AIBU to ask a mortgage question?

[bullywee]

We're considering moving up the ladder and selling our current 2 bed terrace and going for a 3 bed detached.

Going by similar houses which have sold in our street, we'd expect about 230k. The cost of our new home would be in the region of 330k.

For various reasons, including a disabled child, we would rather buy and then sell. We are relatively confident that we could sell our property relatively quickly going by what's happened on our street, and even if we didn't could easily afford a bridging loan in the interim.

Let's assume we purchase a property for 330k (additional 100k requiring to be borrowed, but have a decision in principle that we can borrow up to an extra 150k) and we agree a mortgage on that basis. However, we then subsequently sell our house for say 210k (20k less than expected) or 250k (20k more than expected).

Can the agreed mortgage be varied to take into account that we do not know how much we will actually require until we sell our house?

It is best to get an agreement in principle for the larger amount.
Ideally your house would sell before you would complete and move into the new house.
Then the final amount of mortgage being drawn down could be finalised .
Have you also looked at part exchange with developer of new build? That would give more certainty on price and timing of exchange etc ?

You don’t actually apply for a mortgage until you’re buying a house though so it doesn’t need to be varied. You know that in principle, baring any info being incorrect in terms of you, your earnings, your situation, you can borrow 150k so you just wait until you’ve had an offer accepted on a house and then you start the process of applying for a mortgage.

Where is the deposit coming from?

Is the decision in principle not just for £100k extra borrowing?

You eat enough income to service a £550k mortgage?

You can get a variable or tracker rate to deal with the additional loan being repaid, but it's getting the loan that's the issue.

Thanks all. @Bluebirdover The deposit is essentially coming from equity we have built up in our current property (~80k) but we also have savings that we can add if required.

@Izzymoon and @Kyogo67 many thanks. Our house is ready to go on the market, so the day we have an offer accepted on a house we hope to put our current house on the market. Assuming we manage to sell relatively quickly, it should mean we are able to finalise the actual requirements for the new mortgage once we have accepted an offer on it.

Buying/selling houses is so stressful!

You may struggle to find a house first then put yours on the market.

Most firms ask that you are proceedable (ie your house has an offer) before letting you view somewhere new.

So you want a bridging loan for nearly 100% of the property?

That's not likely to be available.

You can only use the equity, if you buy and sell simultaneously.

You’ll struggle to buy a property if you don’t have yours sold or are a cash buyer. I’d not want to sell to someone applying for a bridging loan. With the market as it is a seller can often pick their buyer from a few

I was under the impression that a bridging loan was a loan was a short term loan that could be used in circumstances where, for instance, there was a delay in getting funds from an existing property due to a slow sale?

I'm not very clued up. I think I will speak to a mortgage lender.

@Smithhy that's helpful. We may need to revise our plans and get the house on the market and then try to find somewhere.

Bridging loans are extremely difficult to get.

You'd need enough income to support both mortgages, I'd doubt you'd get a bridging loan for nearly 100% of the property value.

Unfortunately I think your chances of doing it that way are close to zero. Lenders don't like bridging loans and I have only seen them provided by a company that wanted to move a highly valued employee across the country.

Speak to your lender tomorrow though and good luck!

having now read full post, my advice would be to first release equity from your current home then buy the new one with a low deposit.
You can make early repayments on the mortgage once you manage to sell.

A birdging loan has to be agreed in principle before you buy and for the full amount you will need including deposit, stamp duty or any other costs you can't cover from savings. You need to be able to show you can pay the full cost of both mortgages. The intention is for bridging finance to be short term, but they're not going to assume your house will sell quickly. It is much harder to get bridging finance and it isn't something you can do last minute. We had a substantial deposit, we had a ceiling for borrowing against the new property. Ours was written taking the maximum equity they could from the first house then another mortgage against the new house for a smaller amount. Any remaining money after selling and paying off the mortgage on the original property plus selling costs had to be paid into the mortgage on the new house.

Not to mention if you compete on your purchase without selling your current home, you’ll be liable for second home stamp duty on the new house. Granted you can reclaim that if you sell your existing home within a certain window but you still have to stump up the money at the time.

Sorry ours was written as two seperate loans, not strictly bridging finance, but forfil the same purpose and the only way anyone would do it. You will have to show you can finance the full amount of the debt, not just the 150K on top of your current mortgage.

Honestly that seems hard work, it really will not be as simple as you've thought it will. As a other poster has said,have you thought about second home issue? Can you truly afford two mortgages, two councils tax, insurances etc. You really have no idea how long it could take to sell your home. What if a buyer drops out and you have to put it on the market again?

What are your reasons for doing this? Maybe there is a better solution?

You need to have an agreed offer on yours first. Then you put in an offer. The solicitors will do-ordinate the exchange and moving dates.

Yoi are over thinking this.

It doesn’t usually work like that. You’ll find it difficult to get an offer accepted on your new property until your current property is under offer. Once both offers are in and accepted then you make the full mortgage application for the amount you need.

This has been really very useful.

We are concerned about selling our house and not finding a new property soon enough to co-ordinate dates as that would mean temporary accommodation. However, I see the plan is not ideal/going to work and we will re-evaluate accordingly.

Bridging loans are expensive and very difficult to arrange unless you’re a high earner. We’ve done what you want to do (buy first, then sell). We failed to get bridging finance and ended up taking a single mortgage secured on both properties, chosen as a tracker rate with no fees and no early redemption penalties. Then sell the first, repay the mortgage by taking out a new lower loan on the second. But to do that you need to be able to afford the full mortgage, so in your case you’d need a mortgage of £460k (assuming you have £100k deposit in total). It worked well for us, but very stressful having a mortgage right at the very top of affordability while waiting for the first house to sell. Would you be eligible for a £460k mortgage?

This can form part of the criteria you look for if you receive multiple offers on your home, the highest offer is not always the best, there may be a lower offer from a buyer who is prepared to be flexible on moving dates therefore saving you the costs associated with moving into temporary accommodation. If someone really wants your house they are usually prepared to wait!

Its not rocket science - you don't exchange etc until the property you're buying is ready too. Now if that is slow, yes, it can lose you a buyer and reset the process but its actually quite unusual to sell and move into rented because your next property is ready