Mortgages and being in a good position to move

[StripyBlanket]

I hope I can explain this....

We have paid off our mortgage in full and our house is worth £150k.. We have £50k in savings.

We have found a house we want to move on which is on the market for £250k. Ideally we will sell our house and take out a 50k mortgage to buy the new house.

We can actually get a mortgage for the full property price (with our savings as a deposit) If we can't sell our house quickly, would it be worth doing this and becoming first time buyers? So we don't have to sell our house and thus break the chain and proceed. If we can a mortgage with no early redemption fee, we could then pay the mortgage mostly off when we sell our house.

Does that make sense? Is it possible?

[neweymcnewname]

You can't become first time buyers if you had a mortgage before! Were u hoping to benefit form one of the government saving schemes for first time buyers or something? You would be 'chain free', if you got a mortgage, because you wouldn't be waiting to sell a house before you could buy the new one.

[Char22thom]

You can be chain free or cash buyers. (But you wouldn't be in this case) but you can only be first time buyer once as far as I Understand it

[TheNumberfaker]

You would be chain free but would need to think about stamp duty implications of owning a second home...

[SofiePendragon]

You can buy a second house without selling your first house if you want to. The only complication is that you'll pay more stamp duty, although you can apply for a refund of the extra if you sell your current home within 3 years.

[elfofftheshelf]

We did exactly this to secure the property we really wanted. As others have said, it does mean you pay a LOT more stamp duty so you have to factor that in, but you can apply for a refund if you sell your current home (within a specified period of time).

The pros for us were that we closed out the chain - and this gave us leverage over the rest of the chain when they started trying to slow the move down. It also meant that we could have work done to our new house before moving in. The downside, was obviously paying 2 mortgages (not a huge issue) and the stress of continuing to market the property. Luckily, we sold and completed within 8 weeks of our purchase so in the end if worked out well for us (and we were prepared to make it a rental if we couldn't sell).

Think through the pros and cons and if it works for you, I'd say go for it.

[trixymalixy]

We did this. As others have said we paid a fair whack of extra stamp duty.

You have a house though so can't be first time buyers?

[VacantExpression]

You mean proceedable, no-chain buyers, not FTB but yes its entirely possible and we have done it. It meant we had to run two properties for a couple of months but meant we could get the house we wanted and move in our own time too. I'd recommend it (as long as you have looked into all financial implications and know the risks etc).

[purpleviolet1]

Sorry to hijack the thread but also looking to purchase before selling our property. What's the chat with paying extra stamp duty? We're aware of the stamp duty on purchasing new property but not on the stamp duty on selling old property?

[VacantExpression]

www.stampdutycalculator.org.uk/stamp-duty-second-homes.htm

It recently increased for second homes purpleviolet1, but you can claim is back as long as you sell your first home within a certain time

[purpleviolet1]

Thanks very much. The property we are selling is actually under parents name , who passed away. We are in the process of getting the deeds transferred (going through court to wind up the estate etc as she died intestate) and then one of the siblings is buying it, effectively off the other siblings. I wonder what the best way to approach this is...

[VacantExpression]

Not an uncommon situation, solicitor should sort it all out I'd have thought?

[purpleviolet1]

Just thinking from a stamp duty point of view. Never really considered it on the inherited property being sil to sibling!

[StripyBlanket]

Thanks for all your advice. Didn't realise about the stamp duty issue but understand now

[wrinkleseverywhere]

We did this. It was before the stamp duty changes so that didn't affect us.
You need to think the mortgage position through carefully. If you only need to borrow £50k but borrow £200k due to the "gap", what are you going to do with the £150k equity from the sale? You may not be able to overpay the mortgage by more than 10% (£20k in my example) so what will you do with the remaining £130k? No savings account interest is going to earn more than you will be paying out on interest on the mortgage. Where is the other £130k going to sit & what are you going to do with it? At the very least you'll want to split it between two accounts to take advantage of the government guarantee scheme.
Your mortgage costs will probably be higher as you are borrowing more. Using the "affordability" criteria, can you afford to pay both if need be? What will happen if the property doesn't sell? Can you pay both?

[StripyBlanket]

Thanks wrinkles. I need to speak to the mortgage people because I was envisaging paying off most of the mortgage in one go once we sell our house. But this might be an issue if overpayments are capped. Lots to think about!

[CotswoldStrife]

We did this a few years back, we got a fixed-rate mortgage for a couple of years and were then able to pay off the mortgage at the end of that term without any financial penalties. We did pay off the whole mortgage amount though, if you want to pay off just part of it then that will be trickier as others have already mentioned (with a limit on overpayments).

Might be best to speak to a mortgage broker for some advice. Good luck!