caprimad

PS: Another reason I'd like to move quickly…. somehow, my Experian credit score is currently maxed out (first time, I think, in my entire life that I've got a perfect credit score!) - seems like I should use that before they figure out that it should be a bit lower!!

Bigphil1474

Don't worry about your Experian credit score, not a big issue for house buying. You don't have to actually move out of your house as soon as you 'sell' it. You find a buyer for yours, then it is sold subject to contract (SSTC) - they start doing all the checks on the property, sort their mortgage out etc. As soon as yours is SSTC, you can put an offer in on the house you want. If they accept it, they will then put an offer in on the house they want. You aren't actually saving a huge amount of hassle if you sell, move out, then offer - it's just one less piece in the chain. If the vendors at the house you want are willing to move out then it might be quicker, but most people wouldn't do that IME. I wouldn't worry about fixing your house up either. It will be valued based on current condition. If you can tidy it up and do a few fixing jobs that you never got round to doing to make it more saleable, that might help, but spending money on it might be a waste anyway. Declutter and tidy, lick of paint here and there is probably all you need.